# To Our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NASDAQ_DORM_2021/NASDAQ_DORM_2021.mmd` · pages 1-7_

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To Our Shareholders,

Fiscal 2021 was a year of record financial results for Dorman. I couldn't be more pleased given the many challenges our organization faced. These included COVID 19 outbreaks, inflation, tight labor conditions, and global supply chain disruptions that put cost pressure on our business and impacted our ability to deliver our products swiftly. Our team faced those challenges straight on and focused on controlling costs and driving efficiencies where we could, while continuing to execute our strategic initiatives. We flexed our supply chain and logistics relationships, innovated and brought new solutions to the aftermarket to enhance our product offering, enabling us to grow faster than the overall market. Our efforts, combined with the overall strength of the aftermarket, enabled us to overcome these challenges and produce record financial results for fiscal 2021.

This year was also marked by the completion of the largest acquisition in Dorman's history with the addition of Dayton Parts. Dayton enhances our heavy-duty offering and presents additional opportunities for us to bring innovation to the aftermarket. We couldn't be more excited about the Dayton business and believe it is a great fit for Dorman due to the similarity of the two companies with respect to how they are organized, their cultures, and how well Dayton complements and adds to our already robust product offering. Dayton significantly expands our heavy-duty manufacturing and distribution platform and gives us best-in-class heavy-duty supplier capabilities, with strengthened fleet and distributor relationships across the United States and Canada. Our combined financial results are already exceeding our expectations.

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## Other highlights from the year include:

• Growing organic net sales by 16% (excluding Dayton), outpacing the overall estimated market growth.

• Delivering 34% growth in adjusted diluted earnings per share over 2020.

• Increasing the number of new innovative products launched by 24% year-over-year.

• Growing net sales of complex electronics parts by 20% over 2020.

• Continuing to strengthen talent throughout the organization.

A key part of our overall business strategy is to introduce new and innovative solutions and products to the aftermarket and, during 2021, we continued to invest heavily in research and development to support that objective. Today's vehicles are more complex, requiring greater engineering expertise and sometimes greater investments and longer times to develop. We embrace the challenge of developing complex parts since we believe our engineering capabilities are a competitive advantage for us, and our investment is rewarded since more complex parts tend to have higher average selling prices.

Being a successful innovator includes brand recognition and raising brand awareness. As part of our initiative to strengthen Dorman's well-established brand within the industry, we've expanded our technician training program via key channel partnerships, training over 50,000 automotive repair technicians in 2021. We've also increased our presence in the digital arena, launching original content like our Dorman \( ^{®} \)  OF EX1™ Guide where we promote the Dorman brand, highlight our new products, and provide advice and cost-effective solutions for automotive repairs.

Turning to capital allocation, our strategy remains to focus on internal and external growth opportunities, with organic investment remaining a top priority followed by acquisitions that meet our strategic criteria. The acquisition of Dayton was the M&A highlight of 2021, and with the new $600 million credit facility we put in place in 2021 we believe we have the liquidity to execute against our strategic growth initiatives, including the ability to respond quickly to M&A opportunities as they arise.
Returning excess cash to shareholders opportunistically through our share buyback program also remains a cornerstone of our strategy. In 2021, we repurchased 605,628 shares of our common stock for a total of $61.6 million and had $145.6 million of availability remaining under our current share repurchase authorization as of December 25, 2021.

Looking ahead, the strong underlying automotive aftermarket industry fundamentals that we observed in 2021 are continuing into 2022. Our "sweet-spot" remains vehicles aged 8 to 13 years old, which we believe will grow at a higher rate than the overall aftermarket over the next few years as this segment of the car parc continues to recover from the impact of the Great Recession of 2008. Our business outlook remains favorable and we're encouraged not only by the strong demand trends but also by the new and innovative products and solutions that we expect to roll out to our customers.

Of course, we'll continue to monitor worldwide events and react swiftly to mitigate supply-side constraints and logistics issues. Thus far, our pricing actions and cost-saving initiatives have allowed us to offset the inflation that we have been seeing from freight, material commodity, and wage rate pressures since the second half of 2021. Our ability to successfully navigate and work around these issues is based on the experience of our global team as well as the longstanding relationships with our supply partners.

Overall, while the global environment and impact of inflation remain somewhat uncertain, we're confident that we have the right team and tools in place to navigate this environment and execute our strategic initiatives. We believe that our Culture of Contribution, unending focus on innovation, and commitment to excellence will position us for continued success. I want to thank our Contributors, customers, suppliers, shareholders, and other key stakeholders for your unwavering confidence and support.

Kevin M. Olsen
President & CEO