12.

Capital Stock

Controlling Interest by Officers, Directors and Family Members. As of February 19, 2015, the estate of the late Richard Berman, Sharyn Berman, Steven Berman, who is Chairman and Chief Executive Officer and director of the Company, his father and his brothers beneficially own approximately 24% of the outstanding shares of our common stock and have a controlling influence over the election of our Board of Directors, the outcome of most corporate actions requiring shareholder approval (including certain fundamental transactions) and the affairs of the Company.

Undesignated Stock. We have 50,000,000 shares authorized of undesignated capital stock for future issuance. The designation, rights and preferences of such shares will be determined by our Board of Directors.

Dividend. 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 dividend resulted in a cash payment of $54.7 million to our shareholders.

Incentive Stock Plan. Our 2008 Stock Option and Stock Incentive Plan (the “Plan”) was approved by our shareholders on May 20, 2009. Under the terms of the Plan, our Board of Directors may grant up to 2,000,000 shares of common stock in the form of shares of restricted stock, incentive stock options and non-qualified stock options or combinations thereof to officers, directors, employees, consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved and stock options are exercisable upon the terms set forth in the grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. At December 27, 2014, 1,719,766 shares were available for grant under the Plan.

We grant restricted stock to certain employees and members of our Board of Directors. The value of restricted stock issued is based on the fair value of our common stock on the grant date. Vesting of restricted stock is conditional based on continued employment or service for a specified period. Compensation cost related to the stock is recognized on a straight-line basis over the vesting period. We retain the restricted stock, and any dividends paid thereon, until the vesting provisions have been met. Compensation cost related to restricted stock was $1.1 million, $0.8 million and $0.8 million before taxes in fiscal 2014, fiscal 2013, and fiscal 2012, respectively. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations. No cost was capitalized during fiscal 2014, fiscal 2013 or fiscal 2012.

The following table summarizes our restricted stock activity for the three years ended December 27, 2014:


	Shares			Weighted Average Price
Balance at December 31, 2011		204,800		$	17.12
Granted		15,000		$	26.70
Vested		(45,646	)	$	16.84

Balance at December 29, 2012		174,154		$	18.02
Granted		25,500		$	45.06
Vested		(47,069	)	$	17.38
Cancelled		(43,126	)	$	18.28

Balance at December 28, 2013		109,459		$	24.47
Granted		26,347		$	51.41
Vested		(41,619	)	$	23.44
Cancelled		(21,287	)	$	48.29

Balance at December 27, 2014		72,900		$	27.82

As of December 27, 2014, there was approximately $1.4 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.5 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as financing activities. The excess tax benefit generated from vested restricted shares was $0.5 million, $0.3 million, and $0.3 million in fiscal 2014, fiscal 2013, and fiscal 2012, respectively, and was credited to additional paid in capital.

We grant stock options to certain employees and members of our Board of Directors. We expense the grant-date fair value of stock options. Compensation cost is recognized on a straight-line basis over the vesting period, during which related services are performed. Compensation cost charged against income was $0.1 million, $0.1 million and $0.2 million before taxes in fiscal 2014, fiscal 2013, and fiscal 2012, respectively. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations. No cost was capitalized during fiscal 2014, fiscal 2013 or fiscal 2012.

No stock options were granted in fiscal 2014 or fiscal 2013. In fiscal 2012, we used the Black-Scholes option valuation model to estimate the fair value of stock options granted. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data. The risk-free rate is based on the U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. The weighted-average grant-date fair value of options granted during fiscal 2012 was $11.05 per option. We included a forfeiture assumption of 5.4% in the calculation of expense in fiscal 2014, fiscal 2013 and fiscal 2012.

The following table summarizes the valuation assumptions used to calculate the fair value of options granted:


	2012
Expected dividend yield		0	%
Expected stock price volatility		59	%
Risk-free interest rate		0.9	%
Expected life of options		4.7 years

The following table summarizes our stock option activity for the three years ended December 27, 2014:


	Shares			Option Price per Share		Weighted Average Price		Weighted Average Remaining Terms (years)		Aggregate Intrinsic Value
Balance at December 31, 2011		692,800		$	2.00 – $19.37	$	5.46
Granted		20,000			$22.71	$	22.71

Exercised		(438,800	)	$	2.00 – $ 7.74	$	4.27
Balance at December 29, 2012		274,000		$	2.54 – $22.71	$	8.62
Exercised		(96,500	)	$	2.54 – $22.71	$	7.21

Cancelled		(36,000	)	$	7.74 – $22.71	$	16.98
Balance at December 28, 2013		141,500		$	5.05 – $19.37	$	7.13
Exercised		(66,500	)	$	5.67 – $19.37	$	6.97

Balance at December 27, 2014		75,000		$	5.05 – $19.37	$	7.28		3.5	$	3,119,000

Options exercisable at December 27, 2014		73,000		$	5.05 – $19.37	$	6.95		3.5	$	3,060,000

The total intrinsic value of stock options exercised during fiscal 2014 was $2.8 million. As of December 27, 2014, there was approximately $0.1 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 1 year.

The following table summarizes information concerning currently outstanding and exercisable options at December 27, 2014:


	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$ 5.05 – $5.67		21,000		3.9	$	5.64		21,000	$	5.64
$ 6.90		44,000		3.0	$	6.90		44,000	$	6.90
$ 7.74		6,000		5.0	$	7.74		6,000	$	7.74
$19.37		4,000		6.0	$	19.37		2,000	$	19.37

Balance at December 27, 2014		75,000		3.5	$	7.28		73,000	$	6.95

Cash received from option exercises was $0.5 million, $0.6 million, and $1.6 million during fiscal 2014, fiscal 2013, and fiscal 2012, respectively. The excess tax benefit generated from option exercises was $0.3 million, $0.8 million and $2.4 million during fiscal 2014, fiscal 2013 and fiscal 2012, respectively, and was credited to additional paid in capital.

Performance-Based Long Term Award Program. In December 2012, the Compensation Committee of our Board of Directors approved the Performance-Based Long Term Award Program which connects compensation for certain of our executives to the compounded annual growth in our pre-tax income, as defined in the program, over our most recent three fiscal years. At the discretion of the Compensation Committee, the Performance-Based Long Term Award will be paid in either cash or equity. If the award is paid in equity, it will be paid under the 2008 Stock Option and Stock Incentive Plan. This is a liability-classified award. For fiscal 2014 and fiscal 2013, the Compensation Committee elected to settle the award in cash.

401(k) Retirement Plan. The Dorman Products, Inc. 401(k) Retirement Plan and Trust (the “401(k) Plan”) is a defined contribution profit sharing and 401(k) plan covering substantially all of our employees as of December 27, 2014. Annual contributions under the 401(k) Plan are determined by the Compensation Committee of our Board of Directors. Total expense related to the 401(k) Plan was $2.5 million, $1.9 million and $2.0 million in fiscal 2014, fiscal 2013 and fiscal 2012, respectively. At December 27, 2014, the 401(k) Plan held 361,138 shares of our common stock.

Common Stock Repurchases. We periodically repurchase, at the then current market price, and cancel common stock issued to 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. During fiscal 2014, our Board of Directors approved the repurchase and cancellation of 61,830 shares of our common stock for $3.1 million at an average price of $50.71 per share. During fiscal 2013, our Board of Directors approved the repurchase and cancellation of 78,580 shares of our common stock for $3.5 million at an average price of $44.39 per share.

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. We announced that our Board of Directors increased the share repurchase program authorization to $30 million on May 20, 2014, to $50 million on July 30, 2014 and to $100 million on October 28, 2014. In addition, on May 20, 2014, we announced that our Board of Directors extended the share repurchase program through May 31, 2015, and on October 28, 2014, we announced that our Board of Directors further extended the share repurchase program through December 31, 2015. 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. We repurchased 855,600 common shares for $40.4 million at an average price of $47.20 under this program during fiscal 2014. No repurchases were made under this program during fiscal year ended December 28, 2013.