STANDARD MOTOR PRODUCTS INC
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
SMP$44.46-2.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0001140361-24-008994
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0000093389-25-000012
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 114 previous paragraphs and 101 current paragraphs.
27 unchanged; 43 reworded; 28 added; 37 removed; 7 previous and 3 current paragraphs rearranged.
Tables are not compared: 10 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
•strong demand in our Temperature Control operating segment primarily reflecting the impact of warmer year-over-year seasonal weather conditions,
Current report
•net sales of$35.7 million for the period from acquisition to December 31, 2024 in our new segment, Nissens Automotive, created with the acquisition of Nissens Automotive, a leading European supplier of thermal management and engine efficiency products for the automotive aftermarket, on November 1, 2024,
Current report
•stable demand in our Vehicle Control aftermarket segment across our major product groups, and
Current report
•a slight increase in net sales in our Engineered Solutions operating segment with growth from business wins and successful cross-selling efforts offset by slowing customer production in the fourth quarter.
Current report
Gross margin as a percentage of net sales in 2024 was 28.9% as compared to 28.6% in 2023. Overall, the gross margin increase as a percentage of sales in 2024 primarily reflects the positive impact of higher sales volumes leading to higher fixed manufacturing cost absorption, improved operating performance including the impact of cost control measures, and increased pricing, which more than offset lingering inflationary increases in certain materials and labor costs. We anticipate that the ongoing benefits from our cost-savings initiatives and strong gross margins in our newly acquired operating segment, Nissens Automotive, will mitigate continued pressure on margins resulting from inflationary headwinds. 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.
Current report
Separation Program
Current report
During the second quarter of 2024 we offered a voluntary retirement incentive package of severance and other benefit enhancements to eligible employees in the United States and Canada as part of our commitment to optimizing our cost structure and providing professional development opportunities to our employees. The offer period ended on June 14, 2024. During the third quarter of 2024, we expanded the program to include involuntary separations. We recorded expenses of$7.1 million in 2024, with additional expenses to be recorded of approximately$0.6 million in 2025, and $0.1 million in 2026 for an aggregate cost of approximately $7.7 million. It is anticipated that the overall separation program will reduce operating expenses in 2025. Expenses incurred pursuant to the program are recorded in restructuring and integration expenses in our statement of operations.
Current report
Vehicle Control’s net sales for 2024 increased $24.6 million, or 3.3%, to$762.6 million compared to$737.9 million in 2023. Demand in the Vehicle Control segment remained relatively stable across our major product groups.
Current report
business wins as well as successful cross-selling efforts, partly offset by slowing customer production schedules in the fourth quarter.
Current report
Net sales of $35.7 million, or 2.4% of total SMP's net sales, for our newly acquired operating segment, Nissens Automotive, are included in our consolidated results for the two months from the closing date of the acquisition. We expect Nissens Automotive's net sales to follow a similar annual seasonal pattern as the Temperature Control segment, as demand for many of Nissens Automotive's products increase with warmer weather. We also expect to benefit from revenue synergies resulting from the acquisition starting in 2026 and beyond.
Current report
Compared to 2023, gross margin percentage decreased from 32.3% to 32.0%at Vehicle Control, increased from 28.4% to 31.0%at Temperature Control, anddecreased from 19.4% to 17.5%at Engineered Solutions. Gross margin percentage for the Nissens Automotive segment was 32.2% for the two months from the closing date of the acquisition.
Current report
The gross margin percentage in our Vehicle Control operating segment remained relatively flat reflecting higher sales volume and higher fixed cost absorption due to higher production levels than those achieved in 2023, partially offset by inflationary cost increases.
Current report
The gross margin percentage increase in our Temperature Control operating segment reflected higher sales volume, some increased pricing, improved operating performance from cost savings initiatives, and favorable fixed cost absorption due to higher production levels than those achieved in 2023.
Current report
The gross margin percentage decrease at our Engineered Solutions operating segment is driven primarily by cost inflation and an unfavorable customer sales mix, partially offset by some higher pricing. We expect some pressure on demand into 2025 for our Engineered Solutions products as production schedules at customers slow.
Current report
The gross margin percentage at our Nissens Automotive operating segment was negatively impacted by $3.1 million of amortization for inventory fair value adjustments related to the application of accounting for business combinations. Amortization of the remaining inventory fair value adjustment will continue through Q2 2025.
Current report
While we anticipate continued margin pressure resulting from inflationary headwinds and 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, cost synergies related to our acquisition of 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.
Current report
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased$41.5 million to$335.1 million, or 22.9% of consolidated net sales in 2024, as compared to$293.6 million, or 21.6% of consolidated net sales in 2023. Excluding the$14.3 million impact of including Nissens Automotive into our financial statements for the two months from the acquisition date, the increase in selling, general and administrative expenses is principally due to the impact of(i) $10.5 million higher distribution and freight expenses in our legacy business primarily due to higher sales, (ii) $10.3 million of costs associated with our acquisition of Nissens Automotive, including $2.3 million of derivative losses on
Current report
forward foreign exchange contract used to economically hedge the purchase price, and (iii) $4.6 million of increased rent and incremental expenses as we transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas.
Current report
Restructuring and Integration Expenses. Restructuring and integration expenses were$7.7 millionin 2024 compared to$2.6 million in 2023. Restructuring and integration expenses incurred in 2024 relate primarily to the Separation Program announced in the second quarter of 2024, and expanded to encompass involuntary separations in the third quarter of 2024, as part of our commitment to optimizing our cost structure and providing professional development opportunities to our employees. We anticipate that the program will be substantially complete by the end of 2027. Restructuring and integration expenses in 2024 consist of$7.3 million of costs related to workforce reductions and severance costs, and$0.4 million for the relocation of machinery and equipment; while 2023 expenses primarily related to the Cost Reduction Initiative consist of$2 millionof costs related to workforce reductions and severance costs, and$0.7 million for therelocation of machinery and equipment.
Current report
Net earnings during 2024 were $28.5 million compared to $34.4 million in 2023. The decrease in cash provided by operating activities resulted primarily from an increase in inventories of $36.9 million compared to a decrease of $29.5 million in the prior year, as well as increases in other working capital accounts primarily due to higher net sales and preparation for pre-season orders in our Temperature Control segment, and lower net earnings.
Current report
Investing Activities. Cash used in investing activities was $418.7 million in 2024 as compared to $25.7 million in 2023. Investing activities during 2024 primarily consisted of (i) $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 (ii) capital expenditures of $44 million. The year-over-year increase in capital expenditures primarily relates to the implementation of upgraded automation equipment, racking and other equipment, as we invest in the start-up of our new distribution facility in Shawnee, Kansas.
Current report
Financing Activities. Cash provided by financing activities was$349.5 million in 2024 as compared to cash used in financing activities of$109.6 million in 2023. 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.
Current report
During 2024, we (i) increased our borrowings under our 2024 Credit Agreement by $392 million, (ii) paid dividends to SMP shareholders of $25.3 million, and (iii) made cash payments for the repurchase of shares of our common stock of $10.4 million. These activities were funded with cash provided by our operating activities, in addition to borrowings under our 2024 Credit Agreement.
Current report
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 (“CDOR”) to the Canadian Overnight Repo Rate Average (“CORRA”) 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.
Current 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 delayed draw term loan facility in U.S. dollars; and (iv) a 100 million euros delayed draw 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.
Current report
The Company may prepay the borrowings, in whole or in part, at any time without premium or penalty, subject to certain conditions.
Current report
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.
Current report
transactions, as market conditions warrant. To date, there have been 321,229 shares repurchased for a total cost of $10.4 million, all of which occurred during the first half of 2024. As of December 2023 there had been no repurchases of our common stock under the program.
Removed paragraphs (37)
Previous report
Consolidated net sales for 2023 were $1,358.3 million, a decrease of $13.5 million, or 1% compared to net sales of $1,371.8 million in 2022; while consolidated net sales for 2022 increased $73 million, or 5.6%, compared to net sales of $1,298.8 million in 2021. Consolidated net sales decreased in our Vehicle Control and Temperature Control operating segments, while net sales in our Engineered Solutions operating segment increased when compared to the comparable period in the prior year.
Previous report
Gross margins as a percentage of net sales in 2023 was 28.6% as compared to 27.9% in 2022. The gross margin percentages in 2023 increased year-over-year in each of our Vehicle Control, Temperature Control and Engineered Solutions operating segments. Overall, the gross margin increase as a percentage of sales in 2023 reflects the positive impact of increased pricing, improved operating performance, and the favorable customer sales mix in Engineered Solutions, which more than offset ongoing inflationary increases in certain raw materials, labor and transportation costs, as well as the lower fixed cost absorption due to lower production levels than those achieved in 2022 as we worked down inventory levels, and the weakening of the U.S. dollar on our international operations. While we anticipate continued margin pressure resulting from inflationary headwinds, we believe that our annual cost savings initiatives coupled with our ability to pass through higher prices to our customers should help to offset much of this impact to our gross margins.
Previous report
Operating margin as a percentage of net sales in 2023 was 6.8% as compared to 7.6% in 2022. Included in our operating margin were selling, general and administrative expenses (“SG&A”) of $293.6 million, or 21.6% of net sales in 2023, $276.6 million, or 20.2% of net sales in 2022, and $247.5 million, or 19.1% of net sales in 2021. The higher SG&A expenses in 2023 is principally due to the impact of (1) higher interest rate related costs of $14 million incurred in our supply chain financing arrangements and (2) higher distribution costs, all of which more than offset the positive 2023 comparative impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from a customer that filed for bankruptcy in the first quarter of 2023 to our estimated recoverable amount. Excluding the impact of the incremental interest rate costs incurred in our supply chain financing arrangements, SG&A expenses in the year ended December 31, 2023 were 20.6% of consolidated net sales, just slightly higher than the percentage in the comparable prior year period.
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In May 2023, we signed a lease for a new distribution facility in Shawnee, Kansas with a lease commencement date of July 1, 2023. The new facility will expand our total distribution network square footage to meet our growing demands in the automotive aftermarket industry. The new 575,000 square foot facility will replace our current 363,000 square foot facility in Edwardsville, Kansas, and integrate state-of-the-art technologies to deliver improved logistics capabilities, operational efficiencies, as well as enhanced employee, customer and supplier experiences. The new facility is located just five miles away from our Edwardsville facility, enabling us to retain our existing workforce avoiding the additional costs of hiring and training. The facility will have a phased opening beginning in 2024 and be fully operational in early 2025. We will incur additional costs in 2023 and 2024 during the phase-in period while we operate the two facilities.
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Impact of Russia’s Invasion of the Ukraine
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Russia’s invasion of the Ukraine, and the resultant sanctions imposed by the U.S. and other governments, have created risks, uncertainties and disruptions impacting business continuity, liquidity and asset values not only in the Ukraine and Russia, but in markets worldwide. Significant price increases have occurred in gas and energy markets, as well as in other commodities. Although we have no facilities or business operations in either the Ukraine or Russia, have historically had only minor sales to customers in Russia, which we have subsequently discontinued, and have not experienced additional significant disruptions in the supply chain, the inherent risks and uncertainties surrounding the invasion are being closely monitored. We have manufacturing and distribution facilities in Bialystok, Poland and Pecel, Hungary. Our facility in Bialystok, Poland does not use natural gas in its production process, or for heating, and, as such, is not impacted by Russia’s decision to halt the export of all natural gas to Poland and Bulgaria. While we have not been impacted by the war to date, there can be no assurances that any escalation of the invasion will not have an adverse impact on our business, financial condition and results of operations.
Previous report
Impact of Global Supply Chain Disruption and Inflation
Previous report
Disruptions in the global economy have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw materials, labor and transportation. In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including implementing cost savings initiatives and the pass through of higher costs to our customers in the form of price increases, and maintaining inventory at levels to minimize potential disruptions from out-of-stock raw materials and components to ensure higher fill rates with our customers. We believe that we have also benefited from our geographically diversified manufacturing footprint and our strategy to bring more product manufacturing in-house, especially with respect to product availability and fill rates. We expect these inflationary trends to continue for some time, and while we believe that we will be able to somewhat offset the impact, there can be no assurances that unforeseen future events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have an adverse effect on our business, financial condition and results of operations.
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Comparison of Results of Operations For Fiscal Years 2023 and 2022
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Sales. Consolidated net sales for 2023 were $1,358.3 million, a decrease of $13.5 million, or 1%, compared to $1,371.8 million in the same period of 2022, with the majority of our net sales to customers located in the United States. Consolidated net sales decreased in our Vehicle Control and Temperature Control operating segments, while net sales in our Engineered Solutions operating segment increased when compared to the comparable period in the prior year.
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Vehicle Control’s net sales for the year ended December 31, 2023 decreased $12.7 million, or 1.7%, to $737.9 million compared to $750.6 million in the same period of 2022. The decrease in net sales in our Vehicle Control operating segment reflects the impact of lower sales to a customer that filed for bankruptcy in the first quarter of 2023, as well as the negative impact of lower customer pipeline orders in 2023 and softer fourth quarter sales.
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Compared to 2022, gross margins at Vehicle Control increased 1.4 percentage points from 30.9% to 32.3%. Gross margins at Temperature Control increased 0.2 percentage points from 28.2% to 28.4%, and gross margins at Engineered Solutions increased 0.4 percentage points from 19% to 19.4%.
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The gross margin percentage increase in our Vehicle Control operating segment reflects the positive impact of increased pricing and operating performance, which more than offset increases in material and labor costs, as well as the lower fixed cost absorption due to lower production levels than those achieved in the same period in 2022. The gross margin percentage increase in our Temperature Control operating segment reflects the impact increased pricing and operating performance; while the gross margin percentage increase at our Engineered Solutions operating segment is driven primarily by favorable customer sales mix and increased pricing. All of our operating segments were negatively impacted by the ongoing inflationary cost increases in certain raw materials, labor and transportation expenses. While we anticipate continued margin pressure resulting from inflationary headwinds, we believe that our annual cost savings initiatives coupled with our ability to pass through higher prices to our customers should help to offset much of this impact to our gross margins.
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Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) increased to $293.6 million, or 21.6% of consolidated net sales in 2023, as compared to $276.6 million, or 20.2% of consolidated net sales in 2022. The $17 million increase in SG&A expenses as compared to 2022 is principally due to the impact of (1) higher interest related costs of $14 million incurred in our supply chain financing arrangements and (2) higher distribution cost, all of which more than offset the positive 2023 comparative impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from one of our customers that filed a petition for bankruptcy in January 2023 to our estimated recovery amount. Excluding the impact of the incremental interest rate costs incurred in our supply chain financing arrangements, SG&A expenses in 2023 were 20.6% of consolidated net sales, slightly higher than the percentage in the comparable prior year period.
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Restructuring and Integration Expenses. Restructuring and integration expenses were $2.6 million in 2023 compared to restructuring and integration expenses of $1.9 million in 2022. Restructuring and integration expenses in 2023 consists of (1) the $2.5 million of costs incurred in our 2022 cost reduction initiative, and (2) the $0.1 million increase in environmental cleanup costs for ongoing remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York location; while 2022 expenses consists of (1) costs of $1.5 million incurred in our 2022 cost reduction initiative, (2) relocation expenses of $0.2 million of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland, and (3) the $0.2 million increase in environmental cleanup costs for ongoing remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York location.
Previous report
During the fourth quarter of 2022, to further our ongoing efforts to improve operating efficiencies and reduce costs, we announced plans for a reduction in our sales force, and initiated plans to relocate certain product lines from our Independence, Kansas manufacturing facility and from our St. Thomas, Canada manufacturing facility to our manufacturing facilities in Reynosa, Mexico. Total restructuring and integration expenses related to the initiative were $2.5 million and $1.5 million 2023 and 2022, respectively. Expenses related to the initiative for the year ended December 31, 2023 consist of (1) expenses of approximately $0.7 million related to a further sales force reduction, (2) expenses of $1.3 million of employee severance and bonuses related to our product line relocations, and (3) expenses of $0.5 million related to the relocation of machinery and equipment to our manufacturing facilities in Reynosa, Mexico. Expenses related to the initiative for the year ended December 31, 2022 consist of (1) expenses of $0.9 million related to our sales force reduction, and (2) expenses of $0.6 million consisting of employee severance related to our product line relocations. Additional restructuring costs related to the initiative, and expected to be incurred, are approximately $0.5 million. We anticipate that the Cost Reduction Initiative will be completed by the end of the second quarter of 2024.
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Comparison of Results of Operations For Fiscal Years 2022 and 2021
Previous report
Vehicle Control’s net sales for the year ended December 31, 2022 increased $13.2 million, or 1.8%, to $750.6 million compared to $737.4 million in the same period of 2021. The increase in net sales in our Vehicle Control operating segment reflects the impact of strong customer demand and price increases implemented in 2022, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs.
Previous report
Temperature Control’s net sales for the year ended December 31, 2022 increased $27.1 million, or 8.4%, to $351.2 million compared to $324.1 million in the same period of 2021. The increase in net sales in our Temperature Control segment reflects the impact of continued strong customer demand, with the elevated demand we saw in 2021 holding firm, fueled by record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions in 2021, and the impact of price increases, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.
Previous report
Engineered Solutions’ net sales for the year ended December 31, 2022 increased $32.7 million, or 13.8%, to $270 million compared to $237.3 million in the same period of 2021. The increase in net sales in our Engineered Solutions operating segment reflects the impact of the positive contribution of incremental sales from our soot sensor, Trombetta and Stabil acquisitions of $44.6 million. Compared to the year ended December 31, 2021, excluding the incremental net sales from the acquisitions, Engineered Solutions net sales decreased $11.9 million, or 5%.
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Compared to 2021, gross margins at Vehicle Control decreased 1.5 percentage points from 32.4% to 30.9%, gross margins at Temperature Control decreased 0.1 percentage points from 28.3% to 28.2%, and gross margins at Engineered Solutions decreased 1.6 percentage points from 19.6% to 19%.
Previous report
The gross margin percentage decrease in Vehicle Control compared to the prior year reflects the impact of lower fixed cost absorption due to lower and more normalized production, inflationary cost increases in raw materials, labor and transportation, which were somewhat offset by increased pricing, and higher freight and related expenses resulting from higher inventory levels. The slight gross margin percentage decrease in Temperature Control compared to the prior year reflects the impact of inflationary cost increases in raw materials, labor and transportation, and higher freight and related expenses resulting from higher inventory levels, which were offset by seasonal volume, customer mix and increased pricing. The gross margin percentage decrease in Engineered Solutions compared to the prior year reflects the impact of inflationary cost increases in raw materials, labor and transportation. While we anticipate continued margin pressures across all of our segments resulting from inflationary cost increases, we believe that our annual cost initiatives, and our ability to pass through higher prices to our customers, will help to offset the impact of the inflationary increases on our margins.
Previous report
Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) increased to $276.6 million, or 20.2% of consolidated net sales in 2022, as compared to $247.5 million, or 19.1% of consolidated net sales in 2021. The $29.1 million increase in SG&A expenses as compared to 2021 is principally due to the impact of (1) higher interest related costs of $20.6 million incurred in our supply chain financing arrangements, (2) the impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from one of our customers that filed a petition for bankruptcy in January 2023 to our estimated recovery amount, (3) incremental expenses of $7.2 million from our soot sensor, Trombetta and Stabil acquisitions, including amortization of intangible assets acquired, and (4) inflationary cost increases resulting in higher distribution and freight costs. SG&A expenses in 2022 were favorably impacted by the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower SG&A expenses as a percentage of sales.
Previous report
Restructuring and Integration Expenses. Restructuring and integration expenses were $1.9 million in 2022 compared to restructuring and integration expenses of $0.4 million in 2021. Restructuring and integration expenses incurred in 2022 of $1.9 million related to (1) severance costs of $0.9 million in connection with a reduction in our sales force, (2) expenses of $0.6 million consisting of employee severance costs related to our product line relocations from our Independence, Kansas manufacturing facility and from our St. Thomas, Canada manufacturing facility to our manufacturing facilities in Reynosa, Mexico, (3) relocation expenses of $0.2 million of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland, and (4) the $0.2 million increase in environmental cleanup costs for ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York location.
Previous report
Restructuring and integration expenses incurred in 2021 of $0.4 million related to the relocation of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland. The soot sensor product line relocation has been completed.
Previous report
Operating Income. Operating income was $104.1 million, or 7.6%, of consolidated net sales in 2022, compared to $129 million, or 9.9%, of consolidated net sales in 2021. The year-over-year decrease in operating income of $24.9 million is the result of higher SG&A expenses driven primarily by the increased interest rate costs incurred in our supply chain financing arrangements, and to a lesser extent by the impact of lower gross margins as a percentage of consolidated net sales and higher restructuring and integration costs offset, in part, by higher consolidated net sales.
Previous report
Net Earnings Attributable to Noncontrolling Interest. In May 2021, we acquired the Trombetta business for $111.7 million. As part of the acquisition, we acquired a 70% ownership in a joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”). Net earnings attributable to the noncontrolling interest of $84,000 and $68,000 during the years ended December 31, 2022 and 2021, respectively, represents 30% of the net earnings of Trombetta Asia, Ltd.
Previous report
Investing activities during 2022 consisted of (1) the cash payment of $1.7 million for our acquisition of 100% of the capital stock of Kade Trading GmbH, a German company, (“Kade”) , net of $1 million of cash acquired and the $0.5 million earn-out; (2) the payment of $0.2 million for our 3.55% increase in equity ownership in Foshan Che Yijia New Energy Technology Co., Ltd., (“CYJ”), a China-based joint venture that manufactures automotive electric air conditioning compressors; and (3) capital expenditures of $26 million.
Previous report
In June 2022, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as agent. The new credit agreement provides for a $500 million credit facility comprised of a $100 million term loan facility and a $400 million revolving credit facility. Borrowings under the new credit facility were used to repay all outstanding borrowings under the then existing revolving credit facility, and certain fees and expenses incurred in connection with the refinancing.
Previous report
Cash provided by financing activities was $55.5 million in 2022. During 2022, we (1) increased our borrowings under our revolving credit facilities by $114.2 million; (2) reduced our borrowings under lease obligations and our Polish overdraft facility by $2.9 million; (3) made cash payments of $2.1 million for debt issuance costs in connection with our refinancing; (4) made cash payments for the repurchase of shares of our common stock of $29.7 million; and (5) paid dividends of $23.4 million. Cash provided by borrowings under our credit facilities were used to fund our operating activities, investing activities, reduce our borrowings under lease obligations and our Polish overdraft facility, pay debt issuance costs in connection with the refinancing, purchase shares of our common stock and pay dividends.
Previous report
Comparison of Liquidity and Capital Resources For Fiscal Years 2022 and 2021
Previous report
In June 2022, we entered into a new Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (the “Credit Agreement”). The Credit Agreement provides for a $500 million credit facility comprised of a $100 million term loan facility (the “term loan”) and a $400 million multi-currency revolving credit facility available in U.S. Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the administrative agent and the lenders (the “revolving facility”). The Credit Agreement replaces and refinances the existing Credit Agreement, dated as of October 28, 2015, among the Company, SMP Motor Products Ltd. and Trumpet Holdings, Inc., as borrowers, JPMorgan Chase Bank, N.A., as administrative agent and lender, and the other lenders named therein (the “2015 Credit Agreement”).
Previous report
In March 2020, our Board of Directors authorized the purchase of up to $20 million of our common stock under a stock repurchase program. Stock repurchases under this program during the year ended December 31, 2021 were 150,273 shares of our common stock at a total cost of $6.5 million thereby completing the 2020 Board of Directors authorization.
Previous report
In February 2021, our Board of Directors authorized the purchase of up to an additional $20 million of our common stock under a stock repurchase program. Stock repurchases under this program during the year ended December 31, 2021 were 464,992 shares of our common stock at a total cost of $20 million, thereby completing the February 2021 Board of Directors authorization.
Previous report
In October 2021, our Board of Directors authorized the purchase of up to an additional $30 million of our common stock under a stock repurchase program. Stock repurchases under this program, during the year ended December 31, 2021 and 2022 were 7,000 and 692,067 shares of our common stock, respectively, at a total cost of $0.3 million and $29.7 million, respectively, thereby completing the October 2021 Board of Directors authorization.
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Index
Reworded paragraphs (43)
Previous wording
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 three-year period ended December 31, 2023.
Current wording
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, 2024. Discussion and analysis of our financial condition and results of operations for fiscal year 2023, and comparisons of fiscal years 2023 and 2022 can be 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, 2023.
Previous wording
Our net sales performance in 2023 reflects the impact of multiple factors including:
Current wording
Consolidated net sales for 2024 were$1,463.8 million, aincrease of$105.6 million, or 7.8% compared to net sales of$1,358.3 million in 2023. Theincrease in net sales in 2024 reflects the impact of multiple factors including:
Previous wording
New Distribution Facility in Shawnee, Kansas
Current wording
Operating margin as a percentage of net sales in 2024 was 5.5%as compared to 6.8% in 2023. Included in our operating margin were selling, general and administrative expenses of$335.1 million, or 22.9% of net sales in 2024 compared to $293.6 million, or 21.6% of net sales in 2023. The$41.5 million increase in selling, general and administrative expenses in 2024 is principally due to (i)$14.3 million of selling, general and administrative expenses for Nissens Automotive as the results of our new operating segment are consolidated into our financial statements for the two months from the close of the acquisition, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales, (iii) costs associated with our acquisition of Nissens Automotive, and (iv) increased rent and incremental expenses as we transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas. The new larger distribution center will integrate new distribution technologies including a mechanized material handling system designed to deliver improved logistics capabilities, operational efficiencies, as well as enhanced employee, customer and supplier experiences and is expect to be fully operational later in 2025. We will incur additional costs in 2025 during the phase-in period while we operate the two facilities.
Previous wording
Overall, our core automotive aftermarket business remains strong, and we continue to be optimistic about the long-term growth potential of the complementary markets served in our Engineered Solutions operating segment.
Current wording
Overall, our core automotive aftermarket business remains strong, and we are both excited and optimistic for the growth potential in our newly acquired operating segment, Nissens Automotive and the long-term growth potential of the complementary markets served in our Engineered Solutions operating segment.
Previous wording
Sales. Consolidated net sales for 2022 were $1,371.8 million, an increase of $73 million, or 5.6%, compared to $1,298.8 million in the same period of 2022, with the majority of our net sales to customers located in the United States. Consolidated net sales increased across all of our operating segments, when compared to the comparable period in the prior year.
Current wording
Sales. Consolidated net sales for 2024 were$1,463.8 million, anincrease of $105.6 million, or 7.8%, compared to$1,358.3 million in 2023, with the majority of our net sales to customers located in the United States. Consolidated net sales increased in all our operating segments when compared to the prior fiscal year.
Previous wording
Temperature Control’s net sales for the year ended December 31, 2023 decreased $13.4 million, or 3.8%, to $337.8 million compared to $351.2 million in the same period of 2022. The lower year-over-year Temperature Control net sales reflects the impact of a slow start to the season caused by a rainy spring and cool early summer temperatures across key markets which negatively impacted first and second quarter 2023 net sales. After the slow start to the season, demand increased significantly in the third quarter of 2023 as summer temperatures increased. The result was strong third quarter 2023 net sales, which was not enough to offset the slow start to the season. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.
Current wording
Temperature Control’s net sales for 2024 increased$42.3 million, or 12.5%, to$380.1 million compared to $337.8 million in 2023. Thehigher year-over-year Temperature Control net sales reflects higher customer demand due to the impact of warmer seasonal weather conditions in the U.S. compared to 2023. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.
Previous wording
Engineered Solutions’ net sales for the year ended December 31, 2023 increased $12.6 million, or 4.7%, to $282.6 million compared to $270 million in the same period of 2022. Overall, net sales in our Engineered Solutions operating segment showed year-over-year improvement driven by strong demand and new business wins, and we continue to be optimistic about the long-term growth potential of the complementary markets served in our newly created Engineered Solutions operating segment.
Current wording
Engineered Solutions’ net sales for 2024 increased$2.9 million, or 1%, to$285.5 million compared to$282.6 million in 2023. Overall, net sales in our Engineered Solutions operating segment showed year-over-year improvement driven by new
Previous wording
Gross Margins. Gross margins, as a percentage of consolidated net sales, increased to 28.6% for 2023, compared to 27.9% for 2022. The following table summarizes gross margins by segment for the years ended December 31, 2023 and 2022, respectively (in thousands):
Current wording
Gross Margins. Gross margins, as a percentage of consolidated net sales, increased to 28.9% for 2024, compared to 28.6% for 2023. The following table summarizes gross margins by segment for the years ended December 31, 2024 and 2023, respectively (in thousands):
Previous wording
Operating Income. Operating income was $92.7 million, or 6.8%, of consolidated net sales in 2023, compared to $104.1 million, or 7.6%, of consolidated net sales in 2022. The year-over-year decrease in operating income of $11.4 million is the result of lower net sales, higher SG&A expenses, consisting primarily of higher interest rate related costs of $14 million incurred in our supply chain financing arrangements, and higher restructuring and integration expenses offset, in part, by higher gross margins as a percentage of sales.
Current wording
Operating Income. Operating income was$80.6 million, or 5.5%, of consolidated net sales in 2024, compared to$92.7 million, or 6.8%, of consolidated net sales in 2023. The year-over-year decrease in operating income of $12.1 million is primarily the result of higher selling, general and administrative expenses, including costs associated with the acquisition of Nissens Automotive, and higher restructuring and integration expenses, partially offset, by the impact of higher net sales and improved gross margin percentage.
Previous wording
Other Non-Operating Income (Expense), Net. Other non-operating income, net was $2.3 million in 2023, compared to $4.8 million in 2022. The year-over-year decrease in other non-operating income, net results from the decrease in year-over-year equity income from our joint ventures, and the unfavorable impact of changes in foreign currency exchange rates. The decline in equity income from our joint ventures is due, in part, to lower production levels related to inventory reduction plans, and the impact of our acquisition of an additional 15% equity interest in Gwo Yng. Commencing in July 2023, on the date of our 15% increase in equity interest, the financial results of Gwo Yng were no longer accounted for under the equity method of accounting. Instead, Gwo Yng’s financial results were reported on a consolidated basis, resulting in lower joint venture equity income.
Current wording
Other Non-Operating Income, Net. Other non-operating income, net was$6.9 million in 2024, compared to$2.3 million in 2023. The year-over-year increase in other non-operating income, net results from the increase in year-over-year equity income from our joint ventures, and the favorable impact of changes in foreign currency exchange rates. Equity income from our joint ventures increased irrespective of the year-over-year decline in the equity income of Gwo Yng, reflecting the impact of our acquisition of an additional 15% equity interest in Gwo Yng in July 2023. Commencing on the date of our equity interest increase, the financial results of Gwo Yng were no longer accounted for under the equity method of accounting. Instead, Gwo Yng’s financial results are reported on a consolidated basis. As such, other non-operating income, net includes equity income of Gwo Yng of $0.7 million in 2023.
Previous wording
Interest Expense. Interest expense increased to $10.6 million in 2022, compared to $2 million in 2021. The year-over-year increase in interest expense reflects the impact of higher average outstanding borrowings in 2022 when compared to 2021, and the impact of higher year-over-year average interest rates on our credit facilities.
Current wording
Interest Expense. Interest expense increased to$13.5 million in 2024, compared to$13.3 million in 2023. The year-over-year increase in interest expense reflects the impact ofhigher average outstanding balances due to borrowings under our 2024 Credit Agreement to fund our acquisition of Nissens Automotive, partly offset by slightly lower year-over-year average interest rates on our credit facilities, including the impact of our interest swap agreements. We expect interest expense to increase in 2025 due to higher overall outstanding balances under our 2024 Credit Agreement connected to our acquisition of Nissens Automotive.
Previous wording
Income Tax Provision. The income tax provision for 2023 was $18.4 million at an effective tax rate of 22.5%, compared to $25.2 million at an effective tax rate of 25.6% in 2022. The lower effective tax rate in 2023 compared to 2022 reflects the impact of lower state and local income taxes due to changes in state laws, rates and filing methodologies, changes in foreign and domestic mix, and the effective rate impact of lower year-over-year pre-tax income.
Current wording
Income Tax Provision. The income tax provision for 2024 was$19.4 million at an effective tax rate of 26.2%, compared to$18.4 million at an effective tax rate of 22.5% in 2023. The higher effective tax rate in 2024 compared to 2023 reflects the impact of non-deductible transaction costs associated with our acquisition of Nissens Automotive, an increase in earnings from international as compared to U.S. operations, and the effective tax rate impact of lower year-over-year pre-tax income.
Previous wording
Loss From Discontinued Operations. Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2023 and 2022, as well as other information available and considered by us, and legal expenses and other costs associated with our asbestos-related liability. During the years ended December 31, 2023 and 2022, we recorded a net loss of $29 million and $17.7 million from discontinued operations, respectively. The loss from discontinued operations for the year ended December 31, 2023 and 2022 includes (1) a $23.8 million and $18.5 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2023 and 2022 actuarial studies; (2) legal and other miscellaneous expenses, before taxes, of $4.9 million and $5.4 million for 2023 and 2022, respectively, and (3) a $10.5 million pre-tax provision in 2023 related to a breach of contract legal proceeding. 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.
Current wording
Loss From Discontinued Operations. Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31,2024 and 2023, as well as other available information, and legal expenses and other costs associated with our asbestos-related liability. During the years ended December 31,2024 and 2023, we recorded a net loss of$26.1 million and$29 million from discontinued operations, respectively. The loss from discontinued operations for the year ended December 31,2024 and 2023 includes (i) a$29.3 million and $23.8 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2024 and 2023 actuarial studies; (ii) legal and other miscellaneous expenses, before taxes, of$4.8 million and $4.9 million for 2024 and 2023, respectively, and (iii) a $10.5 million pre-tax provision in 2023 related to a breach of contract legal proceeding. 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.
Previous wording
Net Earnings Attributable to Noncontrolling Interest. Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in our 70% owned joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”) and, in our 80% ownership in Gwo Yng, commencing in July 2023 upon the completion of our step acquisition. Net earnings attributable to the noncontrolling interest were $204,000 and $84,000 during the years ended December 31, 2023 and 2022, respectively. For additional information on the Gwo Yng step acquisition, see Note 2, “Business Acquisitions and Investments,” in the notes to our consolidated financial statements (unaudited).
Current wording
Net Earnings Attributable to Noncontrolling Interest. Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in our 70% owned joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”) and, in our 80% ownership in Gwo Yng, commencing in July 2023 upon the completion of our step acquisition. Net earnings attributable to the noncontrolling interest were$1.0 million and$0.2 million during the years ended December 31,2024 and 2023, respectively. For additional information on the Gwo Yng step acquisition, see Note 2, “Business Combinations,” in the Notes to Consolidated Financial Statements in Item 8 of this Report.
Previous wording
For a detailed discussion on the restructuring and integration costs, see Note 3, “Restructuring and Integration Expense,” of the Notes Consolidated Financial Statements in Item 8 of this Report.
Current wording
For a detailed discussion on the restructuring and integration costs, see Note 3, “Restructuring and Integration Expenses,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
Previous wording
Our primary cash requirements include working capital, capital expenditures, regular 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 Agreement.
Current wording
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).
Previous wording
Operating Activities. During 2023, cash provided by operating activities was $144.3 million compared to cash used in operating activities of $27.5 million in 2022. The increase in cash provided by operating activities resulted primarily from the larger year-over-year decrease in accounts receivable, the decrease in inventories compared to an increase in inventories in the prior year, the increase in accounts payable compared to a decrease in accounts payable in the prior year, no change in prepaid expenses and other current assets compared to an increase in prepaid expenses and other current assets in the prior year, and the smaller year-over-year decrease in sundry payables and accrued expenses offset, in part, by the decrease in net earnings.
Current wording
Operating Activities. During 2024, cash provided by operating activities was $76.7 million as compared to cash provided by operating activities of $144.3 million in 2023.
Previous wording
Net earnings during 2023 were $34.4 million compared to $55.4 million in 2022. During 2023, (1) the decrease in accounts receivable was $8 million compared to the year-over-year decrease in accounts receivable of $6.9 million in 2022; (2) the decrease in inventories was $29.5 million compared to the year-over-year increase in inventories of $67.5 million in 2022; (3) the increase in accounts payable was $19.6 million compared to the year-over-year decrease in accounts payable of $48.6 million in 2022; (4) there was no change in prepaid expenses and other current assets compared to the year-over-year increase in prepaid expenses and other current assets of $5.5 million in 2022; and (5) the decrease in sundry payables and accrued expenses was $4.3 million compared to the year-over-year decrease in sundry payables and accrued expenses of $29.1 million in 2022. During 2023, we generated operating cash flow of $144.3 million by reducing our inventory to more normalized levels while actively managing our accounts receivable and accounts payable. We will continue to manage our working capital to maximize our operating cash flow. Now that global supply chains have stabilized, allowing us to lower working capital in 2023, we expect cash flows from operations will return to historical levels in 2024.
Current wording
During the year ended December 31, 2023, we generated significant operating cash flow by reducing our inventory to more normalized levels while actively managing our accounts receivable and accounts payable. We continue to actively manage our working capital to maximize our operating cash flow.
Previous wording
Investing Activities. Cash used in investing activities was $25.7 million in 2023 compared to $27.8 million in 2022. Investing activities during 2023 consisted of (1) the payment of $4 million for our acquisition of an additional 15% equity interest in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co., Ltd. (“Gwo Yng”) and (2) capital expenditures of $28.6 million offset, in part, by cash acquired of $6.8 million in the Gwo Yng step acquisition.
Current wording
Cash used in investing activities during 2023 primarily consisted of (i) the payment of $4.0 million for our acquisition of an additional 15% equity interest in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co., Ltd. (“Gwo Yng”) and (ii) capital expenditures of $28.6 million, partially offset by $6.8 million of cash acquired in the Gwo Yng step acquisition.
Previous wording
Financing Activities. Cash used in financing activities was $109.6 million in 2023 compared to cash provided by financing activities of $55.5 million in 2022. During 2023, we (1) reduced our borrowings under our Credit Agreement by $83.5 million; and (2) paid dividends of $25.2 million and $0.7 million to shareholders of our noncontrolling interests, respectively. Cash provided by our operating activities was used to reduce our borrowings under our Credit Agreement, fund our investing activities and pay dividends.
Current wording
During 2023, we (i) reduced our borrowings under our 2022 Credit Agreement by $83.5 million; and (ii) paid dividends of $25.2 million and $0.7 million to SMP shareholders and shareholders of our noncontrolling interests, respectively. Cash provided by our operating activities was used to reduce our borrowings under our 2022 Credit Agreement, fund our investing activities and pay dividends.
Previous wording
Dividends of $25.2 million and $23.4 million were paid in 2023 and 2022, respectively. Quarterly dividends were paid at a rate of $0.29 in 2023 and $0.27 in 2022.
Current wording
Quarterly dividends were paid at a rate of$0.29 in 2024 and 2023.
Previous wording
Our primary sources of funds are ongoing net cash flows from operating activities and availability under our Credit Agreement (as detailed below).
Current wording
Our primary sources of funds are ongoing net cash flows from operating activities and availability under our 2024 Credit Agreement (as detailed below).
Previous wording
Borrowings under the Credit Agreement were used to repay all outstanding borrowings under the 2015 Credit Agreement, and pay certain fees and expenses incurred in connection with the Credit Agreement, with future borrowings used for other general corporate purposes of the Company and its subsidiaries. The term loan amortizes in quarterly installments of 1.25% in each of the first four years, and quarterly installments of 2.5% in the fifth year of the Credit Agreement. The revolving facility has a $25 million sub-limit for the issuance of letters of credit and a $25 million sub-limit for the borrowing of swingline loans. The maturity date is June 1, 2027. The Company may request up to two one-year extensions of the maturity date.
Current wording
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.
Previous wording
The Company may, upon the agreement of one or more of then existing lenders or of additional financial institutions not currently party to the Credit Agreement, increase the revolving facility commitments or obtain incremental term loans by an aggregate amount not to exceed (x) the greater of (i) $168 million or (ii) 100% of consolidated EBITDA (as defined in the Credit Agreement) for the four fiscal quarters ended most recently before such date, plus (y) the amount of any voluntary prepayment of term loans, plus (z) an unlimited amount so long as, immediately after giving effect thereto, the pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement) does not exceed 2.5 to 1.0.
Current wording
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.
Previous wording
Term loan and revolver facility borrowings in U.S. Dollars bear interest, at the Company’s election, at a rate per annum equal to Term SOFR plus 0.10% plus an applicable margin, or an alternate base rate plus an applicable margin, where the alternate base rate is the greater of the prime rate, the federal funds effective rate plus 0.50%, and one-month Term SOFR plus 0.10% plus 1.00%. Term loan borrowings are being made at one-month Term SOFR. The applicable margin for the term benchmark borrowings ranges from 1.0% to 2.0%, and the applicable margin for alternate base rate borrowings ranges from 0% to 1.0%, in each case, 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 for Term SOFR borrowings. Interest is payable at the end of the selected interest period, but no less frequently than quarterly.
Current wording
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.
Previous wording
The Company’s obligations under the 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. Concurrently with the Company’s entry into the Credit Agreement, the Company also entered into a seven year interest rate swap agreement with Wells Fargo Bank, N.A., Co-Syndication Agent and lender under the Credit Agreement, on $100 million of borrowings under the Credit Agreement. The interest rate swap agreement matures in May 2029.
Current wording
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.
Previous wording
Outstanding borrowings at December 31, 2023 under the Credit Agreement were $156 million, consisting of current borrowings of $5 million and long-term debt of $151 million; while outstanding borrowings at December 31, 2022 were $239.5 million, consisting of current borrowings of $55 million and long-term debt of $184.5 million. Letters of credit outstanding under the Credit Agreement were $2.3 million and $2.4 million at December 31, 2023 and 2022, respectively.
Current wording
Outstanding borrowings at December 31, 2024 under the 2024 Credit Agreement were$545.4 million, net of deferred financing costs, consisting of current borrowings of$25.2 million and long-term debt of $520.1 million; while outstanding borrowings at December 31, 2023, were $156 million, consisting of current borrowings of $5 million and long-term debt of $151 million. Letters of credit outstanding under the Credit Agreement were $2.5 million and $2.3 millionat December 31, 2024 and 2023, respectively.
Previous wording
At December 31, 2023, the weighted average interest rate under our Credit Agreement was 5%, which consisted of $156 million in borrowings at 5% under Term SOFR, adjusted for the impact of the interest rate swap agreement on $100 million of borrowings. At December 31, 2022, the weighted average interest rate under our Credit Agreement was 5.2%, which consisted of $237 million in borrowings at 5.2% under Term SOFR, adjusted for the impact of the interest rate swap agreement on $100 million of borrowings, and an alternative base rate borrowing of $2.5 million at 8%. During the year ended December 31, 2023, our average daily alternative base rate loan balance was $0.1 million, compared to a balance of $5.6 million for the year ended December 31, 2022.
Current wording
At December 31, 2024, the weighted average interest rate on borrowings under the 2024 Credit Agreement was 5.6%, primarily consisting of Term SOFR for borrowings in U.S. dollars and EURIBOR for borrowings in euros, adjusted for the impact of the interest rate swap agreement on$100 millionof the U.S. dollar borrowings. At December 31, 2023, the weighted average interest rate under our 2022 Credit Agreement was 5.0%, under Term SOFR, adjusted for the impact of the interest rate swap agreement on $100 million of borrowings. During the year ended December 31, 2024, our average daily alternative base rate loan balance was$0.7 million, compared to a balance of $0.1 million for the year ended December 31, 2023.
Previous wording
The 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 Credit Agreement also contains customary events of default.
Current wording
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.
Previous wording
In November 2023, our Polish subsidiary, SMP Poland sp. z.o.o., further amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce. The overdraft facility, as amended, provides for borrowings under the facility in Euros and U.S. Dollars. Under the amended terms, the overdraft facility provides for borrowings of up to Zloty 30 million (approximately $7.6 million) if borrowings are solely in Zloty, or up to 85% of the Zloty 30 million limit (approximately $6.5 million) if borrowings are in Euros and/or U.S. Dollars. The overdraft facility has a maturity date in March 2024, with automatic three-month renewals 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 will bear interest at a rate equal to (1) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.0% for borrowings in Polish Zloty, (2) the one month Euro Interbank Offered Rate (“EURIBOR”) + 1.0% for borrowings in Euros, and (3) 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 no borrowings outstanding under the overdraft facility at both December 31, 2023 and December 31, 2022.
Current wording
In November 2023, our Polish subsidiary, SMP Poland sp. z.o.o., further amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce. The overdraft facility, as amended, provides for borrowings under the facility in euros and U.S. dollars. Under the amended terms, the overdraft facility provides for borrowings of up to Polish zloty 30 million (approximately $7.3 million) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $6.2 million) if borrowings are in euros and/or U.S. dollars. The overdraft facility had an original maturity date in March 2024, with automatic three-month renewals 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. The facility automatically renewed in December 2024 to a March 2025 maturity date. Borrowings under the amended overdraft facility will 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 Euro Interbank Offered Rate (“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 no borrowings outstanding under the overdraft facility at both December 31, 2024 and December 31, 2023.
Previous wording
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 being accounted for as a sale.
Current wording
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.
Previous wording
Pursuant to these agreements, we sold $830.8 million and $813.7 million of receivables for the years ended December 31, 2023 and 2022, respectively. Receivables presented at financial institutions and not yet collected as of December 31, 2023 were $4.5 million and remained in our receivable balance as of that date. There were no receivables presented at financial institutions and not yet collected as of December 31, 2022. 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 $46 million, $32 million and $11.5 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, 2023, 2022 and 2021, respectively.
Current wording
Pursuant to these agreements, we sold$884.7 million and $830.8 million of receivables for the years ended December 31, 2024 and 2023, respectively. Receivables presented at financial institutions and not yet collected as of December 31, 2024 and December 31, 2023 were approximately $5.8 million and $4.5 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$48.5 million, $46 million and $32 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, 2024, 2023 and 2022, respectively.
Previous wording
In January 2023, one of our customers filed a petition for bankruptcy. In connection with the bankruptcy filing, we evaluated our potential risk and exposure as related to our outstanding accounts receivable balance from the customer as of December 31, 2022, and estimated our anticipated recovery. As a result of our evaluation, we recorded a $7 million pre-tax charge during the year ended December 31, 2022 to reduce our accounts receivable balance to our estimated recovery. The $7 million pre-tax charge was included in selling, general and administrative expenses in our consolidated statement of operations. The bankruptcy court proceedings have continued into 2023. Although the courts have named us a “critical supplier,” the funds allocated to us have not yet been determined and, as such, we have not recorded an adjustment to the $7 million pre-tax charge previously recorded.
Current wording
In January 2023, one of our customers filed a petition for bankruptcy and we recorded a $7 million pre-tax charge in selling, general and administrative expenses in our consolidated statement of operations during the year ended December 31, 2022 to reduce our accounts receivable balance to our estimated recovery.
Previous wording
In July 2022, our Board of Directors authorized the purchase of up to an additional $30 million of our common stock under a new 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 no repurchases of our common stock under the program.
Current wording
In July 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
Previous wording
Material cash commitments as of December 31, 2023 consist of required cash payments to service our outstanding borrowings of $156 million under our Credit Agreement with JPMorgan Chase Bank, N.A., as agent and the future minimum cash requirements of $131.7 million through 2034 under operating leases. All of our other cash commitments as of December 31, 2023 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.
Current wording
Material cash commitments as of December 31,2024 consist of required cash payments to service our outstanding borrowings of$545.4 million under our 2024 Credit Agreement with JPMorgan Chase Bank, N.A., as agent and the future minimum cash requirements of$144.8 million through 2034 under operating leases. All of our other cash commitments as of December 31,2024 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.
Previous wording
We anticipate that our cash flow from operations, available cash, and available borrowings under our 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 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 Credit Agreement, our business could be adversely affected.
Current wording
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.
Previous wording
You should be aware that 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.
Current wording
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.
Previous wording
At acquisition, we estimate and record the fair value of purchased intangible assets, which primarily consist of customer relationships, trademarks and trade names, patents, developed technology and intellectual property, and non-compete agreements. 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. As related to valuing customer relationships, significant estimates and assumptions used include but are not limited to: (1) forecasted revenues attributable to existing customers; (2) forecasted earnings before interest and taxes (“EBIT”) margins; (3) customer attrition rates; and (4) the discount rate. Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. 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. We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions.
Current wording
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. We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions.
Previous wording
We assess the impairment of long‑lived assets, identifiable intangibles assets and goodwill 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 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.
Current wording
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 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.
Previous wording
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 goodwill quantitative impairment test. In performing the quantitative 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.
Current wording
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.
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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. Identifiable intangible assets with finite lives are amortized over their useful lives generally on a straight-line basis.
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
Interest Expense. Interest expense increased to $13.3 million in 2023, compared to $10.6 million in 2022. The year-over-year increase in interest expense reflects the impact of higher year-over-year average interest rates on our credit facilities when compared to 2022, which more than offset the impact of lower average outstanding balances.
Previous report — wording carried elsewhere
The following table summarizes consolidated net sales by segment and by major product group within each segment for the years ended December 31, 2022 and 2021 (in thousands):
Previous report — wording carried elsewhere
Gross Margins. Gross margins, as a percentage of consolidated net sales, decreased to 27.9% for 2022, compared to 29% for 2021. The following table summarizes gross margins by segment for the years ended December 31, 2022 and 2021, respectively (in thousands):
Previous report — wording carried elsewhere
Other Non-Operating Income (Expense), Net. Other non-operating income, net was $4.8 million in 2022, compared to $3.5 million in 2021. The year-over-year increase in other non-operating income, net results primarily from the favorable impact of changes in foreign currency exchange rates, and to a lesser extent the increase in year-over-year equity income from our joint ventures.
Previous report — wording carried elsewhere
Income Tax Provision. The income tax provision for 2022 was $25.2 million at an effective tax rate of 25.6%, compared to $31 million at an effective tax rate of 23.8% in 2021. The higher effective tax rate in 2022 compared to 2021 results primarily from the income tax provision impact related to the exercise of restricted stock.
Previous report — wording carried elsewhere
Loss From Discontinued Operations. Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2022 and 2021, as well as other information available and considered by us, and legal expenses and other costs associated with our asbestos-related liability. During the years ended December 31, 2022 and 2021, we recorded a net loss of $17.7 million and $8.5 million from discontinued operations, respectively. The loss from discontinued operations for the year ended December 31, 2022 and 2021 includes an $18.5 million and $5.3 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2022 and 2021 actuarial studies; and legal expenses and other miscellaneous expenses, before taxes, of $5.4 million and $6.1 million for 2022 and 2021, 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.
Previous report — wording carried elsewhere
For a detailed discussion of our Liquidity and Capital Resources comparison of fiscal year 2022 to fiscal year 2021, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.