Good morning, and welcome to the Dorman Products 2026 annual meeting of shareholders. I would now like to introduce the first presenter, Kevin Olsen, Chairman, President, and Chief-
Good morning. Thanks for joining us today. Similar to last year's annual meeting, this year's meeting is being held virtually. This allows us to be more inclusive, enabling our shareholders from around the world to participate. We'll conduct the formal portion of our meeting first. Then we'll provide an update on our business. We'll finish by answering questions at the end of the meeting. It's now shortly after 8:30 A.M. This meeting is officially called to order. At this time, I'd like to introduce the other members of the board who are attending today. They are Lisa Bachmann, Steven Berman, John Gavin, Richard Riley, Kelly Romano, Mikes Stakias, and Darrell Thomas. I'd like to recognize the members of Dorman's senior leadership team who are here with me.
We have with us today Charles Rayfield, Dorman's Chief Financial Officer and Treasurer, and Joe Braun, Dorman's Chief Counsel and Corporate Secretary. As Chairman, I'll be presiding over today's meeting, and Joe will serve as Secretary for the meeting. In addition to the directors and members of our management team I've introduced, two representatives from our independent auditors, KPMG, are joining us today. They are Robert Capriotti and Matthew Rogers. At the end of the meeting, during the Q&A session, they'll be available for questions. Now I'll turn the floor over to Joe Braun, who's going to read the notice of the meeting. Joe?
Thanks, Kevin. We're meeting today to vote on the four matters described in the proxy statement. After the voting, we'll adjourn the formal meeting, hear from Kevin on the state of the business, and provide time for general questions. Only confirmed shareholders may ask questions in the designated field on the web portal. Out of consideration for others, please limit yourself to two questions. Please note that while this meeting is being recorded, no one attending the webcast is permitted to use any recording device. For additional information, please see the rules of conduct for this meeting, which are posted at the bottom of this webcast. Turning now to the formal meeting requirements.
I received proof by affidavit that notice of the meeting has been duly given and that a proxy statement and annual report have been made available electronically or have been mailed to Dorman shareholders of record as of March 25th, 2026. Those shareholders received information on how they can vote their shares in connection with today's meeting. Our inspector of elections, American Election Services, has filed with me their oath of office and certification that all legal requirements for conducting this meeting have been met. Based on information provided by the company's transfer agent, there were approximately 30 million shares of Dorman's common stock outstanding as of the March 25th, 2026 record date. Moreover, based on information from our inspector of elections, a majority of the voting power of the common stock outstanding and entitled to vote is present in person or by proxy at today's meeting.
Therefore, a quorum is present for the purposes of conducting all the business of this meeting. A list of the shareholders eligible to vote has been available for inspection at our corporate headquarters in Colmar, Pennsylvania for the past 10 days, and it's also available during this meeting by following the instructions via the link at the bottom of this webcast. Therefore, this meeting is lawfully and properly convened. As I mentioned, there are four proposals on the agenda today. Proposal 1 is the election of 8 nominees as directors. All of our current directors have been nominated for re-election, and their biographies are included in the proxy statement beginning on page 7. A nominee for director will be elected to serve on the board if the votes cast for such nominee exceed the votes cast against such nominee.
Proposal 2 is the advisory approval of the compensation of our named executive officers identified in the proxy statement. A vote on this proposal is a non-binding vote, although the compensation committee and the board will take the results of the vote into consideration when making future compensation decisions. The proposed resolution for adoption is included in the proxy statement on page 26. To be adopted, this proposal must be approved by a majority of the votes cast. Proposal 3 is the ratification of KPMG as Dorman's independent registered public accounting firm for 2026.
A vote on this proposal is a non-binding vote, which means that even if the selection is ratified, our audit committee, in its discretion, may select a different registered public accounting firm any time during the year if it determines that such a change would be in the best interest of the company and its shareholders. The proposal is included in more detail in the proxy statement on page 28. To be adopted, this proposal must be approved by a majority of the votes cast. Proposal four is the approval of the 2026 omnibus incentive plan. The proposal is described in more detail in the proxy statement on page 29. To be adopted, this proposal must be approved by a majority of the votes cast. At this time, we'll proceed to a vote on each of the proposals.
Let me remind you that if you have already voted, there is no need for you to cast another ballot during this meeting unless you wish to change the vote that you previously submitted. Any shareholder who hasn't yet voted or wishes to change their vote may do so by clicking on the voting button on the web portal and following the instructions there. I now declare the polls open for voting. Now that everyone has had the opportunity to vote, I now declare the polls closed.
Joe, at this time, can you please provide the preliminary voting results?
We've been informed by the Inspector of Elections that the preliminary voting report shows that the nominees for election to the board have been duly elected, the compensation of the named executive officers has been approved by advisory vote, the shareholders have ratified the selection of KPMG as Dorman's independent registered public accounting firm for fiscal 2026, and the 2026 Omnibus Incentive Plan has been approved. We'll report the final vote results in an SEC filing within four business days.
Thanks, Joe. There being no further business to come before the meeting, the annual meeting is now adjourned. At this time, I'll give a brief update on our business, followed by our Q&A session. Before I begin, though, I'll ask for Joe to make a brief statement regarding that update. Joe?
Thanks, Kevin. You should note that our remarks may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Dorman's actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of specific risk factors that could cause actual results to differ materially from those expressed in the forward-looking statements, please refer to Dorman's Form 10-K for the year ended December 31, 2025, and its Form 10-Q for the quarter ended March 28, 2026, each of which is filed with the U.S. Securities and Exchange Commission. In addition, we may include some non-GAAP financial measures in our discussions.
Reconciliations of the most directly comparable GAAP financial measures can be found in our most recent earnings release for the first quarter of 2026, which is accessible via our investor relations homepage at dormanproducts.com. Now, I'll turn it over to Kevin for the business update. Kevin?
Thanks, Joe . Thank you to our shareholders for joining us today. Despite a dynamic macroeconomic environment, most notably impacted by tariffs, we delivered strong performance in fiscal 2025. The year was marked by solid top and bottom line growth, sustained innovation, and disciplined execution across the organization. This performance builds on the momentum we've driven over the last several years and reflects the resilience, focus, and commitment that our contributors bring to Dorman each and every day. For the year, net sales reached $2.13 billion, representing a 6% increase over 2024. Growth was driven by our light-duty business with strong demand in the first and second quarters, along with the successful execution of pricing initiatives during the back half of the year. We also delivered meaningful margin expansion and earnings growth.
Adjusted operating income increased 17% and adjusted diluted EPS rose 24% to $8.87. These results were driven by disciplined pricing actions, the timing of tariff-related costs, strong performance of new products, and continued progress from our supplier diversification and productivity initiatives. While tariffs impacted inventory costs and cash flow timing during the year, we remained disciplined in our capital deployment. In 2025, we generated $114 million in operating cash flow, repaid $42 million of debt, and repurchased $41 million of common stock, all while finishing the year with a strong balance sheet and liquidity position. While M&A activity was quieter during the year due to the economic uncertainty, acquisitions remain an important component of our long-term growth algorithm. 2025 was also marked by an important milestone for our innovation strategy.
During the year, our contributors launched more than 5,500 new SKUs across our light-duty, heavy-duty, and specialty vehicle segments, driving record new product sales. With one of the largest product portfolios in the industry, we continue to serve as a leading growth engine for our customers. On the innovation front, a key area of differentiation for Dorman is our ability to identify, design, and develop complex electronic solutions for our end users. In 2025, we took meaningful steps to add these advanced offerings to our portfolio. A great example was the launch of our electronic power steering rack for certain Dodge Ram truck models. As part of our OE FIX catalog, this highly complex critical component was designed with meaningful improvements over the OEM's part to help ensure long, reliable service life.
Solutions like this illustrate how we meet the evolving needs of next-generation vehicles. Our innovation pipeline is stronger and deeper than ever. Throughout 2025, we also continued to strengthen our operational and commercialization capabilities, from increased automation in our distribution centers to process improvements across the business and initiatives to enhance customer experience and drive expanded market reach. We made targeted investments during the year to support sustainable growth. We also made significant progress strengthening resiliency and redundancy within our supply chain. In a year heavily shaped by tariff developments, we further diversified our sourcing footprint to improve flexibility, mitigate cost impacts, and enhance service levels for our customers and end users. While the first several months of 2026 have presented evolving economic and geopolitical dynamics, I feel confident in our ability to navigate through the challenges we're facing given our strong business model and financial position.
The macro trends of the light-duty aftermarket remain strong, with the average age of vehicles, miles traveled, and used vehicle prices continuing to increase. While the freight markets remain pressured, our heavy-duty segment is capturing share in certain channels, and our specialty vehicle segment is positioned well with a broadened product portfolio and expanded dealer network. These factors, combined with increasing vehicle complexity and our diversified capabilities in innovation, supply chain, and commercial execution, position Dorman well to drive long-term growth. I'd like to close by thanking our world-class contributors for their dedication and commitment. Their efforts and our strong culture are the foundation of our success. I also wanna thank our customers, suppliers, and shareholders for their continued partnership and trust. On behalf of the board of directors and management team, thank you for supporting Dorman.
We'd like to give our shareholders an opportunity to ask questions by entering them into the web portal. Please note we'll attempt to answer as many questions as time allows, but only questions that are relevant to the meeting will be addressed. At this time, we've reached the end of our program. Thank you for attending today's annual meeting and for your continuing support of Dorman.
This now concludes today's meeting. Thank you for attending. You may now disconnect and have a wonderful rest of your day.