On this page of StockholderLetter.com we present the 4/8/2024 shareholder letter from Dorman Products, Inc. — ticker symbol DORM. Reading current and past DORM letters to shareholders can bring important insights into the investment thesis.

 •  4/8/2024 Letter Continued (Full PDF)
 •  4/4/2023 DORM Stockholder Letter
 •  4/7/2025 DORM Stockholder Letter
 •  More "Auto Parts" Category Stockholder Letters
 •  DORM Benford's Law Stock Score = 85

DORM 4/8/2024 Shareholder/Stockholder Letter Transcript:

dormanproducts.com
Giving repair professionals, enthusiasts and owners
greater freedom to fix motor vehicles.
2023
ANNUAL REPORT

ANNUAL REPORT
LETTER TO
SHAREHOLDERS
To Our Fellow Shareholders:
We   re proud to report another year of strong
growth in 2023, as we achieved record annual
net sales for the twenty-third consecutive year
and an 18% rate of compounded annual growth
over the last five years. We accomplished this
while also delivering a dramatically improved
margin structure. Gross margin improved
throughout the year as we worked through
higher cost inventory sourced during elevated
inflationary periods in 2022, resulting in record
diluted earnings per share in the third and
fourth quarters of 2023. We also drove record
Free Cash Flow in 2023 that we used to pay
down our debt and repurchase our shares.
In 2023, we completed the successful
integration of our SuperATV acquisition from
2022, which followed the acquisition and
integration of Dayton Parts, which we acquired
in 2021. Consequently, we changed our
reporting structure to reflect three segments
that are better aligned with the sectors of the
motor vehicle aftermarket in which we operate:
Light Duty, Heavy Duty, and Specialty Vehicle.
We are now able to apply Dorman   s innovation
2023 ANNUAL REPORT
model around new product development
in three distinct sectors, which we believe
represent $165 billion in total addressable
market opportunity. Net sales outside of our
Light Duty segment represented 24% of total
2023 net sales, and we expect the proportion
of net sales in our Heavy Duty and Specialty
Vehicle segments to collectively surpass 30% of
total net sales by 2028.
Our 2023 results were the product of
investments in our operations, to both increase
flexibility and drive efficiencies into, and costs
out of, our core activities. We brought our new
827,000-square-foot distribution center in
Whiteland, IN into full operation, and we   re
continuing to assess our overall footprint to
help optimize production. We   re also continuing
to invest in automation tools in our distribution
centers to help ensure that our hard-working
Contributors can safely and efficiently deliver to
our customers the right products, at the right
time, and for the right total cost. And finally, we
continue to diversify and globalize our supply
chain, adding resilience and optionality to our
nimble, asset-light, and capital-efficient model.

2023 ANNUAL REPORT
Financial Highlights:
    Achieved record net sales of $1.93 billion, an
increase of 13% over 2022.
    Improved Adjusted Gross Margin 290 bps, to 36.1%
for the year.
    Achieved record Adjusted Operating Income of
$233 million, and improved Adjusted Operating
Income Margin 20 bps, to 12.1% for the year.
    Delivered the third straight year of Adjusted Diluted
EPS of greater than $4.50.
    Paid down $159 million of debt and reduced Total
Net Leverage Ratio as determined under our credit
facility from 2.5x to 1.87x.
We continue to be a leader in product innovation, and
we think the capabilities and approach of our new
product development team give us a competitive
advantage. Over decades, our ideation team has built
an expansive network of relationships with repair
technicians and end customers in the field that enable
us to continuously cultivate a robust new product
pipeline. Over the last three years, we   ve brought
over 19,000 new SKUs to market across our three
segments, many of which have enhanced features
designed to solve the repair problems inherent in the
original equipment. Some shining examples include
our patented oil filter housing, a number of electronic
control modules, and a Dorman   OE FIX    line of
pre-pressed axles. We continue to deliver innovative
aftermarket solutions, from bumper-to-bumper and
across different drivetrains from internal combustion
engines, to hybrid, to battery electric vehicles.
Brand recognition and awareness are key pillars of our
success as a product innovator and an aftermarket
leader. During 2023, we continued strengthening
Dorman   s well-established reputation, growing our
aftermarket training program and reaching over
64,000 automotive repair technicians. We also won
several industry and customer awards in recognition
of our omnichannel marketing capabilities and
product content leadership. These accolades were
due to our continued marketing investment and
distribution of popular content, like our annual
Dorman   OE FIX    Guide, which promotes our brand
and highlights new products that provide innovative
solutions for motor vehicle repairs. In 2023, we
also invested in our Dayton brand, updating brand
design, and launching our new    The Heavy Duty
Partner    campaign. As a result of these efforts and
our commitment to providing innovative solutions,
the Dorman brands, including the recently acquired
brands under the SuperATV umbrella, remain market
leaders in awareness, usage, and advocacy.
Regarding capital allocation, with a high-interest-rate
environment, we focused on paying down debt in
2023, reducing amounts outstanding under our credit
facility by $159 million and our total net leverage
ratio as determined under our credit facility to 1.87x,
below our 2.00x target. We   ll continue to support our
product innovation as a primary investment objective,
by funding necessary research and development
and capital expenditures. We will continue to
opportunistically evaluate strategic and accretive
mergers and acquisitions as a supplement to our
organic growth opportunities, as well as repurchase
shares to drive returns for our shareholders.
As I look forward, I   m optimistic about 2024. Many
industry fundamentals across our three segments
remain strong and, while there is a level of macro
uncertainty in global markets that has the potential
to impact near-term results, I believe we have the
team and plans in place to deliver strong results in
2024. I   m confident in our ability to continue to drive
innovation, capitalize on the breadth of our diverse
portfolio across segments, and draw on the many
strengths and deep commitment of our Contributors.
As we   ve proven year after year, we   ve continually
found new ways to grow our business, through new
product categories, new markets and customer
channels, and our operating discipline. I believe we   ll
continue to do so, thanks in no small part to our
Contributors, shareholders, customers, and other key
stakeholders who have confidence in and support us
along the way.
Kevin M. Olsen
President & CEO
Dorman   s 2022 results included a 53rd week. To help make results more comparable, the 53rd week has been excluded from the 2022 results referenced in this letter. A table reconciling 2022 results to 2022 results
excluding the 53rd week is included at the end of this Annual Report.
This letter includes statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on Dorman   s current
expectations and assumptions. Words such as    may,       will,       should,       likely,       probably,       anticipates,       expects,       intends,       plans,       projects,       believes,       views,       estimates,    and similar expressions are used to identify these
forward-looking statements. For a discussion identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see Dorman   s filings with the US
Securities and Exchange Commission, including, but not limited to,    Risk Factors    in the Form 10-K portion of this Annual Report.
Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Diluted Earnings Per Share and Free Cash Flow are Non-GAAP financial measures. Reconciliations of
these Non-GAAP financial measures to the most directly comparable GAAP financial measures are included at the end of this Annual Report.
DORMANPRODUCTS.COM

ANNUAL REPORT
THE STORY OF
DORMAN PRODUCTS
Dorman   s story begins with the mass market automobile.
The first moving assembly line was introduced in 1913,
accelerating car manufacturing and making vehicles
more affordable. Early cars offered people the newfound
freedom of mobility. However, to maintain this freedom,
people now needed to maintain their vehicles.
Only a few years later, in 1918, Jack and Lew Dorman, two
enterprising brothers from Cincinnati, discovered that
many people couldn   t find the basic parts they needed to
repair their cars. They started a company named Dorman
Products, selling hard-to-find automotive hardware
sourced from salvaged vehicles.
The Dormans soon found success manufacturing star
washers, and expanded into selling other hardware, like
brake adjusting screws and center spring bolts. Over
time, the company   s product lines grew to include dozens
of different small part categories, like bearings, caps,
clamps, fittings, hoses and springs.
Merchandising was where Dorman really made its mark
2023 ANNUAL REPORT
in the aftermarket. Various assortments and inventory
systems revolutionized the small parts business, and
many of these vintage orange shelves, trays, bins and
display stands are now highly sought-after collector
items.
In 1978, two other brothers, Richard and Steven Berman,
started their own company selling small replacement
parts outside Philadelphia. Seeing that there were
many simple products that people couldn   t buy from
anyone else except original equipment manufacturers,
they founded R&B Inc. to deliver more convenient and
affordable solutions. They became best known under the
brand name Motormite Manufacturing, which launched
many popular product lines like HELP!   and ConductTite  .
After competing for decades, Motormite acquired
Dorman in 1994. In 2006, the two companies further
unified under the single Dorman Products brand. Today
the company is publicly listed on the Nasdaq Global
Select Market under the ticker DORM.

2023 ANNUAL REPORT
Dorman is now one of the leading suppliers of
replacement and upgrade parts in the motor vehicle
aftermarket industry, serving passenger cars, light-,
medium-, and heavy-duty trucks, as well as specialty
vehicles, including utility terrain vehicles and all-terrain
vehicles. Dorman has more than a dozen facilities and
3,872 employees worldwide*. Headquartered in Colmar,
Pennsylvania, Dorman offers more than 133,000 distinct
products.*
As vehicles have evolved, so have we. Far from the early
days of simple components, Dorman now delivers
some of the most advanced replacement parts in the
aftermarket, like ABS modules, electronic throttle
bodies and VVT solenoids. Many of our OE FIX    parts
solve common problems customers have with the OEM
alternative, reducing repair cost and installation time,
and increasing reliability and serviceability.
The original drive of the Dorman and Berman brothers
still guides the company today. Just as both sets of
brothers saw a need to give people better options for
maintaining automobiles, we continue to give repair
professionals and owners greater freedom to fix their
vehicles. Dorman was one of the first companies to
provide these solutions, and we continue to be first to
market with new solutions every day.
Learn more at DormanProducts.com/tour.
*As of December 31, 2023.
SELECTED CONSOLIDATED FINANCIAL DATA
Fiscal Year Ended
($ in thousands, except per share data)
2023
2022
2021
2020
2019
$1,929,788
$1,733,749
$1,345,249
$1,092,748
$991,329
11.3%
28.9%
23.1%
10.2%
1.8%
685,423
564,450
462,916
383,116
339,825
Gross profit margin
35.5%
32.6%
34.4%
35.1%
34.3%
Income from operations
214,760
171,048
171,551
133,373
105,828
11.1%
9.9%
12.8%
12.2%
10.7%
129,259
121,549
131,532
106,870
83,762
$4.10
$3.85
$4.12
$3.30
$2.56
$4.54
$4.68
$4.64
$3.45
$2.65
Cash and cash equivalents
$36,814
$46,034
$58,782
$155,576
$68,353
Outstanding debt under credit
agreement
577,135
736,238
239,360


208,758
41,688
100,338
151,966
95,306
43,968
37,883
19,840
15,450
29,560
164,790
3,805
80,498
136,516
65,746
(67)
488,956
345,483
14,808

15,333
17,577
61,583
36,781
39,387
Statement of Operations Data:
Net sales
Sales Growth
Gross profit
Operating margin
Net income
Earnings per share:
Diluted

Adjusted diluted
Balance Sheet and Cash Flow Data:
Cash provided by operating
activities
Capital expenditures

Free cash flow
Cash used for acquisitions,
net of cash acquired
Share repurchases under
repurchase program

Non-GAAP measures. See NOTE below.
To help improve comparability, Adjusted Diluted Earnings Per Share for 2022 has been adjusted to remove the 53rd week. No other amounts shown for
2022 have been adjusted to reflect the removal of the 53rd week 
NOTE: For additional information regarding the amounts presented above, see the Form 10-K portion of this Annual Report.
Reconciliations of Adjusted Diluted Earnings Per Share to diluted earnings per share and Free Cash Flow to cash provided by
operating activities are included at the end of this Annual Report.

DORMANPRODUCTS.COM



 4/8/2024 Letter Continued (Full PDF)