# LETTER TO
SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NASDAQ_DORM_2019/NASDAQ_DORM_2019.mmd` · pages 1-7_

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LETTER TO
SHAREHOLDERS

## To Our Shareholders,

In 2019, we made solid strides executing our strategy by expanding within high growth areas of our business, leveraging our organic growth engine and implementing several structural and organizational changes that will benefit our business for years to come.

Our organic growth profile remained solid during the year as we utilized our distinctive network of industry resources to identify failure-prone parts, investing heavily in R&D to explore and capitalize on promising growth prospects within our industry. Some highlights include:

• 17% of fiscal 2019 net sales came from products launched in the last two years, with particular strength in chassis, powertrain and hardware, showcasing a robust product offering that has delivered year after year.

• We launched 5,239 new SKUs in fiscal 2019, 31% of which are new-to-the-aftermarket. We believe our innovative design, engineering and quality control capabilities continue to drive our competitive advantage and make us the go-to solution for our customers.

• Our heavy duty line grew 17% in the second half of the year, as we launched over 1,000 heavy duty SKUs during 2019, effectively doubling the size of our offering. We believe the fleet-facing sales organization we established during the year positions us well to effectively meet our customer demand and promote increased awareness.

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• Our chassis business continued to gain momentum as we won major contracts across multiple channels in our business. These wins are expected to drive strong revenue growth for Dorman. This demonstrates the successful execution of our plan to solidify our position in the chassis space, which began with the 2017 acquisition of MAS Automotive Distributors, Inc., or MAS.

Importantly, we have successfully executed several streamlining initiatives designed to increase efficiency and improve our position in the market. We completed the successful integration of our past acquisitions of MAS and Flight Systems Automotive Group LLC, or Flight Systems, as well as consolidated a few facilities to enhance our operational performance. This included consolidating a production facility in Michigan with our Flight Systems facility in Pennsylvania, as well as the significant undertaking of consolidating our Portland, Tennessee, operations. During fiscal 2019, we completed the consolidation of our old distribution center in Portland, and our Montreal facility, into a larger, state-of-the-art facility in Portland. We expect that this will allow us to better satisfy customer demand and improve productivity moving forward. To support these changes around our business, we've significantly bolstered our executive team with experienced team members who are committed to driving Dorman's long-term success.

While we are very pleased with the progress we made, we also worked through a few shorter-term challenges, which ultimately weighed on our financial performance in fiscal 2019. Revenue during the year increased modestly, however, redundant facility costs, negative customer mix and increased customer return provisions more than offset the benefit from our cost saving initiatives, resulting in a year-over-year earnings decline. While these were disappointing results for our shareholders, they were caused largely by changes that were necessary for Dorman to drive continued improvements in both innovation and operational scale. We are confident these changes position us well to drive long-term sustainable growth.

Additionally, our balance sheet and cash flow remain strong, and we have the financial flexibility to enhance our product portfolio with strategic M&A, as well as engage in share repurchases. Our commitment to returning cash to our shareholders is evidenced by the 500,000 shares we repurchased in 2019, for a total of $39 million.

Looking ahead, Dorman anticipates the number of vehicles in operation in our primary subsegment to increase over the next few years, which we expect will provide a tailwind to our business. With newer vehicles containing increasingly more electronic modules, as these parts fail, Dorman is ideally situated to capitalize on this continually expanding market opportunity.

Of course, the full impact of COVID-19 on our industry and the economy as a whole remains to be seen, but we believe we will navigate these challenging times much the same way we have done for decades – with relentless innovation, an extensive product lineup, and a commitment by our hard-working contributors to serving the needs of our customers.

In closing, I would like to thank our contributors, suppliers, customers and shareholders for their continued confidence and support. We believe the changes we made this year will position us well and I look forward to the bright future ahead.

![](images/2_0.jpg)

Kevin M. Olsen

President & CEO