# STANDARD MOTOR PRODUCTS, INC. (SMP)

Informational only - not investment advice.

CIK: 0000093389
SIC: 3714 Motor Vehicle Parts & Accessories
SIC breadcrumb: [Manufacturing](/division/D/) > [Transportation Equipment](/major-group/37/) > [SIC 3714 Motor Vehicle Parts & Accessories](/industry/3714/)
Latest 10-K filed: 2026-02-26
SEC page: https://www.sec.gov/edgar/browse/?CIK=93389
Filing source: https://www.sec.gov/Archives/edgar/data/93389/000009338926000012/smp-20251231.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 1791158000 | USD | 2025 | 2026-02-26 |
| Net income | 41335000 | USD | 2025 | 2026-02-26 |
| Assets | 1995241000 | USD | 2025 | 2026-02-26 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000093389.json. Derived margins are computed from the extracted annual SEC facts.

| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue |  | 1,058,482,000 | 1,116,143,000 | 1,092,051,000 | 1,137,913,000 | 1,128,588,000 | 1,298,816,000 | 1,371,815,000 | 1,358,272,000 | 1,463,849,000 | 1,791,158,000 |
| Net income |  | 60,430,000 | 37,976,000 | 43,003,000 | 57,917,000 | 57,393,000 | 90,886,000 | 55,351,000 | 34,148,000 | 27,500,000 | 41,335,000 |
| Operating income |  | 98,789,000 | 97,521,000 | 81,268,000 | 94,495,000 | 108,895,000 | 128,999,000 | 104,135,000 | 92,677,000 | 80,624,000 | 136,507,000 |
| Gross profit |  | 322,487,000 | 326,656,000 | 312,787,000 | 331,800,000 | 336,655,000 | 376,931,000 | 382,539,000 | 388,826,000 | 423,321,000 | 559,408,000 |
| Diluted EPS |  | 2.62 | 1.64 | 1.88 | 2.54 | 2.51 | 4.02 | 2.50 | 1.54 | 1.24 | 1.84 |
| Assets |  | 768,697,000 | 787,567,000 | 819,116,000 | 903,854,000 | 956,540,000 | 1,197,961,000 | 1,254,929,000 | 1,293,047,000 | 1,814,126,000 | 1,995,241,000 |
| Liabilities |  | 327,669,000 | 333,913,000 | 375,931,000 | 399,626,000 | 406,304,000 | 585,334,000 | 633,891,000 | 642,174,000 | 1,184,044,000 | 1,296,979,000 |
| Stockholders' equity |  | 441,028,000 | 453,654,000 | 467,201,000 | 504,228,000 | 550,236,000 | 601,580,000 | 610,020,000 | 635,064,000 | 615,745,000 | 683,699,000 |
| Cash and cash equivalents | 18,800,000 | 19,796,000 | 17,323,000 | 11,138,000 | 10,372,000 | 19,488,000 | 21,755,000 | 21,150,000 | 32,526,000 | 44,426,000 |  |
| Net margin |  | 5.71% | 3.40% | 3.94% | 5.09% | 5.09% | 7.00% | 4.03% | 2.51% | 1.88% | 2.31% |
| Operating margin |  | 9.33% | 8.74% | 7.44% | 8.30% | 9.65% | 9.93% | 7.59% | 6.82% | 5.51% | 7.62% |

## Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-30. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000093389.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

| Quarter | End date | Revenue | Net income | Diluted EPS | Method |
| --- | --- | ---: | ---: | ---: | --- |
| 2022-Q2 | 2022-06-30 |  |  | 0.86 | reported discrete quarter |
| 2022-Q3 | 2022-09-30 |  |  | 0.40 | reported discrete quarter |
| 2023-Q1 | 2023-03-31 |  |  | 0.54 | reported discrete quarter |
| 2023-Q2 | 2023-06-30 | 353,075,000 | 9,137,000 | 0.41 | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 386,413,000 | 6,659,000 | 0.30 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 290,756,000 | 6,434,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2024-Q1 | 2024-03-31 | 331,403,000 | 8,824,000 | 0.39 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 389,829,000 | 17,063,000 | 0.77 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 399,265,000 | 3,810,000 | 0.17 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 343,352,000 | -2,197,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2025-Q1 | 2025-03-31 | 413,379,000 | 12,566,000 | 0.56 | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 493,853,000 | 25,242,000 | 1.13 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 498,836,000 | -4,335,000 | -0.19 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 385,090,000 | 7,862,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2026-Q1 | 2026-03-31 | 451,166,000 | 17,136,000 | 0.75 | reported discrete quarter |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance
- [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States
- [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States
- [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States
- [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States
- [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States
- [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized
- [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized
- [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks
- [GDP](/indicator/GDP/): Gross Domestic Product
- [GPDI](/indicator/GPDI/): Gross Private Domestic Investment
- [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment
- [PCEC](/indicator/PCEC/): Personal Consumption Expenditures
- [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services
- [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt
- [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit
- [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts
- [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures
- [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing
- [USCONS](/indicator/USCONS/): All Employees, Construction
- [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade
- [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities
- [USGOVT](/indicator/USGOVT/): All Employees, Government
- [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private
- [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods
- [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- [BUSINV](/indicator/BUSINV/): Total Business Inventories
- [EXPGS](/indicator/EXPGS/): Exports of Goods and Services
- [IMPGS](/indicator/IMPGS/): Imports of Goods and Services
- [IR](/indicator/IR/): Import Price Index (End Use): All Commodities
- [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand

## Latest quarter (10-Q)

Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/93389/000009338926000050/smp-20260331.htm

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization.
Confidence: high
Filing date: 2026-04-30
Report date: 2026-03-31

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this Report are indicated by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “estimates,” “projects,” “strategies” and similar expressions. These statements represent our expectations based on current information and assumptions and are inherently subject to risks and uncertainties. Our actual results could differ materially from those which are anticipated or projected as a result of certain risks and uncertainties, including, but not limited to, changes or loss in business relationships with our major customers and in the timing, size and continuation of our customers’ programs; changes in our supply chain financing arrangements, such as changes in terms, termination of contracts and/or the impact of rising interest rates; increases in production or material costs, including procurement costs resulting from higher customs duties and tariffs; the ability of our customers to achieve their projected sales; competitive product and pricing pressures, and inflationary cost increases in raw materials, labor and transportation, that cannot be recouped in product pricing; the performance of the automotive aftermarket and/or other end-markets that we supply; changes in the product mix and distribution channel mix; economic and market conditions; successful integration of acquired businesses; our ability to achieve benefits from our cost savings initiatives; product liability matters (including, without limitation, those related to asbestos-related contingent liabilities); the effects of disruptions in the supply chain caused by geopolitical risks; uncertainties in U.S. trade policy, particularly as it relates to Mexico, Canada, China, and the European Union; as well as other risks and uncertainties, such as those described under Risk Factors, Quantitative and Qualitative Disclosures About Market Risk and those detailed herein and from time to time in the filings of the Company with the SEC. Forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. In addition, historical information should not be considered as an indicator of future performance. The following discussion should be read in conjunction with the unaudited consolidated financial statements, including the notes thereto, included elsewhere in this Report.

Overview

We are a leading manufacturer and distributor of premium replacement parts in the automotive aftermarket and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets. Our business is organized into four operating segments. Our automotive aftermarket business is comprised of three segments, Vehicle Control, Temperature Control and Nissens Automotive while our Engineered Solutions segment offers a broad array of conventional and future-oriented technologies. We sell our products primarily to retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Europe, Canada, Mexico, and other foreign countries.

Our Vehicle Control operating segment services our core automotive aftermarket customers, deriving its sales from three major product groups: (1) Ignition, Emissions & Fuel Delivery, which includes the traditional internal combustion engine (ICE) dependent categories; (2) Electrical & Safety, which includes powertrain neutral vehicle technologies such as electrical switches/relays, safety related products such as anti-lock brake and vehicle speed sensors, tire pressure monitoring, park assist sensors, and advanced driver assistance components; and (3) Wire Sets & Other, which includes spark plug wire sets and other related products, and are product categories we have noted to be in secular decline based upon product life cycle.

Our Temperature Control operating segment services our core automotive aftermarket customers with thermal products, and is poised to benefit from the broader adoption of more complex air conditioning and other thermal systems. These systems will provide passenger comfort regardless of the vehicles’ powertrain, and are being developed to cool batteries and other products used on electric vehicles. Segment offerings include sales from thermal products in the aftermarket business under two major product groups: (1) AC System Components, which includes compressors, connecting lines, heat exchangers, and expansion devices; and (2) Other Thermal Components, which includes parts that provide engine, transmission, electric drive motor, and battery temperature management.

Our Nissens Automotive operating segment services our core automotive aftermarket customers primarily in Europe with thermal management and engine efficiency products. Segment offerings include premium replacement parts within the following major product groups: (1) Air Conditioning, which includes compressors and condensers, electronics, such as blowers, fans and pressure sensors, and related components, such as evaporators, expansion valves and heaters; (2) Engine Cooling, which includes radiators and oil coolers, electronics, such as electric water pumps and temperature sensors, and related components, such as expansion tanks and fan clutches; and (3) Engine Efficiency, which includes turbochargers and

26

intercoolers, electronics, such as exhaust gas recirculation (EGR) valves and modules, and related components, such as EGR coolers and oil feed pipes.

Our Engineered Solutions operating segment supplies custom-engineered solutions to vehicle and equipment manufacturers in highly diversified global end-markets such as commercial and light vehicles, construction, agriculture, power sports and marine. Segment offerings include product categories that offer a broad array of conventional and future-oriented technologies, including those that are specific to vehicle electrification as well as those that are powertrain-neutral.

Overview of Financial Performance

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto. This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during the three months ended March 31, 2026 and 2025.

Three Months Ended

March 31,

(In thousands, except per share data)

2026

2025

Net sales

$

451,166 

$

413,379 

Gross profit

139,173 

124,722 

Gross profit %

30.8

%

30.2

%

Operating income

34,093 

24,462 

Operating income %

7.6

%

5.9

%

Earnings from continuing operations before income taxes

25,296 

18,949 

Provision for income taxes

6,826 

5,069 

Earnings from continuing operations

18,470 

13,880 

Loss from discontinued operations, net of income taxes

(1,185)

(1,139)

Net earnings

17,285 

12,741 

Net earnings attributable to noncontrolling interest

149 

175 

Net earnings attributable to SMP

17,136 

12,566 

Net earnings per share data attributable to SMP – Diluted:

Continuing operations

$

0.81 

$

0.61 

Discontinued operations

(0.06)

(0.05)

Net earnings per common share

$

0.75 

$

0.56 

Consolidated net sales for the three months ended March 31, 2026 were $451.2 million, an increase of $37.8 million, or 9.1%, compared to net sales of $413.4 million in the same period in 2025.

The increase in net sales in the three months ended March 31, 2026 when compared to the same period in the prior year reflects the impact of multiple factors including:

•higher net sales in our Vehicle Control operating segment as certain customers expanded their range of our products, as well as some benefit from higher prices following the pass through to customers of tariffs implemented later in 2025,

•improved net sales in our Engineered Solutions operating segment as growth begins to recover from the general softness in end markets experienced in 2025,

•increased net sales in our Nissens Automotive operating segment with the benefit of foreign exchange conversion and higher demand from existing customers, and

•slight increase in net sales in our Temperature Control operating segment as the benefits of the strong growth in 2025 continue into early 2026.

•Overall, full year results at our Temperature Control and Nissens Automotive operating segments will be dependent upon summer weather conditions and customer inventory levels.

Gross margins, as a percentage of net sales, increased to 30.8% in the first quarter of 2026 compared to 30.2% in the first quarter of 2025. Overall, the gross margin increase as a percentage of sales in the first quarter of 2026 primarily reflects

27

the positive impact of higher sales volumes including the impact of cost control measures and $4.6 million of amortization for inventory fair value adjustments related to the application of accounting for business combinations in the first quarter of 2025 that did not recur, which more than offset the impact of higher tariffs on imports into the United States.

Operating margin as a percentage of net sales for the three months ended March 31, 2026 increased to 7.6% as compared to 5.9% for the same period in 2025. Included in our operating margin were selling, general and administrative expenses of $104.8 million, or 23.2% of net sales for the three months ended March 31, 2026 compared to $99.8 million, or 24.2% of net sales, for the same period in 2025. The $5.0 million increase in selling, general and administrative expenses in the first quarter of 2026 as compared to the first quarter of 2025 is principally due to higher distribution expenses driven by higher sales. However, selling, general and administrative expenses as a percentage of net sales improved due to higher sales volume relative to fixed cost components.

United States Trade Policy

Since February 2025, the United States government imposed new tariffs on imports to the United States from certain countries and regions, including Canada, Mexico, China, the European Union and many other countries. Certain foreign governments have implemented retaliatory actions in response to the change in United States trade policy. We operate manufacturing plants in, and rely on imports primarily from Canada, Mexico, China and the European Union to serve our customers in the United States, and therefore, we are exposed to the adverse impacts of higher tariffs on imported raw materials, components and finished goods. In response, we have taken, and will continue to take actions to optimize our operations to minimize the impact of such tariffs and maintain our profitability through cost and pricing measures. We believe our diverse global footprint provides a competitive advantage and resiliency within our supply chain. More than one-half of our sales in the United States are from products manufactured in North America, which are currently mostly exempt from tariffs under the United States-Mexico-Canada Agreement. Products sourced from China represent approximately one-quarter of our sales in the United States, with the remainder of our sales in the United States from products sourced from other regions of the world which are currently subject to lower tariffs. Furthermore, our recent acquisition of Nissens Automotive provides sales diversification outside of the United States. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the United States and affected countries, retaliation imposed by other countries, tariff e

[Excerpt truncated for page length; source filing is linked above.]

## Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization.
Confidence: high

ITEM 7.           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview of Financial Performance

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto. This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during each of the fiscal years in the two-year period ended December 31, 2025. Discussion and analysis of our financial condition and results of operations for fiscal year 2024, and comparisons of fiscal years 2024 and 2023 can be

26

Index

found in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Year Ended December 31,

(In thousands, except per share data)

2025

2024

Net sales

$

1,791,158 

$

1,463,849 

Gross profit

559,408 

423,321 

Gross profit %

31.2

%

28.9

%

Operating income

136,507 

80,624 

Operating income %

7.6

%

5.5

%

Earnings from continuing operations before income taxes

110,523 

73,989 

Provision for income taxes

30,617 

19,385 

Earnings from continuing operations

79,906 

54,604 

Loss from discontinued operations, net of income taxes

(37,698)

(26,128)

Net earnings

42,208 

28,476 

Net earnings attributable to noncontrolling interest

873 

976 

Net earnings attributable to SMP

41,335 

27,500 

Net earnings per share data attributable to SMP – Diluted:

Continuing operations

$

3.52 

$

2.41 

Discontinued operations

(1.68)

(1.17)

Net earnings per common share

$

1.84 

$

1.24 

Consolidated net sales for 2025 were $1,791.2 million, an increase of $327.3 million, or 22.4% compared to net sales of $1,463.8 million in 2024. The increase in net sales in 2025 reflects the impact of multiple factors including:

•$269.6 million higher net sales in 2025 due to the inclusion of a full year performance of our new segment, Nissens Automotive which was acquired on November 1, 2024, as compared to two months in 2024,

•strong demand in our Temperature Control operating segment primarily reflecting the impact of growth in certain product categories and gains in market share,

•stable demand in our Vehicle Control aftermarket segment, offset by

•lower net sales in our Engineered Solutions operating segment as growth from business wins and successful cross-selling efforts offset lower demand due to cyclical softness across global end markets.

Gross margin as a percentage of net sales in 2025 was 31.2% as compared to 28.9% in 2024. Overall, the increase in gross margin as a percentage of sales in 2025 primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar. In addition, we experienced the positive impact of higher sales volumes in our legacy segments lead to higher fixed manufacturing cost absorption, improved operating performance including the impact of cost control measures, and increased pricing primarily to incorporate higher tariffs on imports into the United States, which more than offset increases in certain materials and labor costs and a lag in the timing of updating pricing for the impact of higher tariffs. We anticipate that the ongoing benefits from our cost-savings initiatives and synergies with our newly acquired operating segment, Nissens Automotive, will mitigate continued pressure on margins. While our business in U.S. markets could be impacted by additional tariffs, we expect to mitigate the impact with a combination of price increases and cost reduction efforts.

Operating margin as a percentage of net sales in 2025 was 7.6% as compared to 5.5% in 2024. Overall the increase in operating margin as a percentage of sales primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which resulted in improved gross margin, as well as lower acquisition related costs and restructuring expenses. Included in our operating margin were selling, general and administrative expenses of $420.7 million, or 23.5% of net sales in 2025 compared to $335.1 million, or 22.9% of net sales in 2024. The $85.6 million increase in selling, general and administrative expenses in 2025 is principally due to (i) $79.3 million in selling, general and administrative expenses for Nissens Automotive as the results reflect a full year of activity compared to two months from the close of the acquisition in 2024, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales and costs associated with the transition away from our Edwardsville, Kansas distribution center to our new

27

Index

distribution facility in Shawnee, Kansas, and (iii) increased general and administrative costs related to company-wide strategic initiatives, offset by (iv) lower costs associated with our acquisition of Nissens Automotive.

The global automotive aftermarket industry continues to be resilient with a growing number of older vehicles on the road. Our global automotive aftermarket business remains strong with demand for our products driven by the quality, brand recognition and high levels of customer service that we provide. We are optimistic about our business and are well positioned to capitalize on these favorable trends and the long-term growth potential in the coming years.

United States Trade Policy

Since February 2025, the United States government imposed new tariffs on imports to the United States from certain countries and regions, including Canada, Mexico, China, the European Union and many other countries. Certain foreign governments have implemented retaliatory actions in response to the change in United States trade policy. We operate manufacturing plants in, and rely on imports primarily from Canada, Mexico, China and the European Union to serve our customers in the United States, and therefore, we are exposed to the adverse impacts of higher tariffs on imported raw materials, components and finished goods. In response, we have taken, and will continue to take actions to optimize our operations to minimize the impact of such tariffs and maintain our profitability through cost and pricing measures. We believe our diverse global footprint provides a competitive advantage and resiliency within our supply chain. More than one-half of our sales in the United States are from products manufactured in North America, which are currently mostly exempt from tariffs under the United States-Mexico-Canada Agreement. Products sourced from China represent approximately one-quarter of our sales in the United States, with the remainder of our sales in the United States from products sourced from other regions of the world which are currently subject to lower tariffs. Furthermore, our recent acquisition of Nissens Automotive provides sales diversification outside of the United States. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the United States and affected countries, retaliation imposed by other countries, tariff exemptions, and decisions to pause, reimpose or increase tariffs. We will continue to actively monitor international trade developments and evaluate the potential impact on our results of operations and financial condition.

28

Index

Results of Operations

Sales. Consolidated net sales for 2025 were $1,791.2 million, an increase of $327.3 million, or 22.4%, compared to $1,463.8 million in 2024, with the majority of our net sales to customers located in the United States. Consolidated net sales increased in all of our automotive aftermarket operating segments when compared to the prior fiscal year.

The following table summarizes consolidated net sales by segment and by major product group within each segment (in thousands):

Year Ended December 31,

2025

2024

Vehicle Control

Engine Management (Ignition, Emissions and Fuel Delivery)

$

486,203 

$

467,460 

Electrical and Safety

241,938 

229,361 

Wire Sets and Other

57,251 

65,739 

Total Vehicle Control

785,392 

762,560 

Temperature Control

AC System Components

316,781 

274,926 

Other Thermal Components

109,586 

105,162 

Total Temperature Control

426,367 

380,088 

Nissens Automotive

Air Conditioning

126,727 

9,214 

Engine Cooling

126,389 

19,287 

Engine Efficiency

52,261 

7,244 

Total Nissens Automotive

305,377 

35,745 

Engineered Solutions

Light Vehicle

84,887 

91,548 

Commercial Vehicle

81,239 

89,171 

Construction/Agriculture

35,618 

35,832 

All Other

72,740 

68,905 

Total Engineered Solutions

274,484 

285,456 

Intersegment sales

(462)

— 

Total

$

1,791,158 

$

1,463,849 

Vehicle Control’s net sales for 2025 increased $22.8 million, or 3%, to $785.4 million compared to $762.6 million in 2024. Increases in net sales within engine management and electrical safety product groups reflected strong demand from customers, and was tempered by the continued secular decline in sales of wire sets.

Temperature Control’s net sales for 2025 increased $46.3 million, or 12%, to $426.4 million compared to $380.1 million in 2024. The higher year-over-year Temperature Control net sales reflects continued very strong customer demand compared to the same period in 2024 benefiting from a longer peak season, growth in certain product categories and gains in market share as our existing customers continued to grow. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.

Nissens Automotive's net sales for 2025 increased by $269.6 million from $35.7 million in 2024 to $305.4 million in 2025 due to a full year of sales activity as compared to two months from the acquisition date in 2024. Nissens Automotive's net sales exceeded our expectations in 2025 reflecting gains in market share. Demand for Nissens Automotive products follow a similar annual seasonal pattern as the Temperature Control segment, as demand for many products generally increases with warmer weather. We expect to benefit from revenue synergies resulting from the acquisition in 2026 and beyond.

29

Index

Engineered Solutions’ net sales for 2025 decreased $11.0 million, or 4%, to $274.5 million compared to $285.5 million in 2024. Overall, net sales in our Engineered Solutions operating segment declined year-over-year as growth from new business wins and successful cross-selling efforts, was more than offset by slower demand from existing customers. We are optimistic that demand will stabilize in 2026.

Gross Margins. Gross margins, as a percentage of consolidated net sales, increased to 31.2% for 2025, compared to 28.9% for 2024. The following table summarizes gross margins by segment (in thousands):

Year Ended

December 31,

Vehicle

Control

Temperature

Control

Nissens Automotive

Engineered

Solutions

Other

Total

2025

Net sales

$

785,392

$

426,367

$

305,377

$

274,484

$

(462)

$

1,791,158

Gross margins

247,105

144,821

120,430

47,052

—

559,408

Gross margin percentage

31.5

%

34.0

%

39.4

%

17.1

%

—

31.2

%

2024

Net sales

$

762,560

$

380,088

$

35,745

$

285,456

$

—

$

1,463,849

Gross margins

244,085

117,792

11,525

49,919

—

423,321

Gross margin percentage

32.0

%

31.0

%

32.2

%

17.5

%

—

28.9

%

Compared to 2024, gross margin percentage at our Temperature Control and Nissens Automotive operating segments increased by 3.0 percentage points from 31.0% to 34.0%, and 7.2% percentage points from 32.2% to 39.4%, respectively. Gross margin percentage at our Vehicle Control and Engineered Solutions operating segments decreased slightly by 0.5 percentage points from 32.0% to 31.5% and 0.4 percentage points from 17.5% to 17.1%, respectively.

The gross margin percentage in our Vehicle Control operating segment decreased slightly as higher sales volume and higher fixed cost absorption due to higher production levels than those achieved in 2024, was more than offset by the impact of passing higher tariffs on imports into the United States through to customers at cost.

The gross margin percentage increase in our Temperature Control operating segment reflected higher sales volume, higher customer pricing, improved operating performance from cost savings initiatives, lower seasonal returns and favorable fixed cost absorption due to higher production levels than those achieved in 2024.

The gross margin percentage at our Nissens Automotive operating segment reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar. Inventory fair value adjustments in 2025 of $4.6 million related to the application of accounting for business combinations were fully amortized by the end of the second quarter of 2025.

Despite lower net sales, the gross margin percentage in our Engineered Solutions operating segment remained close to flat as compared to 2024 due to a favorable customer sales mix, partially offset by costs associated with the discontinuation of a customer program.

While we anticipate continued margin pressure resulting from a competitive market environment, we believe that our cost savings and product rationalization initiatives should mitigate much of this impact to our gross margins as well as, revenue and cost synergies related to the continued integration of our new segment, Nissens Automotive. While our business in U.S. markets could be impacted by additional tariffs, we expect to mitigate the impact with a combination of price increases and cost reduction efforts.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $85.6 million to $420.7 million, or 23.5% of consolidated net sales in 2025, as compared to $335.1 million, or 22.9% of consolidated net sales in 2024. The $85.6 million increase in selling, general and administrative expenses in 2025 is principally due to (i) $79.3 million in selling, general and administrative expenses for Nissens Automotive as the results reflect a full year of activity compared to two months from the close of the acquisition in 2024, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales and costs associated with the transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas, and (iii) increased general and administrative costs related to company-wide strategic initiatives, offset by (iv) lower costs associated with our acquisition of Nissens Automotive.

30

Index

Restructuring Expenses. Restructuring expenses of $2.6 million in 2025, primarily consisted of costs to relocate machinery and equipment within the Cost Reduction Initiative initiated in 2022, as compared to $7.7 million in 2024 which primarily consisted of severance and other benefit enhancements within the Separation Program initiated in 2024. Additional restructuring expenses related to these programs are expected to be immaterial.

Operating Income. Operating income was $136.5 million, or 7.6%, of consolidated net sales in 2025, compared to $80.6 million, or 5.5%, of consolidated net sales in 2024. The year-over-year increase in operating income of $55.9 million primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which resulted in improved gross margin, as well as lower acquisition related costs and restructuring expenses, offset by higher selling, general and administrative expenses.

Other Non-Operating Income, Net. Other non-operating income, net was $5.4 million in 2025, compared to $6.9 million in 2024. The year-over-year decrease in other non-operating income, net primarily results from less favorable impact of changes in foreign currency exchange rates and a decrease in year-over-year equity income from our joint ventures.

Interest Expense. Interest expense increased to $31.3 million in 2025, compared to $13.5 million in 2024. The year-over-year increase in interest expense reflects the impact of higher average outstanding balances due to borrowings under our 2024 Credit Agreement to fund our acquisition of Nissens Automotive in 2024, partly offset by slightly lower year-over-year average interest rates on our credit facilities, including the impact of our interest rate swap agreements.

Income Tax Provision. The income tax provision for 2025 was $30.6 million at an effective tax rate of 27.7%, compared to $19.4 million at an effective tax rate of 26.2% in 2024. The higher effective tax rate in 2025 compared to 2024 reflects an increase in earnings from international as compared to U.S. operations, and an increase in future tax liabilities associated with unrepatriated earnings from international operations.

Loss From Discontinued Operations. Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2025 and 2024, as well as other available information, and legal expenses and other costs associated with our asbestos-related liability. During the years ended December 31, 2025 and 2024, we recorded a net loss of $37.7 million and $26.1 million from discontinued operations, respectively. The loss from discontinued operations for the years ended December 31, 2025 and 2024 includes a $44.4 million and $29.3 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2025 and 2024 actuarial studies, and legal and other miscellaneous expenses, before taxes, of $5.2 million and $4.8 million for 2025 and 2024, respectively. As discussed more fully in Note 23 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.

Net Earnings Attributable to Noncontrolling Interest. Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in Trombetta Asia, Ltd., our 70% owned joint venture in Hong Kong, with operations in China and, in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co. Ltd., our 80% owned joint venture in China. Net earnings attributable to the noncontrolling interest were $0.9 million and $1.0 million during the years ended December 31, 2025 and 2024, respectively.

Restructuring Programs

For a detailed discussion on the restructuring and integration costs, see Note 3, “Restructuring Expenses,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

31

Index

Liquidity and Capital Resources

Our primary cash requirements include working capital, capital expenditures, quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions. The following table summarizes our primary sources of funds including ongoing net cash flows from operating activities and availability under our credit agreements (in thousands).

December 31,

2025

2024

Operating cash flows

$

57,440 

$

76,693 

Total debt

$

618,715 

$

562,314 

Cash and cash equivalents

72,031 

44,426 

Net debt

$

546,684 

$

517,888 

Remaining borrowing capacity

137,004 

193,379 

Total liquidity

$

209,035 

$

237,805 

Operating Activities. During 2025, cash provided by operating activities was $57.4 million as compared to cash provided by operating activities of $76.7 million in 2024.

Net earnings during 2025 were $42.2 million compared to $28.5 million in 2024. The decrease in cash provided by operating activities resulted primarily from an increase in inventories of $81.6 million compared to a increase of $36.9 million in the prior year, primarily due to higher net sales, additional tariff costs capitalized into inventory, preparation for and delivery timing of expected orders in early 2026. We continue to actively manage our working capital to maximize our operating cash flow.

Investing Activities. Cash used in investing activities was $35.7 million in 2025 as compared to $418.7 million in 2024. Investing activities during 2025 primarily consisted of capital expenditures of $38.7 million as compared to 2024 which primarily consisted of $372.5 million of cash paid for the acquisition of 100% of the shares of Nissens Automotive, net of cash acquired of $24.6 million, and capital expenditures of $44.0 million. The year-over-year decrease in capital expenditures primarily relates to lower spending as our new distribution facility in Shawnee, Kansas reaches completion.

We regularly review our plans for capital investment and believe we have sufficient liquidity to meet our needs.

Financing Activities. Cash used in financing activities was $0.3 million in 2025 as compared to cash provided by financing activities of $349.5 million in 2024. In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). Borrowings under the 2024 Credit Agreement were used to repay all outstanding borrowings under the 2022 Credit Agreement and to finance the Company's acquisition of Nissens Automotive and related transaction costs, and will be used for general corporate purposes of the Company and its subsidiaries.

During 2025, we paid dividends to SMP shareholders of $27.3 million funded with net borrowings under our 2024 Credit Agreement and cash provided by our operating activities.

During 2024, we increased our borrowings by $392.0 million under our 2024 Credit Agreement; and paid dividends of $25.3 million and $2.3 million to SMP shareholders and shareholders of our noncontrolling interests, respectively. Cash provided by our operating activities in 2024 was used to reduce our borrowings under our 2022 Credit Agreement, fund our investing activities and pay dividends.

Quarterly dividends were paid at a rate of $0.31 in 2025 and $0.29 in 2024.

Liquidity

Our primary sources of funds are ongoing net cash flows from operating activities and availability under our 2024 Credit Agreement (as detailed below).

32

Index

In May 2024 and July 2024, the Company amended it's then-existing Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders ("2022 Credit Agreement"), to transition from the Canadian Dollar Offered Rate to the Canadian Overnight Repo Rate Average for benchmark borrowings denominated in Canadian dollars and to provide for a new $125 million term loan and the use of funds available under the revolving credit facility to finance the acquisition of Nissens Automotive and related transaction costs. For additional information on our agreement to acquire Nissens Automotive see Note 2, “Business Combinations,” in the Notes to Consolidated Financial Statements in Item 8 of this Report.

In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). The 2024 Credit Agreement matures on September 16, 2029 and provides for an approximately $750 million credit facility, comprised of (i) a $430 million multi-currency revolving credit facility ("global tranche"); (ii) a $10 million multi-currency revolving credit facility, available to one or more wholly-owned Danish subsidiaries of the Company ("Danish tranche"); (iii) a $200 million term loan facility in U.S. dollars; and (iv) a 100 million euros term loan facility. The revolving credit facility has a $25 million sublimit for the issuance of letters of credit, and a $30 million sublimit for the borrowing of swingline loans.

Borrowings under the 2024 Credit Agreement were used to repay all outstanding borrowings under the 2022 Credit Agreement and to finance the Company's acquisition of Nissens Automotive and related transaction costs, and will be used for general corporate purposes of the Company and its subsidiaries. The term loans amortize in quarterly installments of 1.25% in each of the first two years following the funding, 1.875% for the next year, and 2.50% in each quarter thereafter. The Company may request up to two one-year extensions of the maturity date.

The Company may, subject to customary conditions, increase the global tranche or obtain incremental term loans in an aggregate amount not to exceed (x) the greater of (i) $168 million and (ii) 100% of consolidated EBITDA for the four fiscal quarters ended most recently before such date, plus (y) any voluntary prepayment of term loans, plus (z) any amount that, after giving effect to the increase, the pro forma First Lien Net Leverage Ratio (as defined in the 2024 Credit Agreement) does not exceed 2.75 to 1.00. The Company may also, subject to customary conditions, request to increase the Danish tranche by up to $5 million.

Borrowings bear interest at the applicable interest rate index selected by the Company based on the particular currency borrowed plus a credit spread adjustment depending on the index, and a margin ranging from 1.25% to 2.25% per annum based on the total net leverage ratio of the Company and its restricted subsidiaries. The Company may select interest periods of one, three or six months depending on the index. Interest is payable at the end of the selected interest period, but no less frequently than quarterly.

The Company may prepay the borrowings, in whole or in part, at any time without premium or penalty, subject to certain conditions.

The Company’s obligations under the 2024 Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions. The collateral security described above also secures certain banking services obligations and interest rate swaps and currency or other hedging obligations of the Company owing to any of the then existing lenders or any affiliates thereof.

Outstanding borrowings, net of unamortized deferred financing costs, and letters of credit under the 2024 Credit Agreement consist of the following (in millions):

December 31, 2025

December 31, 2024

Current maturities of debt

$

45.3 

$

25.2 

Long-term debt

552.8

520.1

Total outstanding borrowings

$

598.1 

$

545.4 

Letters of credit

$

4.6 

$

2.5 

To manage the interest rate risk on the 2024 Credit Agreement, the Company has entered into interest rate swap agreements designated as cash flow hedges of a portion of the borrowings under the 2024 Credit Agreement to swap floating rate interest to a fixed rate. For additional information see Note 17, "Derivative Financial Instruments" of the Notes to Consolidated Financial Statements in Item 8 of this Report.

33

Index

The weighted average interest rate on borrowings under the 2024 Credit Agreement, adjusted for the impact of interest rate swap agreements, was 4.8% and 5.6% at December 31, 2025 and 2024, respectively. Interest rates primarily consist of Term SOFR for borrowings in U.S. dollars and the Euro Interbank Offered Rate ("EURIBOR") for borrowings in euros. The average daily alternative base rate swingline loan balance was $1.5 million and $0.7 million during the years ended December 31, 2025 and 2024, respectively.

The 2024 Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The 2024 Credit Agreement also contains customary events of default.

In 2023, our Polish subsidiary, SMP Poland sp. z.o.o., amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce to provide for borrowings of up to Polish zloty 30 million (approximately $8.3 million) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $7.1 million) if borrowings are in euros and/or U.S. dollars. The overdraft facility automatically renews every three months until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period. Borrowings under the amended overdraft facility bear interest at a rate equal to (i) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.0% for borrowings in Polish zloty, (ii) the one month EURIBOR + 1.0% for borrowings in Euros, and (iii) the Mid-Point of the Fed Target Range + 1.25% for borrowings in U.S dollars. Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company. There were $3.6 million borrowings outstanding under the overdraft facility at December 31, 2025 and none at December 31, 2024.

In order to reduce our accounts receivable balances and improve our cash flow, we are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions. We sell our undivided interests in certain of these receivables at our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables, and do not service the receivables after the sale. As such, these transactions are accounted for as a sale.

Pursuant to these agreements, we sold $978.6 million and $884.7 million of receivables for the years ended December 31, 2025 and 2024, respectively. Receivables presented at financial institutions and not yet collected as of December 31, 2025 and December 31, 2024 were approximately $1.3 million and $5.8 million, respectively, and remained in our accounts receivable balance for those periods. All receivables sold were reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale. A charge in the amount of $45.3 million, $48.5 million and $46 million related to the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023, respectively.

To the extent that these arrangements are terminated, our financial condition, results of operations, cash flows and liquidity could be adversely affected by extended payment terms, delays or failures in collecting trade accounts receivables. The utility of the supply chain financing arrangements also depends upon a benchmark reference rate for the purpose of determining the discount rate applicable to each arrangement. If the benchmark reference rate increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows.

In 2022, our Board of Directors authorized the purchase of up to $30 million of our common stock under a stock repurchase program. Stock will be purchased under the program from time to time, in the open market or through private transactions, as market conditions warrant. To date, there have been 321,229 shares purchased for a total cost of $10.4 million, all of which occurred in 2024. There were no purchases of our common stock in 2025.

Material Cash Commitments

Material cash commitments as of December 31, 2025 consist of required cash payments to service our outstanding borrowings of $598.1 million under our 2024 Credit Agreement with JPMorgan Chase Bank, N.A., as agent and the future minimum cash requirements of $138.4 million through 2034 under operating leases. All of our other cash commitments as of December 31, 2025 are not material. For additional information related to our material cash commitments, see Note 7, “Leases,” and Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

34

Index

We anticipate that our cash flow from operations, available cash, and available borrowings under our 2024 Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months. Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in the supply chain caused by geo-political risks, future increases in interest rates, and significant inflationary cost increases in raw materials, labor and transportation that we are unable to pass through our customers, macroeconomic uncertainty, and that there will be no material adverse developments in our business, liquidity or capital requirements. If material adverse developments were to occur in any of these areas, there can be no assurance that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our 2024 Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs. In addition, if we default on any of our indebtedness, or breach any financial covenant in our 2024 Credit Agreement, our business could be adversely affected.

For further information regarding the risks in our business, refer to Item 1A, “Risk Factors,” of this Report.

Critical Accounting Policies and Estimates

We have identified the two accounting policies and estimates below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies and estimates on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies and estimates affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 1, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. We can give no assurances that actual results will not differ from those estimates. Although we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates, or in the assumptions that we use in calculating the estimates, the uncertain future effects, if any, of the disruptions in the supply chain caused by geo-political risks, future increases in interest rates, inflation, macroeconomic uncertainty, and other unforeseen changes in the industry, or business, could materially impact the estimates, and may have a material adverse effect on our business, financial condition and results of operations.

Valuation of Long‑Lived and Intangible Assets and Goodwill

The company accounts for business combinations using the acquisition method and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree are generally recorded at their acquisition date fair values. At acquisition, we estimate and record the fair value of purchased intangible assets, which primarily consist of customer relationships, trademarks and trade names, and patents, developed technology and intellectual property. Intangible assets acquired through business combinations are subject to potential adjustments within the measurement period, which is up to one year from the acquisition date.

Valuing intangible assets requires the use of significant estimates and assumptions. Significant estimates and assumptions used in valuing customer relationships include but are not limited to: (i) forecasted revenues attributable to existing customers; (ii) forecasted margins; (iii) customer attrition rates; and (iv) the discount rate.

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. The primary drivers that generate goodwill are the value of synergies between the acquired entities and the company and the acquired assembled workforce, neither of which qualifies as a separately identifiable intangible asset. Goodwill and certain other intangible assets having indefinite lives are not amortized to earnings, but instead are subject to periodic testing for impairment. Intangible assets determined to have definite lives are amortized over their remaining useful lives generally on a straight-line basis. We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions.

We assess long‑lived assets, identifiable intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. With respect to goodwill and identifiable intangible assets having indefinite lives, we test for impairment on an annual basis or in interim periods if an event occurs or circumstances change that may indicate the fair value is below its carrying amount. Factors we consider important, which could trigger an impairment review, include the following: (a) significant underperformance relative to expected historical or projected future operating results; (b) significant changes in the manner of our use of the acquired assets or the strategy

35

Index

for our overall business; and (c) significant negative industry or economic trends. We review the fair values using the discounted cash flows method and market multiples.

When performing our evaluation of goodwill for impairment, if we conclude qualitatively that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then a quantitative impairment test would not be required. If we are unable to reach this conclusion, then we would perform a quantitative impairment test. In performing the quantitative impairment test, the fair value of the reporting unit is compared to its carrying amount. A charge for impairment is recognized by the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Identifiable intangible assets having indefinite lives are reviewed for impairment on an annual basis using a methodology similar with that used to evaluate goodwill. Intangible assets having definite lives and other long-lived assets are reviewed for impairment whenever events such as product discontinuance, plant closures, product dispositions or other changes in circumstances indicate that the carrying amount may not be recoverable. In reviewing intangible assets having definite lives and other long-lived assets for impairment, we compare the carrying value of such assets to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets fair value and their carrying value.

There are inherent assumptions and estimates used in developing future cash flows requiring our judgment in applying these assumptions and estimates to the analysis of identifiable intangibles and long‑lived asset impairment including projecting revenues, interest rates, tax rates and the cost of capital. Many of the factors used in assessing fair value are outside our control and it is reasonably likely that assumptions and estimates will change in future periods. These changes can result in future impairments. In the event our planning assumptions were modified resulting in impairment to our assets, we would be required to include an expense in our statement of operations, which could materially impact our business, financial condition and results of operations.

Asbestos Litigation

In evaluating our potential asbestos-related liability, we have considered various factors including, among other things, an actuarial study of the asbestos related liabilities performed by an independent actuarial firm, our settlement amounts and whether there are any co-defendants, the jurisdiction in which lawsuits are filed, and the status and results of such claims. As is our accounting policy, we consider the advice of actuarial consultants with experience in assessing asbestos-related liabilities to estimate our potential claim liability; and perform an actuarial evaluation in the third quarter of each year and whenever events or changes in circumstances indicate that additional provisions may be necessary. The methodology used to project asbestos-related liabilities and costs in our actuarial study considered: (i) historical data available from publicly available studies; (ii) an analysis of our recent claims history to estimate likely filing rates into the future; (iii) an analysis of our currently pending claims; (iv) an analysis of our settlements and awards of asbestos-related damages to date; and (v) an analysis of closed claims with pay ratios and lag patterns in order to develop average future settlement values. Based on the information contained in the actuarial study and all other available information considered by us, we have concluded that no amount within the range of settlement payments and awards of asbestos-related damages was more likely than any other and, therefore, in assessing our asbestos liability we compare the low end of the range to our recorded liability to determine if an adjustment is required. Future legal costs are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations.

We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future and whenever events or changes in circumstances indicate that additional provisions may be necessary. Given the uncertainties associated with projecting such matters into the future and other factors outside our control, we can give no assurance that additional provisions will not be required. We will continue to monitor events and changes in circumstances surrounding these potential liabilities in determining whether to perform additional actuarial evaluations and whether additional provisions may be necessary. At the present time, however, we do not believe that any additional provisions would be reasonably likely to have a material adverse effect on our liquidity or consolidated financial position. See Note 23, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.

Recently Issued Accounting Pronouncements

For a detailed discussion on recently issued accounting pronouncements and their impact on our consolidated financial statements, see Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

36

Index