If these risks limit or prevent us from acquiring products from foreign suppliers or significantly increase the cost of our products, our operations could be seriously disrupted until alternative suppliers are found, which could negatively impact our business.

Additionally, in 2017 we acquired a business based in Montreal, Canada, whose operations are conducted in both U.S. Dollar and Canadian Dollar currencies.  Since our consolidated financial statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales, and other revenues and expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period.  As a result, foreign currency exchange rates and fluctuations in those rates could adversely impact our financial performance.

We Extend Credit to Our Customers Who May Be Unable to Pay In the Future.

We regularly extend credit to our customers.   A significant percentage of our accounts receivable have been, and willexpected to continue to be concentrated among a relatively small number of automotive retailers and automotive parts distributors in the United States. Our five largest customers accounted for 79% of total accounts receivable as of December 26, 201529, 2018 and 81%85% of total accounts receivable as of December 27, 2014.30, 2017. Management continually monitors the credit terms, and credit limits, and the availability of credit insurance for these and other customers. If any of these customers were unable to pay, our business and financial condition wouldcould be adversely affected.

The Loss of a Key VendorSupplier Could Lead to Increased Costs and Lower Profit Margins.

The majority of the products we sell are purchased from a number of foreign vendors.suppliers. If any of our existing vendorskey suppliers fail to meet our needs, we believe that sufficient capacity exists in the open market to supply any shortfall thatit may result. Nevertheless, it is not alwaysbe possible to replace a vendorsuch supplier without a disruption in our operations andoperations. Furthermore, replacement of a key vendorsupplier is often at higher prices.

Limited Shelf Space May Adversely Affect Our Ability to Expand Our Product Offerings.

Since the amount of space available to a retailer and other purchasers of our products is limited, our products compete with other automotive aftermarket products, some of which are entirely dissimilar and otherwise non-competitive (such as car waxes and engine oil), for shelf and floor space. No assurance can be given that additional space will be available in our customers’customers' stores to support any expansion of the number of products that we offer.

If We Do Not Continue to Develop New Products and Bring Them to Market, Our Business, Financial Condition and Results of Operations Could Be Materially Impacted.

The development and production of new products is often accompanied by design and production delays and related costs typically associated with the development and production of new products. While we expect and plan for such delays and related costs, we cannot predict with precision the time and expense required to overcome these initial problems so that the products comply with specifications.  There is a risk that we may not be able to introduce or bring to full-scale production new products as quickly as we expected in our product introduction plans, which could have a material adverse effect on our business, financial condition, and results of operations.

We May Be Adversely Affected By Changes in Automotive Technology and Improvements in the Quality of New Vehicle Parts.

Our business and financial condition may be adversely impacted by changes in automotive technologies, such as vehicles powered by fuel cells or electricity. These factors could result in less demand for our products thereby causing a decline in our business, financial condition, and results of operations.

In addition, improvements in quality by original equipment manufacturers could adversely affect our business. Generally, if original equipment parts last longer, there could be less demand for our products.

Claims of Intellectual Property Infringement by Original Equipment Manufacturers Could Adversely Affect Our Business and Negatively Impact Our Ability to Develop New Products.

From time to time in the past we have been subject to claims that we are infringing the intellectual property of others.  We currently are the subject of such claims and it is possible that others will assert infringement claims against us in the future.  An adverse finding against us in these or similar intellectual property disputes may have a material adverse effect on our business, financial condition and results of operations if we are not able to successfully develop or license non-infringing alternatives.  In addition, an unfavorable ruling in intellectual property litigation could subject us to significant liability, increased legal expense, and require us to cease developing or selling the affected products or using the affected works of authorship or trademarks.  Any significant restriction that impedes our ability to develop and commercialize our products could have a material adverse effect on our business, financial condition and results of operations.

Quality Problems with Our Products Could Damage Our Reputation and Adversely Affect Our Business.

We have experienced, and in the future may experience, reliability, quality, or compatibility problems in products after their production and sale to customers.  Product quality problems could result in damage to our reputation, loss of customers, a decrease in revenue, litigation, unexpected expenses, and a loss of market share. We have invested and will continue to invest in our engineering, design, and quality infrastructure in an effort to reduce these problems; however, there can be no assurance that we can successfully remedy all of these issues.  To the extent we experience significant quality problems in the future, our business and results of operations may be negatively impacted.

Loss of Third-Party Transportation Providers Upon Whom We Depend or Increases in Fuel Prices Could Increase Our Costs or Cause a Disruption in Our Operations.

We depend upon third-party transportation providers for delivery of our products to us and to our customers. Strikes, slowdowns, transportation disruptions or other conditions in the transportation industry, including, but not limited to, shortages of truckvehicles or drivers, disruptions in rail service, port congestion, or increases in fuel prices, could increase our costs and disrupt our operations and our ability to service our customers on a timely basis.

We May Not Properly Execute, or Realize Anticipated Cost Savings or Benefits from Our Ongoing Information Technology Initiatives.

Our success is partly dependent on properly executing and realizing cost savings or other benefits from our ongoing information technology initiatives. These initiatives are primarily designed to make us more efficient in the development, acquisition and distributions of our products, which is necessary in our highly competitive industry. These initiatives are often complex, and a failure to implement them properly may, in addition to not meeting projected cost savings or benefits, result in an interruption to our business functions.

Unfavorable Results of Legal Proceedings Could Materially Adversely Affect Us.

We are subject to various legal proceedings and claims that have arisen out of the ordinary course of our business which are not yet resolved and additional claims may arise in the future. Although we currently believe that resolving all of these matters, individually or in the aggregate, will not have a material adverse impact on our financial position, legal claims and proceedings are subject to inherent uncertainty and our view on these matters may change in the future.  Regardless of merit, litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention.  Should we fail to prevail in certain matters, we may be faced with significant monetary damages or injunctive relief that would materially adversely affect our business and financial condition and operating results.

We Have No History of Paying Regular Dividends And Do Not Intend to Pay Regular Dividends.

On December 5, 2012, we announced a special cash dividend of $1.50 per share payable on December 28, 2012 to shareholders of record at the close of business on December 17, 2012. This special cash dividend notwithstanding, we do not intend to pay regular cash dividends. Rather, for the foreseeable future, we intend to retain our earnings, if any, for the operation and continued expansion of our business.

Dorman’s Executive Chairman and His Family Members Own a Significant Portion of the Company.

As of February 19, 2016,18, 2019, Steven L. Berman, our Executive Chairman, and his family members beneficially own approximately 24%18% of the Company’s outstanding common stock.  As such, Mr. Berman and his family members can influence matters requiring approval of shareholders, including the election of the Board of Directors and the approval of significant transactions.  Such concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the Company, could deprive shareholders of an opportunity to receive a premium for their common stock as part of a sale of the Company and might ultimately affect the market price of our common stock.

Our Success Depends on the Efforts of Our Management Team.

We are highly dependent on the continuing efforts of our senior management team and other key personnel. Our business, financial condition and results of operations could be materially adversely affected if we lose any of these persons and are unable to attract and retain qualified replacements.

Our Operations, Revenues and Operating Results, and the Operations of Our Third Party Manufacturers, Suppliers and Customers, may be Subject to Quarter to Quarter Fluctuations and Disruptions from Events Beyond Our or Their Control.

Our operations, revenues and operating results, as well as the operations of our third party manufacturers, suppliers and customers, may be subject to quarter to quarter fluctuations and disruptions from a variety of causes outside of our or their control, including work stoppages, market volatility, fuel prices, acts of war, terrorism, cyber incidents, pandemics, fire, earthquake, flooding, changes in weather patterns, weather or seasonal fluctuations or other climate-based changes, including hurricanes or tornadoes, or other natural disasters. If a major disruption were to occur at our operations or the operations of our third party manufacturers, suppliers or customers, it could result in harm to people or the natural environment, delays in shipments of products to customers or suspension of operations, any of which could have a material adverse effect on our business, revenues and operating results.

We rely extensively on our computer systems to manage inventory, process transactions and timely provide products to our customers. Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches, cyber-attacks or other catastrophic events. If our systems are damaged or fail to function properly, we may experience loss of critical data and interruptions or delays in our ability to manage inventories or process customer transactions. Such a disruption of our systems could negatively impact revenue and potentially have a negative impact on our results of operations, financial condition and cash flows.

Regulations Related to Conflict Minerals Could Adversely Impact Our Business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) contains provisions to improve transparency and accountability concerning the supply of certain minerals, known as “conflict minerals”, originating from the Democratic Republic of Congo (“DRC”) and adjoining countries. These rules could adversely affect the sourcing, supply, and pricing of materials used in our products, as the number of suppliers who provide conflict-free minerals may be limited. We may also suffer reputational harm if we determine that certain of our products contain minerals not determined to be conflict-free or if we are unable to modify our products to avoid the use of such materials.  We may also face challenges in satisfying customers who may require that our products be certified as containing conflict-free minerals.

Cyber-attacks or Other Breaches of Information Technology Security Could Adversely Impact Our Business and Operations.

Cyber-attacks or other breaches of network or information technology security may cause equipment failure or disruption to our operations.  Such attacks, which include the use of malware, encryption, computer viruses and other means for disruption or unauthorized access, on companies have increased in frequency, scope and potential harm in recent years. While, to the best of our knowledge, we have not been subject to cyber-attacks or to other cyber incidents which, individually or in the aggregate, have been material to our operations or financial conditions, theyears We take preventive actions we take to reduce the risk of cyber incidents and protect our information technology and networks, however, such preventative actions may be insufficient to repel a major cyber-attack in the future.  To the extent that any disruption or security breach results in a loss or damage to our data or unauthorized disclosure of confidential information, it could cause significant damage to our reputation, affect our relationship with our customers, suppliers and employees, and lead to claims against us and ultimately harm our business.  Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Imposition of New Taxes or Customs Duties on Our Products Could Adversely Affect Our Business.

In fiscal 2018, approximately 77% of our products were purchased from suppliers in a variety of foreign countries. Due to economic and political conditions, tax and duty rates on imported goods may be subject to significant change. The imposition or proposed imposition of new or increased taxes or duties on our products could increase the cost of our products or reduce overall consumption of our products, or both, particularly if tax or duty levels increased substantially relative to those for products manufactured in the United States. The imposition of new taxes on our products or any substantial increase in duty rates on our products could adversely affect our business, financial condition or results of operations.

We are Exposed To Risks Related to Accounts Receivable Sales Agreements.

We have entered into several customer sponsored programs administered by unrelated financial institutions that permit us to sell certain accounts receivable at discounted rates to the financial institutions. The termination of these agreements could have a material adverse effect on our operating results and operating cash flow. Additionally, the interest rates of these agreements are tied to LIBOR. Increases in LIBOR could have a material adverse effect on our financial condition, results of operations and operating cash flows.

The Market Price of Our Common Stock May Be Volatile and Could Expose Us to Securities Class Action Litigation.

The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market conditions. The market price for our common stock may also be affected by our ability to meet analysts’ expectations. Failure to meet such expectations, even slightly, could have an adverse effect on the market price of our common stock. In addition, stock market volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of these companies. Downturns in the stock market may cause the price of our common stock to decline.

Following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against such companies. If similar litigation were instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources, which could have an adverse effect on our business.

Losing the Services of Our Executive Officers or Other Highly Qualified and Experienced Contributors Could Adversely Affect Our Business.

Our future success depends upon the continued contributions of our executive officers and senior management, many of whom have numerous years of experience and would be extremely difficult to replace.  We must also attract and maintain experienced and highly skilled engineering, sales and marketing, finance, logistics, and operations personnel.  Competition for qualified personnel is often intense, and we may not be successful in hiring and retaining these people.  If we lose the services of these key contributors or cannot attract and retain other qualified personnel, our business could be adversely affected.

Our growth may be impacted by acquisitions. We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.

We may not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions successfully. Our future growth is likely to depend to some degree on our ability to acquire and successfully integrate new businesses. We may seek additional acquisition opportunities, both to further diversify our businesses and to penetrate or expand important product offerings or markets. There are no assurances, however, that we will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions, successfully integrate acquired businesses, or expand into new markets. Once acquired, operations may not achieve anticipated levels of revenues or profitability.  Acquisitions involve risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management's attention from other business concerns. Although our management will endeavor to evaluate the risks inherent in any particular transaction, there are no assurances that we will properly ascertain all such risks. Difficulties encountered with acquisitions may have a material adverse effect on our business, financial condition and results of operations.

Item 1B. Unresolved Staff Comments.Comments.

None

Item 2. Properties.Properties.

Facilities

We currentlyAs of December 29, 2018 we have 1321 warehouse and office facilities located throughout the United States, Canada, China, Taiwan and India.

Two of these facilities are owned and the remainder are leased. Our principal facilities are as follows:

Item 3. Legal Proceedings.

We are a party to or otherwise involved in legal proceedings that arise in the ordinary course of business, such as various claims and legal actions involving contracts, competitive practices, intellectual property infringement, product liability claims and other matters arising out of the conduct of our business. In the opinion of management, none of the actions, individually or in the aggregate, would likely have a material financial impact on the Company and we believe the range of reasonably possible losses from current matters is immaterial.

Item 4. Mine Safety Disclosures.

Not Applicable

Item 4.1. Executive Officers of the Registrant.

Executive Officers of the Registrant.

The following table sets forth certain information with respect to our executive officers:

Steven L. Berman became the Executive Chairman of the Company on September 24, 2015.  Additionally, Mr. Berman has served as a director of the Company and as Secretary and Treasurer of the Company since its inception in 1978.  From January 30, 2011 to September 24, 2015, Mr. Berman served as Chairman of the Board and Chief Executive Officer of the Company and from October 24, 2007 to January 30, 2011, Mr. Berman served as President of the Company.  Prior to October 24, 2007, Mr. Berman served as Executive Vice President of the Company. He attended Temple University.

Mathias J. Barton Kevin M. Olsen joined the Company in November 1999June 2016 as Senior Vice President, Chief Financial Officer. He became co-President of the Company in February 2011, President in August 2013, and President and Chief Executive Officer in September 2015. Mr. Barton was appointed to our Board of Directors in January 2014. Prior to joining the Company, Mr. Barton was Senior Vice President and Chief Financial Officer of Central Sprinkler Corporation, a manufacturer and distributor of automatic fire sprinklers, valves and component parts. From May 1989 to September 1998, Mr. Barton was employed by Rapidforms, Inc., a manufacturer of business forms and other products, most recently as Executive Vice President and Chief Financial Officer. He isbecame Executive Vice President in June 2017, President and Chief Operating Officer in August of 2018 and President and Chief Executive Officer on January 1, 2019. Prior to joining the Company, Mr. Olsen was Chief Financial Officer of Colfax Fluid Handling, a graduatedivision of Temple University.Colfax Corporation, a diversified global manufacturing and engineering company that provides gas and fluid-handling and fabrication technology products and services to commercial and governmental customers around the world, from January 2013 through June 2016. Prior to joining Colfax, he served in progressively responsible management roles at the Forged Products Aero Turbine Division of Precision Castparts Corp, Crane Energy Flow Solutions, a division of Crane Co., Netshape Technologies, Inc., and Danaher Corporation. Prior thereto, Mr. Olsen was employed by PwC, LLP.

Jeffrey L. Darby joined the Company in November 1998 as a National Account Manager. He became Senior Vice President, Sales and Marketing in February 2011. He previously held the positions of Group Vice President from 2008 to 2010 and Vice President of Sales – Traditional and Key Accounts from 2006 to 2008. Prior to joining the Company, Mr. Darby worked for Federal Mogul Corporation/Moog Automotive, an automotive parts supplier, beginning in 1990. He holds an MBA Degree from Fairleigh Dickenson University and a B.A. Degree from William Paterson University.

Michael B. Kealey joined Dorman Productsthe Company in November of 2002, as a Product Manager. He became SeniorExecutive Vice President, ProductCommercial in February 2011.June 2017. He previously held the positions of Senior Vice President, Product from February 2011 through May 2017, Vice President – Product from January 2007 through January 2011, and Director – Product Management from April 2003 through December 2006. Prior to joining the Company, Mr. Kealey was employed by Eastern Warehouse Distributors, Inc., a distributor of automotive replacement parts, most recently as Vice President – Purchasing. He attended Temple University.

Matthew S. Kohnke joined Dorman Products in May 2002 as Vice President - Corporate Controller. He became Chief Financial Officer of the Company in February 2011. Prior to joining the Company, Mr. Kohnke worked for Arthur Andersen LLP, beginning as an intern in January 1992 and advancing to manager in the Audit and Business Advisory practice. He is a graduate of Villanova University. Mr. Kohnke is resigning from the Company effective February 26, 2016. See “Changes in Executive Officers.”

Changes in Executive Officers

Mr. Kohnke is resigning from the Company effective February 26, 2016. On February 4, 2016, the Board of Directors of the Company appointed Michael P. Ginnetti is serving as the Company’s Interim Chief Financial Officer Interim Principal Financial Officer and Interim Principal Accounting Officer, effectivefrom August 2018 through February 27, 2016.2019. Mr. Ginnetti will serve in such positions until a successor is named. The Company is in the process of searching for a permanent Chief Financial Officer.

Mr. Ginnetti, 39, currently also serves as Vice President, Corporate Controller of the Company. He has served in this position since May 2011 and will continue to serve in this position while serving as Interim Chief Financial Officer.2011. Prior to joining the Company, Mr. Ginnetti was employed by Technitrol, Inc., an electronic components manufacturer, from 2001 to 2011, most recently as Corporate Controller and Chief Accounting Officer. Previously, he was employed by Arthur Andersen LLP in the Audit and Business Advisory practice.

On February 19, 2019, we announced that David M. Hession was appointed to serve as our Senior Vice President and Chief Financial Officer, effective as of March 1, 2019. Mr. Ginnetti earnedHession, 50,was Vice President, Chief Financial Officer of Johnsonville, LLC, a bachelor science degreeprivately held manufacturer of sausage and other protein products, from May 2013 through January 2019.  Prior to joining Johnsonville, he served in accounting from Penn State Universityprogressively responsible management roles at McCormick & Company, Inc., Tradeout, Inc., and a master of business administration from Temple University.Xylum Corporation. Prior thereto, Mr. Ginnetti is also a Certified Public Accountant.Hession performed management consulting work at Ernst & Young, LLP and Peterson Consulting LP.

PART II

Item 5. Market for Registrant’sRegistrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Our shares of common stock are traded publicly on the NASDAQ Global Select Market under the ticker symbol “DORM”.  At February 19, 201618, 2019 there were 167212 holders of record of our common stock, representing more than 17,000 beneficial owners. The last price forstock.

We do not anticipate paying cash dividends on our common stock on February 19, 2016, as reported byin the NASDAQ Global Select Market, was $48.77 per share. The range of high and low sales prices for our common stock for each quarterly period of fiscal 2015 and fiscal 2014 were as follows:

We do not intend to pay regular cash dividends to our shareholders, not withstanding ourforeseeable future. Any payment of a special cash dividendfuture dividends will be at the discretion of $1.50 per share in December 2012.our board of directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, and other factors that our board of directors deems relevant.

For the information regarding our equity compensation plans, see Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.”

Stock Performance Graph. Below is a line graph comparing the cumulative total shareholder return for our common stock with the cumulative total shareholder return for the Automotive Parts & Accessories Peer Group of the Morningstar Group Index (formerly Hemscott Group Index) and the NASDAQ Composite Market Index for the period from December 25, 201028, 2013 to December 26, 2015.29, 2018. The Automotive Parts & Accessories Peer Group is comprised of 153142 public companies and the information was furnished by Morningstar, Inc. through Zacks Investment Research, Inc. The graph assumes $100 invested on December 25, 201028, 2013 in our common stock and each of the indices, and that the dividends were reinvested when and as paid. In calculating the cumulative total shareholder returns, the companies included are weighted according to the stock market capitalization of such companies.

Stock Repurchases

During the last thirteen weeks of the fiscal year ended December 26, 2015,29, 2018, we purchased shares of our common stock as follows:

Item 6. Selected Financial Data.

Item 7. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward Looking Statements

Certain statements in this document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. While forward-looking statements sometimes are presented with numerical specificity, they are based on various assumptions made by management regarding future circumstances over many of which the Company has little or no control. Forward-looking statements may be identified by words including “anticipate,” “believe,” “estimate,” “expect,” and similar expressions. The Company cautions readers that forward-looking statements, including, without limitation, those relating to future business prospects, revenues, working capital, liquidity, and income, are subject to certain risks and uncertainties that would cause actual results to differ materially from those indicated in the forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include but are not limited to competition in the automotive aftermarket industry, unfavorable economic conditions, loss of key vendors, loss of third-party transportation providers, claims of intellectual property infringement, quality problems, delay in the development and design of new products, space limitations on our customers’ shelves, concentration of the Company’s sales and accounts receivable among a small number of customers, the impact of consolidation in the automotive aftermarket industry, foreign currency fluctuations, timingloss of key suppliers, space limitations on our customers’ shelves, delay in the development and amountdesign of customers’ ordersnew products, improvements in new vehicle quality, claims of Company’s products,intellectual property infringement, quality problems, loss of third-party transportation providers, unfavorable results of legal proceedings, dependence on the Company’s management team,concentration of ownership, disruption from events beyond the Company’s control, risks associated with conflict minerals, risks associated with cyber-attacks, the imposition of new taxes or duties, the termination or modification of accounts receivable sales agreements, common stock market price volatility, loss of highly qualified Contributors, inability to acquire other businesses, and other risks and factors identified from time to time in the reports the Company files with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. For additional information concerning factors that could cause actual results to differ materially from the information contained in this report, reference is made to the information in “Part I, Item 1A Risk Factors.”  You should not place an undue reliance on forward-looking statements.  Such statements speak only to the date on which they are made and we undertake no obligation to update publicly or revise any forward-looking statements, regardless of future developments or the availability of new information.

Overview

We believe we are a leading supplier of replacement parts and fasteners for passenger cars, light trucks, and heavy duty trucks in the automotive aftermarket. We distribute and marketAs of December 29, 2018, we marketed approximately 150,000 different SKU’s77,000 unique parts as compared to approximately 70,000 as of automotive replacement parts,December 30, 2017, many of which we designdesigned and engineer. These SKU’sengineered. Unique parts exclude private label stock keeping units (“SKU’s”) and other variations in how we market, package and distribute our products, but include unique parts of acquired companies. Our products are sold under our various brand names, under our customers’ private label brands or in bulk. We believe we are the dominanta leading aftermarket supplier of original equipment “dealer exclusive” items. Original equipment “dealer exclusive” parts are those parts which were traditionally available to consumers only from original equipment manufacturers or salvage yards. These parts include, among other parts, intake manifolds, exhaust manifolds, window regulators, radiator fan assemblies, tire pressure monitor sensors, complex electronics modules, and exhaust gas recirculation (EGR) coolers.

We generate virtually all of our revenues from customers in the North American automotive aftermarket, primarily in the United States.  Our products are sold primarily through automotive aftermarket retailers; national, regional and local warehouse distributors and specialty markets; and salvage yards.  We also distribute automotive replacement parts outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, Mexico, the Middle East, Asia and Canada.Australia.

Executive OverviewWe may experience significant fluctuations from quarter to quarter in our results of operations due to the timing of orders placed by our customers. Generally, the second and third quarters have the highest level of net sales. The introduction of new products and product lines to customers, as well as business acquisitions, may cause significant fluctuations from quarter to quarter.

We operate on a fifty-two, fifty-three week period ended on the last Saturday of the calendar year. The fiscal years ended December 29, 2018 (“fiscal 2018”) and December 30, 2017 (“fiscal 2017”) were fifty-two week periods. The fiscal year ended December 31, 2016 (“fiscal 2016”) was a fifty-three week period.

Business Performance

We achieved record net sales and net income in fiscal 2015.2018.  Net sales increased 7%8% over fiscal 20142017 levels to $803.0$973.7 million, while net income increased 3%25% to $92.3$133.6 million.  Additionally, we generated $78.1 million of cash flows from operations and repurchased approximately $45.4 million of our outstanding common stock. Additionally, we acquired Flight Systems Automotive Group, LLC for $27.5 million. We believe our strong financial results have been driven by favorable industry dynamics, sales growth resulting from new product sales, continued investments in new product development, a thoughtful approach to acquisitions, industry dynamics, and a commitment to process improvements.other economic factors.

The automotive aftermarket has benefited from some of the factors affecting the general economy, including the impact of recessions, unemployment, and fluctuating gas prices. We believe vehicle owners have become more likely to keep their current vehicles longer and perform necessary repairs and maintenance in order to keep those vehicles well maintained as a result of these factors. According to data published by Polk, a division of IHS Automotive, the average age of vehicles was 11.5 years as of July 2015, which is an increase from 11.4 years as of June 2014 despite increasing new car sales. The number of miles driven is another important statistic that impacts our business. According to the United States Department of Transportation, the number of miles driven has increased each year since 2011 with miles driven having increased 3.5% as of November 2015 as compared to November 2014. Generally, as vehicles are driven more miles, the more likely it is that parts will fail. The combination of the vehicle age increase and number of miles driven has accounted for a portion of our sales growth.

The overall automotive aftermarket in which we compete has benefited from the conditions mentioned above. However, our customer base has been consolidating for a number of years. As a result, our customers regularly seek more favorable pricing and product return provisions, and extended payment terms when negotiating with us. We attempt to avoid or minimize these concessions as much as possible, but we have granted pricing concessions, extended customer payment terms and allowed a higher level of product returns in certain cases. These concessions impact our profit levels and may require additional capital to finance the business. We expect our customers to continue to exert pressure on our margins as the customer base continues to consolidate.New Product Development

New product development is a critical success factor for us and is our primary vehicle for growth.  We have made incremental investments to increase our new product development efforts each year since 2003 in an effort to grow our business and strengthen our relationships with our customers.  The investments are primarily in the form of increased product development resources, increased customer and end-user awareness programs and customer service improvements.  These investments have enabled us to provide an expanding array of new product offerings and grow revenues at levels that exceed market growth rates. As a result of these investments, we introduced 5,543 new products to our customers and end users in fiscal 2018, including 1,716 “New to the Aftermarket” SKU’s.  

Our complex electronics program capitalizes on the growing number of electronic components being utilized on today’s Original Equipment platforms. Current production models contain an average of approximately thirty five electronic modules, with some high-end luxury vehicles containing over one hundred modules. Our complex electronics products are designed and developed in house and extensively tested to ensure consistent performance.performance, and, our product portfolio is focused on further developing Dorman’s leadership position in the category.

In 2012, we introduced a new line of products to be marketed for the medium and heavy duty truck aftermarket. We believe that this market provides many of the same opportunities for growth that the automotive aftermarket has provided us.us over the past several years.  Our focus here is on formerly “dealer only” parts similar to the automotive side of the business. We launched the initial program with a limited offering, but have made additional investments in new product development efforts to expand our product offering.  We currently have approximately 7001,230 SKU’s in our medium and heavy duty product line. We will continue to invest aggressively in the medium and heavy duty product category.

Acquisitions

Our growth is also impacted by acquisitions. For example, in August 2018, we acquired Flight Systems Automotive Group LLC (“Flight Systems” or “Flight”). Additionally, in October 2017, we acquired MAS Automotive Distributors, Inc. (“MAS Industries” or “MAS”). We believe Flight and MAS are highly complementary to our business and growth strategy. We may experienceacquire businesses in the future to supplement our financial growth, distribution capabilities, or product development resources.

Economic Factors

Vehicle owners operate their current vehicles longer than they did several years ago. As a result, owners perform necessary repairs and maintenance in order to keep those vehicles well maintained.  According to data published by Polk, a division of IHS Automotive, the average age of vehicles increased to 11.8 years as of October 2018 from 11.7 years as of October 2017 despite increasing new car sales. Additionally, the number of vehicles in operation in the United States continues to increase, growing 2.2% in 2018 to 285.7 million from 279.6 million in 2017.  Approximately 48% of vehicles in operation are 11 years old or older.  Vehicle scrappage rates have also decreased over the last several years.  The number of miles driven is another important statistic that impacts our business.  According to the United States Department of Transportation, the number of miles driven has increased

each year since 2011 with miles driven having increased 0.3% as of November 2018 as compared to November 2017. Generally, as vehicles are driven more miles, the more likely it is that parts will fail.  The combination of the factors above has accounted for a portion of our sales growth.

Competition among our customer base continues to increase. As a result, our customers regularly seek more favorable pricing and product return provisions, and extended payment terms when negotiating with us.  We attempt to avoid or minimize these concessions as much as possible, but we have granted pricing concessions, extended customer payment terms and allowed a higher level of product returns in certain cases. These concessions impact our profit levels and may require additional capital to finance the business.  We expect our customers to continue to exert pressure on our margins.

Foreign Currency

Our acquisition of MAS increases our exposures to foreign currencies.  MAS is headquartered in Montreal, Canada, and its financial transactions occur in both U.S. Dollars and Canadian Dollars.  Since our consolidated financial statements are denominated in U.S. Dollars, the assets, liabilities, net sales, and expenses of MAS which are denominated in currencies other than the U.S. Dollar must be converted into U.S. Dollars using exchange rates for the current period.  As a result, fluctuations in foreign currency exchange rates may impact our financial results.

In fiscal 2018, approximately 77% of our products were purchased from suppliers in a variety of foreign countries. The products generally are purchased through purchase orders with the purchase price specified in U.S. Dollars. Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S. Dollar and various foreign currencies between the time of execution of the purchase order and payment for the product. To the extent that the U.S. Dollar changes in value relative to foreign currencies in the future, the price of the product for new purchase orders may change in equivalent U.S. Dollars.

The largest portion of our overseas purchases comes from China. The Chinese Yuan to U.S. Dollar exchange rate has fluctuated over the past several years. Any future changes in the value of the Chinese Yuan relative to the U.S. Dollar may result in a change in the cost of products that we purchase from China. However, the cost of the products we procure is also affected by other factors including raw material availability, labor cost, transportation costs, and other factors.

Impact of Inflation

The overall impact of inflation has not resulted in a significant fluctuations from quarter to quarterchange in labor costs or the cost of general services utilized.

The cost of many commodities that are used in our resultsproducts has fluctuated over time resulting in increases and decreases in the cost of operations dueour products.  In addition, we have periodically experienced increased transportation costs as a result of higher fuel prices, capacity constraints, and other factors. We will attempt to the timing of orders placedoffset cost increases by our customers. Generally, the second and third quarters have the highest level of net sales. The introduction of new products and product linespassing along selling price increases to customers, may cause significant fluctuationsusing alternative suppliers and by sourcing purchases from quarter to quarter.other countries.  However there can be no assurance that we will be successful in these efforts.

We operate on a fifty-two, fifty-three week period ended onImpact of Tariffs

Effective September 24^th, the last SaturdayOffice of the calendar year.United States Trade Representative (USTR) imposed an additional tariff on approximately $200 billion worth of Chinese imports. The tariff was approximately 10% as of December 29, 2018. The tariffs enacted to date will increase the cost of many products that are manufactured for Dorman in China. We are taking several actions to fully mitigate the impact of the tariffs including, but not limited to, price increases to our customers and cost concessions from our suppliers. Although we expect to mitigate the impact of tariffs in fiscal years ended December 26, 2015, December 27, 20142019, we expect selling price increases associated with the tariffs to be fully offset by the higher tariffs incurred. Tariffs are not expected to have a material impact on our net income, but will lower our gross and December 28, 2013 were fifty-two week periods.operating profit percentages as these additional costs are passed through to customers.

Results of Operations

The following table sets forth, for the periods indicated, the dollar value and percentage of net sales represented by certain items in our Consolidated Statements of Operations:

* Percentage of sales information does not add due to rounding

Fiscal Year Ended December 26, 201529, 2018 Compared to Fiscal Year Ended December 27, 201430, 2017

Net sales increased 7%8% to $803.0$973.7 million in fiscal 20152018 from $751.5$903.2 in fiscal 2014.2017. Our revenue growth was driven by overall strong demand for our products especially our new products.and the inclusion of revenue from acquired businesses. In fiscal 2018 approximately $48.3 million of net sales were attributed to acquisitions. Our growth was partially offset by the negative effects of a brand protection policy implemented in the fourth quarter of 2017.

Gross profit margin was 38.4%38.3% in fiscal 20152018 compared to 38.2%39.7% in fiscal 2014.2017. The decreased gross profit margin was primarily the result of the impact of acquisitions which carry lower gross margins compared to our historical levels.  Additionally, 2018 gross profit margin was negatively impacted by a $2.0 million inventory fair value adjustment resulting from business acquisitions, lower overall selling prices and an unfavorable shift in mix towards lower margin products.

Selling, general and administrative expenses were $202.1 million, or 20.8% of net sales, in fiscal 2018 compared to $182.4 million, or 20.2% of net sales, in fiscal 2017. The increase in expense was primarily due to the inclusion of the expenses of acquired operations, amortization expense of acquired intangible assets, reinvestment of tax savings in product development and sales organizations, an increase in wage and benefit costs and increased costs associated with our accounts receivable sales program.

Our effective tax rate decreased to 21.9% in fiscal 2018 from 39.6% in fiscal 2017. The decrease was attributable to the Tax Cuts and Jobs Act enacted in the United States in December 2017, which lowered the U.S. Corporate federal income tax rate to 21% beginning in 2018.

Fiscal Year Ended December 30, 2017 Compared to Fiscal Year Ended December 31, 2016

Net sales increased 5% to $903.2 million in fiscal 2017 from $859.6 in fiscal 2016. Our revenue growth was driven by overall strong demand for our products which was partially offset by an additional week of sales in fiscal 2016. Additionally, the MAS acquisition accounted for approximately $7.0 million of sales in fiscal 2017.

Gross profit margin was 39.7% in fiscal 2017 compared to 39.3% in fiscal 2016. The increased gross profit margin was primarily due to a favorable sales mix towards higher margin products, leverage of costs across higher sales volume, and lower transportation costsmaterial price decreases which were partially offset by lower overall selling prices during fiscal 20152017 compared to fiscal 2014.2016. Additionally, 2017 gross profit margin was negatively impacted by inventory fair value adjustment related to MAS of $0.6 million.

Selling, general and administrative expenses were $161.9$182.4 million, or 20.2% of net sales, in fiscal 20152017 compared to $146.5$169.5 million, or 19.5%19.7% of net sales, in fiscal 2014.2016.  The increase in expense was primarily due to higher variable costs associated with our 7%5% sales growth, a $3.0$5.9 million provisionof general wage and fringe inflation, $2.5 million of increased expenses related to the accounts receivable sales program, and $1.0 million of acquisition

related costs. Provisions for doubtful accounts due to the bankruptcy of one customer, $2.2were $0.9 million less in additional investment in new product development and other resources to support our product growth efforts, additional depreciation expenses, including expenses related to information systems, and labor cost increases asfiscal 2017 compared to prior year. Additionally, in fiscal 2014, we recognized a $1.0 million reduction in an earn-out liability related to a prior acquisition that did not recur in fiscal 2015.2016, partially offsetting the increases noted above.

Our effective tax rate increased to 36.7%39.6% in fiscal 20152017 from 36.0%37.0% in fiscal 2014.2016. The increase was primarily attributable to increased provisions for state income taxes and reduced benefits from research and development tax credits in fiscal 20152017 compared to fiscal 2014.

Fiscal Year Ended December 27, 2014 Compared to Fiscal Year Ended December 28, 2013

Net sales increased 13% to $751.52016 and approximately $4.4 million in fiscal 2014of expense resulting from $664.5 million in fiscal 2013. Our revenue growth was driven by overall strong demand for our products and higher revenue from recently introduced products.

Gross profit margin was 38.2% in fiscal 2014 compared to 39.3% in fiscal 2013. The decreased gross profit margin was primarily the result of competitive pricing pressures and a mix shift that resulted in lower overall selling prices.

Selling, general and administrative expenses were $146.5 million, or 19.5%revaluation of net sales in fiscal 2014 compared to $133.0 million, or 20.0% of net sales in fiscal 2013. The increase was primarilydeferred tax assets due to higher variable costs associated with our 13% sales growth, approximately $2.3 million in additional investment in new product developmentthe adoption of the Tax Cuts and other resources to support our product growth efforts, and inflationary increases as compared to fiscal 2013. Additionally, we incurred approximately $5.5 million of incremental costs in fiscal 2014 compared to fiscal 2013 associated with implementing our ERP system including approximately $2.8 million of increased distribution costs, $1.9 million of consulting and other related support costs incurred after the system go-live date, and $0.8 million of additional ERP system depreciation expenses in fiscal 2014 compared to fiscal 2013. Partially offsetting these increases were a $2.1 million reduction in incentive compensation expenses and a $1.0 million reduction in an earn-out liability related to a prior acquisition.

Our effective tax rate increased to 36.0% in fiscal 2014 from 35.9% in fiscal 2013.Jobs Act.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been our invested cash and the cash flow we generate from our operations, including accounts receivable sales programs provided by certain customers. Cash and cash equivalents as ofat December 26, 2015 increased29, 2018 decreased to $78.7$43.5 million from $47.7$71.7 million as ofat December 27, 2014.30, 2017. Working capital was $380.1$488.1 million at December 26, 201529, 2018 compared to $339.5$422.1 million at December 27, 2014.30, 2017. Shareholders’ equity was $518.0$727.6 million at December 26, 201529, 2018 and $462.1$634.8 million at December 27, 2014. 30, 2017. Based on our current operating plan, we believe that our sources of available capital are adequate to meet our ongoing cash needs for at least the next twelve months.  However, our liquidity could be negatively affected by extending payment terms to customers, a decrease in demand for our products, or other factors.

Over the past several years we have continued to extend payment terms to certain customers as a result of customer requests and market demands. These extended terms have resulted in increased accounts receivable levels and significant uses ofhave significantly impacted cash flow.flows. We participate in accounts receivable sales programs with several customers which allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment terms extensions. However, these accounts receivable sales programs bear interest rates tied to LIBOR, therefore, as LIBOR rates increase our cost to sell our receivables also increases. During fiscal 20152018 and fiscal 2014,2017, we sold approximately $519.2$604.7 million and $477.9$582.9 million, respectively, under these programs. We had the ability to sell significantly more accounts receivable under these programs if the needs of the business warranted.  We expect continued pressure to extend our payment terms for the foreseeable future.  Further extensions of customer payment terms will result in additional uses of cash flow or increased costs associated with the sale of accounts receivable.

We haveIn December 2017, we entered into a $30.0 millioncredit agreement which will expire in December 2022.  This agreement provides for an initial revolving credit facility which expires in June 2017.of $100.0 million and gives us the ability to request increases of up to an incremental $100.0 million.  This agreement replaces our previous $30.0 million credit agreement. Borrowings under the facility are on an unsecured basis with interest rates ranging from LIBOR plus 65 basis points to LIBOR plus 250125 basis points based upon the achievementratio of certain benchmarks related to the ratio ofconsolidated funded debt to consolidated EBITDA, as defined by ourthe credit agreement. The interest rate at December 26, 201529, 2018 was LIBOR plus 65 basis points (1.07%(3.17%). ThereThe credit agreement also contains other 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.  The new agreement also requires us to pay an unused fee of 0.10% on the average daily unused portion of the facility. As of December 29, 2018, we were in compliance with all financial covenants contained in the credit agreement. As of December 29, 2018, there were no borrowings under the facility as of December 26, 2015. As of December 26, 2015,and we had two outstanding letters of credit for approximately $1.0$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 $29.0$99.2 million available under the facility at December 26, 2015. The credit agreement also contains covenants, the most restrictive of which pertain to net worth and the ratio of debt to EBITDA. As of December 26, 2015, we were in compliance with all financial covenants contained in the revolving credit facility.29, 2018

Cash Flows

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

During fiscal 2015,2018, cash provided by operating activities was $92.1$78.1 million primarily as a result of $92.3$133.6 million in net income, non-cash adjustments to net income of $15.2$31.2 million and a net increase in operating assets and liabilities of $15.4$86.7 million. Accounts receivable increased $1.1$66.4 million due to the timing of cash receipts at year end.increased net sales which were partially offset by increased accounts receivable sales. Inventory increased $20.2$46.8 million or 12%,due to higher inventory purchases to avoid potentially higher tariffs, to support new product initiativeslaunches and sales growth.maintain customer fill rates as we consolidate facilities. Accounts payable increased by $5.4$27.0 million or 7%, due to increased inventory purchases and the timing of payments to our vendors. Other assets and liabilities, net, increased $0.4 million.

During fiscal 2014,2017, cash provided by operating activities was $59.6$94.2 million primarily as a result of $90.0$106.6 million in net income, non-cash adjustments to net income of $13.5$30.4 million and a net increase in operating assets and liabilities of $43.9$42.7 million. Accounts receivable increased $25.6$5.7 million due to increased net sales and the timing of cash receipts at year end. Inventory increased $25.1 million due to higher inventory purchases to support new product launches and to improve customer fill rates. Accounts payable increased $13.1by $3.7 million bothdue to increased inventory  and the timing of payments to our vendors. Other assets and liabilities, net, increased $15.6 million primarily due to higher net sales. Accounts payable decreased by $1.6 million duean increase in long-term core inventory and a decrease in customer rebates which we expect to timing of purchases and payments to our vendors.settle in cash.

During fiscal 2013,2016, cash provided by operating activities was $61.6$121.5 million primarily as a result of $81.9$106.0 million ofin net income, non-cash adjustments to net income of $11.6$17.6 million and a net increase in operating assets and liabilities of $31.9$2.1 million. Accounts receivable increased $40.8$27.8 million due to increased net sales and the timing of cash receipts at year end. Inventory decreased $24.9 million due to lower inventory increased $18.5 million,purchases and accountsthe effects of several inventory management initiatives. Accounts payable increased $17.6by $8.7 million each due to the timing of payments to our vendors. Other assets and liabilities, net, increased $7.8 million primarily due to higher net sales.an increase in long-term core inventory and a decrease in customer rebates which we expect to settle in cash.

Investing activities used $23.8$59.1 million of cash in fiscal 2015, $29.92018, $94.4 million of cash in fiscal 2014,2017, and $26.6$26.3 million of cash in fiscal 2013.

2016.  

Cash used in financing activities was $37.2$46.9 million in fiscal 2015, $42.72018, $77.3 million in fiscal 2014,2017, and $2.1$24.8 million in fiscal 2013.

2016.