# To Our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NASDAQ_DORM_2017/NASDAQ_DORM_2017.mmd` · pages 3-9_

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To Our Shareholders,

We are pleased to announce another successful year highlighted by record sales and earnings. Our success is a result of the tireless efforts of our contributors who continue to execute our proven "New to the Aftermarket" product development strategy while ensuring high levels of service to our customers and end users of our parts.

Our core mission is to identify failure prone passenger car, light truck, and heavy duty truck parts that are only available from dealerships and make a high quality alternative available to our customers and end users. Whenever possible, we look to remove original design flaws and to make the repair more convenient by including everything necessary to do the job. This approach often results in innovative solutions. This spirit of innovation is embodied in the 50 patents currently issued to Dorman, and the several pending patent applications on file at any given time.

Our growth in revenue and earnings has created long term value for our shareholders. Our business model generated a five year compounded annual growth rate of 10% in net sales and 13% in adjusted EPS. As a result, a \(100 investment in our stock made five years ago would be worth almost \)180 at the end of 2017.

Our net sales increased 5% to \(903.2 million up from \)859.6 million in 2016 despite one less selling week in fiscal 2017. Adjusted net income increased 8% to \(114.7 million from \)106.0 million in the prior year while adjusted diluted earnings per share rose 10% to \(3.37 from \)3.07 in 2016. Please refer to the Non-GAAP Financial measures found at the end of this annual report for a reconciliation to the corresponding GAAP measures. In addition, we returned \(74.7 million to our shareholders through the repurchase of 1.0 million shares of our common stock in fiscal 2017 and, since the program's inception in December, 2013; we have returned \)173.3 million to our shareholders.

We made progress on a number of initiatives in 2017, including:

• We delivered 4,079 new products to our customers and end users in 2017, including 1,192 "New to the Aftermarket" SKUs. This is no small feat, and requires hard work, dedication and teamwork from approximately 400 Dorman contributors engaged in our new product development effort, together with the best systems, processes and capabilities in the Aftermarket.

- Our Heavy Duty business continues to grow as we expanded coverage and gained further marketplace penetration. Revenues were up 31% in 2017 as a result. We now offer more than 1,060 parts for vehicle classes VII and VIII. We will continue to invest aggressively in the Heavy Duty marketplace as we remain bullish about our ability to grow in this channel.

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## 2017 Annual Report

• Our complex electronics product portfolio is focused on further developing Dorman's leadership position in this space. Today we have over 1,000 new and remanufactured complex electronic parts available for sale in the light, medium and heavy duty aftermarket. Revenues from complex electronic parts grew 16% in 2017 and include products such as sensors, hybrid batteries and keyless entry remotes.

- In October we acquired MAS Automotive Distribution Inc. (MAS), a premium chassis parts and control arm company with annual revenues of approximately $40 million. The acquisition firmly positions us a leader in the chassis and suspension categories, and provides a perfect complement to our existing portfolio.

• Finally, I want to mention that our Warsaw, Kentucky distribution facility was named Manufacturer of the Year by the Kentucky Association of Manufacturers in recognition of its manufacturing excellence, innovative leadership and work in the community.

We remain bullish on the long term outlook for our business. The cornerstone of our growth will continue to be our "New to the Aftermarket" products for customers in the North American light, medium and heavy duty markets. To ensure profitable growth over the long-term, we will continue to invest heavily in new product development capabilities and customer relationships. We continue to look for opportunities to acquire businesses that enable us to achieve our strategic objectives. We have a very thoughtful and disciplined approach as it relates to acquisitions and believe there are ample opportunities for us to increase shareholder value through smart acquisitions. In addition, we will continue to use share repurchases to increase shareholder value after other forms of investment are considered.

Our success is built upon our "culture of contribution." The persistence and passion of our contributors is the driving force behind our new product innovations and our proven ability to prosper through various economic environments and industry transitions. Our culture creates an environment where customers come first, and our contributors focus on adding value in all they do. We are guided by this culture and our focus on creating a sustainable, profitable business that contributes to the long term success of our shareholders, customers, and contributors.

Thank you for your continued confidence and support.

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Steven L. Berman
Executive Chairman

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Matt Barton
President
and Chief Executive Officer