STANDARD MOTOR PRODUCTS INC

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Principles of Consolidation & Basis of Presentation

Stan dard Motor Products, Inc. and its subsidiaries (referred to hereinafter in these notes to the consolidated financial statements as “we,” “us,” “our,” “SMP,” or the “Company”) is a leading manufacturer and distributor of premium replacement parts in the automotive aftermarket, and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets. Our automotive aftermarket is comprised ofthree segments, Vehicle Control, Temperature Control and Nissens Automotive, while our Engineered Solutions segment offers a broad array of conventional and future-oriented technologies in markets for commercial and light vehicles, construction, agriculture, power sports, marine, hydraulics and lawn and garden. We sell our products primarily to retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin American countries. In addition to our legacy SMP business, we acquired European automotive aftermarket parts supplier AX V Nissens III ApS (now known as SMP Nissens III ApS) and its direct and indirect subsidiaries (“Nissens Automotive”) in a transaction which closed on November 1, 2024. Nissens Automotive develops, manufactures and markets products within the areas of engine cooling, air conditioning climate systems, and engine efficiency within the automotive aftermarket industry, primarily in Europe. Nissens Automotive will serve as our fourth business segment. For further information and disclosures regarding the Nissens Automotive acquisition, refer to Note 2, "Business Combinations."

These consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and include our accounts and all domestic and international companies that we control. In addition, we use the equity method, to include our share of the results of certain affiliates based on our economic interest, our ability to exercise significant influence over the operating or financial decisions of these affiliates or our ability to direct their economic resources. We do not control these affiliates, as our ownership in these other affiliates is generally 50% or less. All significant inter-company items have been eliminated.

Reclassification

Certain prior period amounts in the accompanying consolidated financial statements and related notes have been reclassified to conform to the 2024 presentation.

Use of Estimates

The preparation of consolidated annual and quarterly financial statements in conformity with generally accepted accounting principles requires management 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 have made a number of estimates and assumptions in the preparation of these consolidated financial statements. We can give no assurance 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 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. Some of the more significant estimates include allowances for expected credit losses, cash discounts, valuation of inventory, valuation of long-lived assets, goodwill and other intangible assets, depreciation and amortization of long-lived assets, product liability exposures, asbestos, environmental and litigation matters, valuation of deferred tax assets, share based compensation and sales returns and other allowances.

Reportable Segments

Our business comprises offour operating segments – Vehicle Control, Temperature Control and Engineered Solutions from our legacy SMP business and a fourth operating segment, Nissens Automotive, which was created in the fourth quarter of 2024 as a result of our acquisition of Nissens Automotive. Our operating segment structure aligns our operations with our strategic focus on diversifying our business, provides greater transparency into our positioning to capture

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opportunities for growth in the future, and provides clarity regarding the unique dynamics and margin profiles of the markets served by each segment.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Allowance for Expected Credit Losses and Cash Discounts

We do not generally require collateral for our trade accounts receivable. Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future. These allowances are established based on a combination of write-off history, supportable forecasts, aging analysis, and specific account evaluations. When a receivable balance is known to be uncollectible, it is written off against the allowance for expected credit losses. Cash discounts are provided based on an overall average experience rate applied to qualifying accounts receivable balances.

Inventories

Inventories are valued at the lower of cost and net realizable value. Cost is determined on the first-in first-out basis. Where appropriate, standard cost systems are utilized for purposes of determining cost; the standards are adjusted as necessary to ensure they approximate actual costs. Estimates of lower of cost and net realizable value of inventory are determined by comparing the actual cost of the product to the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation of the inventory.

We also evaluate inventories on a regular basis to identify inventory on hand that may be obsolete or in excess of current and future projected market demand. For inventory deemed to be obsolete, we provide a reserve on the full value of the inventory. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates our estimate of future demand. Future projected demand requires management judgment and is based upon (a) our review of historical trends and (b) our estimate of projected customer specific buying patterns and trends in the industry and markets in which we do business. Using rolling twelve month historical information, we estimate future demand on a continuous basis. The historical volatility of such estimates has been minimal. We maintain provisions for inventory reserves of$43.7 million and $42.9 million as of December 31, 2024 and 2023, respectively.

We utilize cores (used parts) in our remanufacturing processes for air conditioning compressors, diesel injectors, and diesel pumps. The production of air conditioning compressors, diesel injectors, and diesel pumps involves the rebuilding of used cores, which we acquire either in outright purchases from used parts brokers, or from returns pursuant to an exchange program with customers. Under such exchange programs, at the time of sale of air conditioning compressors, diesel injectors, and diesel pumps, we estimate the core expected to be returned from the customer and record the estimated return as unreturned customer inventory.

In addition, many of our customers can return inventory to us based upon customer warranty and overstock arrangements within customer specific limits. At the time products are sold, we accrue a liability for product warranties and overstock returns and record an asset for unreturned customer inventory based on our estimate of anticipated customer returns. Estimates are based upon historical information on the nature, frequency and probability of the customer return. Unreturned core, warranty and overstock customer inventory is recorded at standard cost. Revision to these estimates is made when necessary, based upon changes in these factors. We regularly study trends of such claims.

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Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost and are depreciated using the straight-line method of depreciation over the estimated useful lives as follows:

Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the lease. Costs related to maintenance and repairs which do not prolong the assets useful lives are expensed as incurred. We assess our property, plant and equipment to be held and used for impairment when indicators are present that the carrying value may not be recoverable.

Leases

We determine if an arrangement is a lease at inception. For operating leases, we include and report operating lease right-of-use (“ROU”) assets, sundry payables and accrued expenses, and noncurrent operating lease liabilities on our consolidated balance sheet for leases with a term longer than twelve months. Finance leases are reported on our consolidated balance sheets in property, plant and equipment, current portion of other debt, and long-term debt.

Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments over the lease term. Our ROU assets represent the right to use an underlying leased asset over the existing lease term, and the corresponding lease liabilities represent our obligation to make lease payments arising from the lease agreement. As most of our leases do not provide for an implicit rate, we use our incremental borrowing rate based on the information available when determining the present value of our lease payments. Our lease terms may include options to terminate, or extend, our lease when it is reasonably certain that we will execute the option. Lease agreements may contain lease and non-lease components, which are generally accounted for separately. Operating lease expense is recognized on a straight-line basis over the lease term.

Business Combinations and Intangible Assets Including Goodwill

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

Valuing intangible assets requires the use of significant estimates and assumptions. Significant estimates and assumptions used in valuing customer relationships include but are not limited to: (i) forecasted revenues attributable to existing customers; (ii) forecasted margins; (iii) customer attrition rates; and (iv) the discount rate. Identifiable intangible assets with finite lives are amortized over their useful lives generally on a straight-line basis.

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.

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Acquisition related costs, including advisory, legal, accounting, valuation and pre-close and other costs, are typically expensed in the periods in which the costs are incurred and are recorded in selling, general and administrative expenses within the statement of operations. The results of operations of acquired businesses are included in the Consolidated Financial Statements from the acquisition date.

Impairment

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.

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

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

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

Foreign Currency Translation

Assets and liabilities of our foreign operations are translated into U.S. dollars at year-end exchange rates. Income statement accounts are translated using the average exchange rates prevailing during the year. The resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) and remain there until the underlying foreign operation is liquidated or substantially disposed of. Foreign currency transaction gains or losses are recorded in other non-operating income (expense), net in our statement of operations.

Revenue Recognition

We derive our revenue primarily from vehicle aftermarket sales in our Vehicle Control, Temperature Control and Nissens Automotive segments, and non-aftermarket sales in our Engineered Solutions Segment. We recognize revenues when our performance obligation has been satisfied and the control of products has been transferred to a customer which typically occurs upon shipment. Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of goods or provision of services. The amount of consideration we receive and revenue we recognize depends on the marketing incentives, product warranty and overstock returns we offer to our customers. For certain of our sales of remanufactured products, we also charge our customers a deposit for the return of a used core component which we can use

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in our future remanufacturing activities. Such deposit is not recognized as revenue at the time of the sale but rather carried as a core liability. At the same time, we estimate the core expected to be returned from the customer and record the estimated return as unreturned customer inventory. The liability is extinguished when a core is actually returned to us, or at period end when we estimate and recognize revenue for the core deposits not expected to be returned. We estimate and record provisions for cash discounts, quantity rebates, sales returns and warranties in the period the sale is recorded, based upon our prior experience and current trends. Significant management judgments and estimates are made in estimating sales returns and allowances relating to revenue recognized in any accounting period.

Product Warranty and Overstock Returns

Many of our products carry a warranty ranging from a 90-day limited warranty to a lifetime limited warranty, which generally covers defects in materials or workmanship and failure to meet industry published specifications and/or the result of installation error. In addition to warranty returns, we also permit our customers to return new, undamaged products to us within customer-specific limits(which are generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories. At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency and average cost of the claim and the probability of the customer return. At the same time, we record an estimate of anticipated customer returns as unreturned customer inventory. Significant judgments and estimates are made in connection with establishing the sales returns and other allowances in any accounting period. Revision to these estimates is made when necessary, based upon changes in these factors. We regularly study trends of such claims.

New Customer Acquisition Costs

New customer acquisition costs refer to arrangements pursuant to which we incur change-over costs to induce a new customer to switch from a competitor’s brand. In addition, change-over costs include the costs related to removing the new customer’s inventory and replacing it with our inventory commonly referred to as a stock lift. New customer acquisition costs are recorded as a reduction to revenue when incurred.

Selling, General and Administration Expenses

Selling, general and administration expenses include shipping costs and advertising, which are expensed as incurred. Shipping and handling charges, as well as freight to customers, are included in distribution expenses as part of selling, general and administration expenses.

Accounting for Income Taxes

Income taxes are calculated using the asset and liability method. Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, as measured by the current enacted tax rates.

We maintain valuation allowances when it is more likely than not that all or a portion of a deferred asset will not be realized. In determining whether a valuation allowance is warranted, we consider all positive and negative evidence and all sources of taxable income such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies to estimate if sufficient future taxable income will be generated to realize the deferred tax asset. The assessment of the adequacy of our valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates, or we adjust these estimates in future periods for current trends or expected changes in our estimating assumptions, we may need to modify the level of valuation allowance which could materially impact our business, financial condition and results of operations.

Tax benefits are recognized for an uncertain tax position when, in management’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances and when new information becomes available. Such adjustments are recognized entirely in the period in which they are identified.

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Asbestos Litigation

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

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

Loss Contingencies

We have loss contingencies, for such matters as legal claims and legal proceedings. Establishing loss reserves for these matters requires estimates, judgment of risk exposure and ultimate liability. We record provisions when the liability is considered probable and reasonably estimable. Significant judgment is required for both the determination of probability and the determination as to whether an exposure can be reasonably estimated. We maintain an ongoing monitoring and identification process to assess how the activities are progressing against the accrued estimated costs. As additional information becomes available, we reassess our potential liability related to these matters. Adjustments to the liabilities are recorded in the statement of operations in the period when additional information becomes available. Such revisions of the potential liabilities could have a material adverse effect on our business, financial condition or results of operations.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments, accounts receivable and derivative financial instruments used to reduce our market risk for changes in interest rates on our variable rate borrowings. We place our cash investments with high quality financial institutions and limit the amount of credit exposure to any one institution. Derivative financial instruments used to reduce our market risk for changes in interest rates on our variable rate borrowings are entered into with high quality financial institutions, with their credit worthiness reviewed on a quarterly basis. Although we are directly affected by developments in the vehicle parts industry, management does not believe significant credit risk exists.

With respect to accounts receivable, such receivables are primarily from warehouse distributors and major retailers in the automotive aftermarket industry located in the U.S. We perform ongoing credit evaluations of our customers’ financial conditions. A significant portion of our net sales are concentrated from our three largest individual customers. The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them, could have a materially adverse impact on our business, financial condition and results of operations.

For further information on net sales to our three largest customers and our concentration our customer risk, see Note 21, “Industry Segment and Geographic Data.”

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Foreign Cash Balances

Substantially all of the cash and cash equivalents, including foreign cash balances, at December 31, 2024 and 2023 were uninsured. Foreign cash balances at December 31, 2024 and 2023 were$42.5 million and$30.5 million, respectively.

Derivative Instruments and Hedging Activities

We occasionally use derivative financial instruments to reduce our market risk for changes in interest rates on our variable rate borrowings. Derivative financial instruments are recorded at fair value in other current and long-term assets, and other current and long-term liabilities in the consolidated balance sheets. For derivative financial instruments that have been formally designated as cash flow hedges, provided that the hedging instrument is highly effective, the entire change in the fair value of the derivative will be deferred and recorded in accumulated other comprehensive income (“AOCI”) in the consolidated balance sheets. When the underlying hedged transaction is realized (i.e., when the interest payments on the underlying borrowing are recognized in the consolidated statements of operations), the gain/loss included in AOCI is recorded in earnings and reflected on the same line as the gain/loss on the hedged item attributable to the hedged risk (i.e., interest expense for cash flow hedges of interest rate risk). At the inception of each transaction, we formally document the hedge relationship, including the identification of the hedge instrument, the related hedged items, the effectiveness of the hedge, as well as its risk management objectives and strategies.

Recently Adopted Accounting Pronouncements

ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This accounting standards update improves segment disclosure requirements, primarily through expanding the disclosures to include significant segment expenses incurred by the business. To achieve these disclosures the following items are required by ASU 2023-07: (i) significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; (ii) the amount and description of the composition of other segment items to reconcile to segment profit and loss; and (iii) the CODM’s title and position and how the CODM uses the reported segment measures to allocate resources. Additionally, ASU 2023-07 requires interim disclosures of all reportable segment profit or loss and assets previously required annually by Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023 and as such we have expanded our disclosures in Note 21, "Industry Segment and Geographic Data,"of the notes to our consolidated financial statements and recast comparative periods.

Standards that are not yet adopted as of December 31, 2024

ASU 2023-09, Income Taxes (Topic 270): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 270): Improvements to Income Tax Disclosures. This accounting standards update will improve transparency and decision making usefulness of income tax disclosures. ASU 2023-09 will expand the annual required income effective tax rate reconciliation disclosures to include disclosure of (i) eight specific categories of rate reconciling items; (ii) additional information for reconciling items that meet or exceed a quantitative threshold; and (iii) expand the required disclosures to include reconciling percentages as well as reported

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amounts. Additionally, ASU 2023-09 will expand required interim and annual disclosures of income taxes paid to include the disaggregation by federal, state and foreign jurisdictions, with expanded disclosures required annually.

The ASU is effective for annual reporting periods beginning after December 15, 2024, which for us is January 1, 2025, with full retrospective application required to all prior periods presented. Early adoption is permitted.

We are currently evaluating the full impact of adopting ASU 2023-09 on our consolidated financial statements, disclosures, processes and controls. We will adopt the guidance when it becomes effective.

ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This accounting standards update seeks to provide investors and users of the financial statements with clearer information regarding companies' cost structures by disaggregating expense line items in the income statement. ASU 2024-03 requires the following disclosures, in tabular format in the notes to the financial statements for public business entities, at each interim and annual reporting period: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, (e) depreciation, depletion, and amortization recognized as part of oil and gas producing activities that are already included in each relevant expense caption. The ASU defines a relevant expense caption as an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e).

Furthermore, the ASU requires the disclosure table to include (i) certain amounts that are already required to be disclosed

under U.S. GAAP in the same disclosure as the other disaggregation requirements, (ii) a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and (iii) the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, which for us is January 1, 2027 and January 1, 2028, respectively. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted.

This new standard, once adopted, will require us to disclose expenses in a more detailed and granular way than we do in these consolidated financial statements. We are currently evaluating the full impact of adopting ASU 2024-03 on our consolidated financial statements, disclosures, processes and controls. We will adopt the guidance when it becomes effective.

We have reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements.

2. Business Combinations

Acquisition of Nissens Automotive

On November 1, 2024, we acquired all the issued and outstanding shares of European automotive aftermarket parts supplier, AX V Nissens III ApS (now known as SMP Nissens III ApS) and its direct and indirect subsidiaries (“Nissens Automotive”) for €366.8 million (approximately $397.1 million), the purchase price consideration, from Nordic private equity firm, Axcel V K/S, and the Nissen family. The acquired Nissens Automotive business was paid for with cash funded by borrowing from our revolving credit facility and term loans, under the 2024 Credit Agreement. The acquisition of Nissens Automotive, a leading European supplier of thermal management and engine efficiency products for the automotive aftermarket, aligns with our strategy to become an aftermarket leader in North America and Europe across our key product categories. Through this acquisition, we will take advantage of collaboration for growth through cross-selling

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opportunities as well as bi-directional synergies with significant savings potential. The Nissens Automotive operating segment was created in the fourth quarter as a result of the acquisition.

As of February 27, 2025, the purchase price allocation is considered preliminary and was based upon a preliminary valuation. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of identifiable intangible assets acquired.

We determined the fair value of acquired intangible assets using the multi-period excess earnings method and the relief-from-royalty method under the income approach for customer relationships and trade names, respectively. These methods generally forecast expected future net cash flows discretely associated with each of the identified intangible assets and adjust the forecasts to present value by applying a discount rate intended to reflect risk factors associated with the cash flows and the time value of money.

In addition to the consideration transferred to complete the transaction, we incurred closing and other acquisition related costs of $8 million recorded as selling, general and administrative costs within the statement of operations during the year ended December 31, 2024.

The following table summarizes the allocation of the acquisition purchase consideration to the identifiable assets acquired and liabilities assumed based on their fair values (in thousands):

(a) Total purchase consideration is the cash paid of $397.1 million for the acquisition.

(b) Goodwill is deductible for tax purposes

(c) Intangible assets comprise of capitalized computer software of $2.2 million and the following preliminary valuation of identifiable intangible assets (in thousands):

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Unaudited Supplemental Pro Forma Financial Information

The following unaudited supplemental pro forma information presents the combined results of operations for the years ended December 31, 2024 and 2023, respectively, as if the Nissens Automotive acquisition was completed on January 1, 2023. The pro forma financial information presented below is for illustrative purposes and is not indicative of the operating results that would have been realized if the acquisition had been completed on January 1, 2023, nor is it indicative of future operating results (in thousands):

The unaudited supplemental pro forma financial information includes adjustments for (i) amortization and depreciation totaling $3.4 million and $4.1 million for the years ended December 31, 2024 and 2023, respectively, that would have been recognized for the acquired intangible assets and the fair value adjustment of property, plant and equipment; (ii) amortization expense for deferred financing costs of $14.5 million and $18.2 million for the years ended December 31, 2024 and 2023, respectively and (iii) the estimated income tax benefit on the unaudited pro forma financial adjustments.

The unaudited supplemental pro forma financial information assumes that the following were incurred during the year ended December 31, 2023: (i) $9.4 million for amortization of the inventory fair-value adjustment, (ii) $1.6 million for acquisition related transaction costs, (iii) $1.8 million for employee retention bonus expense and (iv) the related estimated income tax benefits. The pro forma financial information does not reflect any expected revenue or cost synergies.

Increase in Equity Investment - Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co. Ltd. (2023)

In July 2023, we acquired an additional 15% equity interest in our 65% owned joint venture, Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co. Ltd. (“Gwo Yng”), for Chinese renminbi ("RMB")27,378,290 (approximately $4 million), thereby increasing our equity interest in Gwo Yng to 80%. In connection with the transaction, we amended and restated the charter documents of Gwo Yng to remove all minority shareholder substantive participating rights, giving SMP control of Gwo Yng. As a result, as of the closing date of the transaction, Gwo Yng was accounted for as a business combination achieved in stages (“a step acquisition”). Accordingly, commencing on the closing of the transaction, we reported the results of Gwo Yng on a consolidated basis with the minority ownership interest reported as a noncontrolling interest.

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The following table summarizes the allocation of the total step acquisition purchase consideration to the identifiable assets acquired and liabilities assumed based on their fair values (in thousands):

(a) Total purchase consideration is the sum of the fair value of the previously held equity investment interest in Gwo Yng of $17.7 million and the cash paid of $4 million for the acquisition of the additional 15% equity ownership interest.

(b) Intangible assets consists of customer relationships of $0.4 million that will be amortized on a straight-line basis over the estimated useful life of 10 years and capitalized software of $0.1 million.

Goodwill of $2.2 million was allocated to the Temperature Control and Engineered Solutions segments in the amounts of $1.2 million and $1 million, respectively.

3. Restructuring and Integration Expenses

Separation Program

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. Costs primarily comprise of compensation expense and enhanced medical benefits, and are charged to restructuring and integration expenses in our statement of operations as a one-time termination benefit. Voluntary retirement incentive costs were recognized when the employee accepted the offer or are being recognized over their remaining period of service based on the agreed retirement date. We anticipate that the program will be substantially complete by the end of 2027. Additional pre-tax restructuring costs related to the program are expected to be $0.6 million in 2025, $0.1 million in 2026 and animmaterial amount in 2027 for an aggregate cost of approximately $7.7 million.

Activity for year ended December 31, 2024 related to the separation program workforce reduction consisted of the following (in thousands):

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(a) Restructuring and integration expenses incurred during the year ended December 31, 2024 consist of $3.8 million in our Vehicle Control segment, $0.8 million in our Temperature Control segment, $0.8 million in our Engineered Solutions segment and $1.7 million in our Other segment.

Cost Reduction Initiative

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. The cumulative restructuring expenses incurred to date for the program are $4.6 million. We anticipate that the Cost Reduction Initiative will be substantially completed by the end of 2026. Additional restructuring costs related to the initiative are expected to be immaterial.

Activity for the year ended ended December 31, 2024 related to the cost reduction initiative consisted of the following (in thousands):

(a) Includes $0.1 million of integration expenses recognized and cash payments made for the Particulate Matter Sensor Product Line Relocation program related to the relocation of inventory and equipment in connection with the 2021 acquisitions of certain product lines. The program was completed in 2022.

(b) Restructuring and integration expenses incurred during the year ended December 31, 2024 consist of $0.4 million in our Vehicle Control segment, $0.1 million in our Temperature Control segment and animmaterial amount in our Engineered Solutions segment.

Restructuring and integration activities are included within "sundry payables and accrued expenses" and "other current liabilities" in the consolidated balance sheet.

4. Sale of Receivables

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

Pursuant to these agreements, we sold$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

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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.

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

5. Inventories

6. Property, Plant and Equipment

Depreciation expense was$20.6 million in 2024,$19.7 millionin 2023 and$19 million in 2022.

7. Leases

We have operating and finance leases for our manufacturing facilities, warehouses, office space, automobiles, and certain equipment. Our leases have remaining lease terms of up toten years, some of which may includeone or more five-year renewal options. We have not included any of the renewal options in our operating lease payments, as we concluded that it is not reasonably certain that we will exercise any of these renewal options. Leases with an initial term of twelve months or

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less are not recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over the lease term. Finance leases are not material.

The following tables provide quantitative disclosures related to our operating leases and includes all operating leases acquired from the date of the acquisition (in thousands, except where otherwise indicated):

(a) Variable and other lease expense relate to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less which are not material.

(a)During the year ended December 31, 2024 includes$4.7 million of right-of-use assets related to the lease modification and extension for our manufacturing facility in Bialystok, Poland and $10.8 million of right-of-use assets related to the new lease agreement for our manufacturing facility in Reynosa, Mexico.

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Minimum Lease Payments

At December 31, 2024, we are obligated to make minimum lease payments through 2034, under operating leases, which are as follows (in thousands):

8. Goodwill and Other Intangible Assets

We completed our annual impairment test of goodwill and indefinite-lived intangible assets as of December 31, 2024. As of December 31, 2024, we qualitatively assessed whether it was more likely than not that the fair value of any of our reporting units was less than carrying value, and concluded that the quantitative impairment test would not be required, andno goodwill impairment charge was required as of December 31, 2024. While we concluded that we did not have a goodwill impairment charge as of December 31, 2024, and we do not believe that future impairments are probable, we will need to maintain the current ongoing performance levels at each of our reporting units in future periods to sustain their goodwill and indefinite-lived intangible assets carrying values.

In connection with our operating segment reorganization on January 1, 2023, we reassessed our reporting units and reallocated goodwill from the reporting units that existed prior to the change to the new reporting units, using a relative fair value approach similar to that used when a portion of a reporting unit is to be disposed of. We performed goodwill impairment tests as of January 1, 2023 on both the reporting units in place prior to the change and the new reporting units, and concluded that the estimated fair values of each of the reporting units exceeded their respective carrying amounts and, therefore, no impairment charge was necessary.

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Goodwill

Changes in the carrying values of goodwill by reporting unit during the years ended December 31, 2024 and 2023 are as follows (in thousands):

Acquired Intangible Assets

Acquired identifiable intangible assets as of December 31, 2024 and 2023 consist of (in thousands):

(a) Applies to all intangible assets, except for trademarks/trade names totaling$74.9 million, which have indefinite useful lives and, as such, are not being amortized.

Total amortization expense for acquired intangible assets was $10 million for the year ended December 31, 2024, $8.5 million for the year ended December 31, 2023, and $8.6 million for the year ended December 31, 2022.

The following table summarizes the amortization expense on our intangible assets and the estimated amortization expenses in future periods based on the current estimated useful lives assigned to our intangible assets (in thousands):

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(a) Estimated amortization expenses based on the current estimated useful lives assigned to our intangible assets

For information related to identified intangible assets acquired in the Nissens acquisition, see Note 2, “Business Acquisitions and Investments,” of the notes to our consolidated financial statements.

Other Intangible Assets

Other intangible assets include computer software. Computer software as of December 31, 2024 and 2023 totaled$21.4 millionand$19.1 million, respectively. Total accumulated computer software amortization as of December 31, 2024 and 2023 was$18.3 million and$18.0 million, respectively. Computer software is amortized over its estimated useful life of 3 to 10 years. Amortization expense for computer software was$0.8 million,$0.8 million and$0.7 million for the years ended December 31, 2024,2023 and 2022, respectively.

9. Investments in Unconsolidated Affiliates

Investment in Foshan FGD SMP Automotive Compressor Co. Ltd.

In November 2017, we formed Foshan FGD SMP Automotive Compressor Co., Ltd., a 50/50 joint venture with Foshan Guangdong Automotive Air Conditioning Co., Ltd. (“FGD”), a manufacturer of automotive belt driven air conditioning compressors based in China. We acquired our 50% interest in the joint venture for approximately $12.5 million. We determined that due to a lack of a voting majority, and other qualitative factors, we do not control the operations of the joint venture and accordingly, our investment in the joint venture is accounted for under the equity method of accounting. During the years ended December 31, 2024 and 2023, we made purchases from the joint venture of approximately$60 million and $44.1 million, respectively.

Investment in Foshan Che Yijia New Energy Technology Co., Ltd.

In August 2019, we acquired an approximate 29% minority interest in Foshan Che Yijia New Energy Technology Co., Ltd. (“CYJ”), a manufacturer of automotive electric air conditioning compressors based in China, for approximately $5.1 million. In October 2022, we acquired an additional 3.55% equity interest in CYJ for RMB 1.7 million (approximately $242,000), increasing our interest to approximately 33%. Our minority interest in CYJ is accounted for using the equity method of accounting. During the years ended December 31, 2024 and 2023, purchases we made from CYJ were not material.

In December 2021, Standard Motor Products (Hong Kong), Ltd., (“SMP HK”), a subsidiary of Standard Motor Products, Inc., entered into an unsecured loan agreement with CYJ. Under the terms of the loan agreement, CYJ shall have the right to borrow from SMP HK, as lender, up to an aggregate principal amount of $4 million, with interest calculated on the basis of simple interest of five percent (5%) per annum and a maturity date of November 30, 2023, subject to extension by SMP HK at its sole discretion. In September 2023, the loan agreement was extended through November 30, 2025. Outstanding borrowings under the loan agreement at December 31, 2024 were$4.0 million.

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Investment in Orange Electronic Co. Ltd.

In January 2013, we acquired a 19.4% minority interest in Orange Electronic Co., Ltd. (“Orange”), a manufacturer of tire pressure monitoring system sensors based in Taiwan, for $6.3 million. Our minority interest in Orange is accounted for using the equity method of accounting as we have the ability to exercise significant influence. During the years ended December 31, 2024 and 2023, we made purchases from Orange of approximately$1.4 million and $3.2 million, respectively.

10. Other Assets

Deferred compensation consists of assets held in a nonqualified defined contribution pension plan as of December 31, 2024 and 2023, respectively. Long term investments as of December 31, 2024 consist of certificates of deposit with original maturities in excess of twelve months.

11. Credit Facilities and Long-Term Debt

Total debt outstanding is summarized as follows (in thousands):

(a) Amounts are shown net of unamortized deferred financing costs of $2.7 million at December 31, 2024.

Term Loans and Revolving Credit Facilities

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.”

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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.

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 totwo one-year extensions of the maturity date.

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

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

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

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

Outstanding borrowings 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.

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.

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.

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Polish Overdraft Facility

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 wereno borrowings outstanding under the overdraft facility at both December 31, 2024 and December 31, 2023.

Maturities of Debt

As of December 31, 2024, maturities of debt through 2038, assuming no prepayments, are as follows (in thousands):

Deferred Financing Costs

Deferred financing costs related to our term loan and revolving credit facilities were$4.8 million and $1.6 million as of December 31, 2024 and 2023, respectively. In connection with the July 2024 amendment to our 2022 Credit Agreement and the 2024 Credit Agreement, we deferred financing costs of$5.1 million that will be amortized over the term of the borrowings, and expensed$1.4 million of pre-existing unamortized financing costs to interest expense in our consolidated statement of operations. Deferred financing costs as of December 31, 2024, assuming no prepayments, are being amortized in the amounts of$1.2 million in 2025,$1.1 million in 2026,$1 million in 2027,$0.9 million in 2028, and$0.6 million in 2029.

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12. Accumulated Other Comprehensive Income Attributable to SMP

Changes in Accumulated Other Comprehensive Income by Component (in thousands):

(a) Consists of the unrecognized gain relating to the change in fair value of the cash flow interest rate hedges of $1.4 million ($1.0 million, net of tax) plus cash settlement receipts of $2.5 million ($1.9 million, net of tax) in the year ended December 31, 2024; and the unrecognized loss relating to the change in fair value of the cash flow interest rate hedge of $1.2 million ($0.9 million, net of tax) plus cash settlement receipts of $2.4 million ($1.7 million, net of tax) in the year ended December 31, 2023.

(b) Unrecognized accumulated other comprehensive income (loss) related to the cash flow interest rate hedge is reclassified to earnings and reported as part of interest expense in our consolidated statements of operations when the interest payments on the underlying borrowings are recognized.

(c) Unrecognized accumulated other comprehensive income (loss) related to our post retirement plans is reclassified to earnings and included in the computation of net periodic postretirement benefit costs, which are included in other non-operating income (expense), net in our consolidated statements of operations.

13. Stockholders’ Equity

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 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.

14. Stock-Based Compensation Plans

Our stock-based compensation program is a broad-based program designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. In addition, members of our Board of Directors participate in our stock-based compensation program in connection with their service on our board.

In May 2021, our Board of Directors and Shareholders approved an amendment and restatement to the 2016 Omnibus Incentive Plan (the “Plan”). Under the Plan, which terminates in May 2026, we are authorized to issue, among other things, shares of restricted and performance-based stock to eligible employees and restricted stock to directors of up to 2,050,000 shares; and shares of restricted and performance-based stock to non-employee directors of up to 350,000 shares. Share

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awards granted under the Plan that are cancelled, forfeited or expire by their terms are eligible to be granted again under the Plan. The 2016 Omnibus Incentive Plan is the only remaining plan available to provide stock-based incentive compensation to our employees, directors and other eligible persons. Awards previously granted under the 2006 Omnibus Incentive Plan remain outstanding, while shares not yet granted under the plan are not available for future issuance.

We account for our stock-based compensation plans in accordance with the provisions of FASB ASC 718, Stock Compensation, which requires that a company measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The service period is the period of time that the grantee must provide services to us before the stock-based compensation is fully vested. The grant-date fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in our consolidated statements of operations. Forfeitures are estimated at the time of grant based on historical trends in order to estimate the amount of share-based awards that will ultimately vest. We monitor actual forfeitures for any subsequent adjustment to forfeiture rates.

Restricted Stock and Performance Share Grants

We currently grant shares of restricted stock to eligible employees and our independent directors and performance-based stock to eligible employees. We grant eligible employeestwo types of restricted stock (standard restricted shares and long-term retention restricted shares). Standard restricted shares granted to employees become fully vested generally no earlier than three years after the date of grant. Long-term retention restricted shares granted to selected executives vest at a 25% rate on or within approximatelytwo months of an executive reaching the ages of 60 and 63, and become fully vested on or within approximatelytwo months of an executive reaching the age of 65. Restricted shares granted to directors become fully vested upon the first anniversary of the date of grant.

Performance-based shares issued to eligible employees are subject to athree-year measuring period and the achievement of performance targets and, depending upon the achievement of such performance targets, they may become vested generally no earlier than three years after the date of grant. Each period we evaluate the probability of achieving the applicable targets, and adjust our accrual accordingly. Restricted shares (other than long-term retention restricted shares) and performance shares issued to certain key executives and directors are subject to aone ortwo year holding period upon the lapse of the vesting period. Forfeitures on stock grants are estimated at 5% for employees and 0% for executives and directors based upon our evaluation of historical and expected future turnover.

Before a restricted share becomes fully vested or a performance share is issued, the awardees cannot transfer, pledge, hypothecate or encumber such shares. Prior to the time a restricted share is fully vested, the awardees have all other rights of a stockholder, including the right to vote (but do not receive dividends during the vesting period). Prior to the time a performance share is issued, the awardees have no rights as a stockholder. All shares and rights are subject to forfeiture if certain employment conditions are not met.

At December 31, 2024, under the Plan, there were an aggregate of (a)1,863,027 shares of restricted and performance-based stock grants issued, net of forfeitures, and (b)186,973 shares of common stock available for future grants. For the year ended December 31, 2024,277,742 restricted and performance-based shares were granted (199,510 restricted shares and 78,232 performance-based shares).

In determining the grant date fair value, the stock price on the date of grant, as quoted on the New York Stock Exchange, was reduced by the present value of dividends expected to be paid on the shares issued and outstanding during the requisite service period, discounted at a risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the restriction or vesting period at the grant date. In addition, a further discount for the lack of marketability reduced the fair value of grants issued to certain key executives and directors subject to theone ortwo year post vesting holding period. Assumptions used in calculating the discount for the lack of marketability include an estimate of stock volatility, risk-free interest rate, and a dividend yield.

As related to restricted and performance stock shares, we recorded compensation expense of$5.8 million ($4.3 million, net of tax),$6.2 million ($4.8 million, net of tax) and$7.6 million ($5.7 million, net of tax), for the years ended December 31, 2024, 2023 and 2022, respectively.

The following table shows stock-based compensation unamortized compensation expense and the weighted-average periods over which the unamortized compensation expense is expected to be recognized:

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Our restricted and performance-based share activity was as follows for the years ended December 31, 2024 and 2023:

The weighted-average grant date fair value of restricted and performance-based shares outstanding as of December 31, 2024, 2023 and 2022 was$25.5 million (or$26.82 per share), $26 million (or $29.48 per share), and $28 million (or $31.79 per share), respectively.

15. Employee Benefits

Defined Contribution Plans

We maintain various defined contribution plans, which include profit sharing, and provide retirement benefits for substantially all of our employees. Matching obligations, in connection with the plans which are funded in cash and typically contributed to the plans in March of the following year, are as follows (in thousands):

We maintain a defined contribution Supplemental Executive Retirement Plan for key employees. Under the plan, these employees may elect to defer a portion of their compensation and, in addition, we may at our discretion make contributions to the plan on behalf of the employees. In March 2024 and 2023, contributions of $0.6 million and $0.8 million were made related to calendar years 2023 and 2022, respectively. As of December 31, 2024, we have recorded an obligation of$0.4 million for 2024.

We also have an Employee Stock Ownership Plan and Trust (“ESOP”) for employees who are not covered by a collective bargaining agreement. In connection therewith, we maintain an employee benefits trust to which we contribute shares of treasury stock. We are authorized to instruct the trustees to distribute such shares toward the satisfaction of our future obligations under the plan. The shares held in trust are not considered outstanding for purposes of calculating earnings per

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share until they are committed to be released. The trustees will vote the shares in accordance with its fiduciary duties. During 2024, we contributed to the trust an additional 68,700 shares from our treasury and released 68,700 shares from the trust leaving 200 shares remaining in the trust as of December 31, 2024. The provision for expense in connection with the ESOP was approximately$2.8 million in 2024, $3.0 million in 2023 and $2.3 million in 2022.

16. Other Non-Operating Income, Net

The components of other non-operating income, net are as follows (in thousands):

17. Derivative Instruments

As part of our risk management strategy, we occasionally use derivative instruments, including interest rate swaps, forward foreign exchange contracts and non-derivative instruments such as foreign currency denominated debt, to reduce our market risk for changes in interest rates and to manage foreign exchange rate risk. The objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting the fair value of assets and liabilities.

Derivative instruments may be designated as fair value hedges, cash flow hedges or hedges of the foreign currency exposure of a net investment in a foreign operation (“net investment hedges”) or they may not be designated as hedging instruments. Derivative instruments are recognized at fair value on a gross basis in the consolidated balance sheets. The change in fair value of the derivative instruments is recognized in the consolidated statements of operations or consolidated statements of comprehensive income depending upon the type of hedge as further discussed below. Cash flows from derivative programs are classified with the activities that correspond to the underlying hedged items in the consolidated statements of cash flows.

Due to the use of derivative instruments, we are exposed to the risk that our counterparties will fail to meet their contractual obligations. To mitigate counterparty credit risk, we have a policy of only entering into derivative contracts with carefully selected major financial institutions based on their credit ratings and other factors, and periodically reassess their creditworthiness. We do not offset derivative assets against liabilities in master netting agreements and there were no receivables or payables recognized on receipt or payment of cash collateral at December 31, 2024 and 2023.

The interest rate swaps effectively convert a portion of our variable rate borrowings under our existing facilities to a fixed rate based upon determined notional amount. The forward foreign exchange contracts fix expected future cash flows in U.S. dollar terms on certain transactions and foreign currency denominated debt is used to partially offsets the effects of foreign currency on our investments in certain foreign subsidiaries. We do not enter into derivative instruments for trading or speculative purposes.

Cash Flow Hedges

In 2022, we entered into an interest rate swap agreement with a notional amount of $100 million that matures in May 2029. The interest rate swap agreement is designated as a cash flow hedge of interest payments on $100 million of borrowings under our 2024 Credit Agreement. Under the terms of the swap agreement, we will receive monthly variable interest payments based on one month Term SOFR and will pay interest based on a fixed rate of 2.683% per annum.

In October 2024, we entered into an interest rate swap agreement with an initial notional amount of €100 million that matures in March 2030. At December 31, 2024, the notional amount was $103.9 million or €100 million. The interest rate swap agreement is designated as a cash flow hedge of interest payments on euro denominated borrowings under our 2024

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Credit Agreement equal to the notional amount of the interest rate swap agreement. The notional amount of the interest rate swap will decrease quarterly starting from June 2025. Under the terms of the swap agreement, we will receive monthly variable interest payments based on one month EURIBOR and will pay interest based on a fixed rate of 2.11% per annum.

The fair value of the interest rate swap agreements as of December 31, 2024 was an asset of$5.4 million and a liability of$0.1 million and an asset of $3.9 million as of December 31, 2023, which has been deferred and recorded in accumulated other comprehensive income, net of income taxes, in our consolidated balance sheet. When the hedged interest payment on the underlying borrowing is recognized in interest expense, the respective deferred gain/loss in accumulated other comprehensive income is reclassified to earnings as interest expense in the consolidated statements of operations. The amount to be reclassified from accumulated other comprehensive income in the next twelve months is expected to be$1.3 million. We perform quarterly hedge effectiveness assessments and anticipate that the interest rate swap will be highly effective throughout its term. If it becomes probable that the hedged interest payment(s) will not occur, we immediately recognize the related deferred hedging gains/losses in earnings. There were no such reclassifications during the year ended December 31, 2024.

Net Investment Hedge

At December 31, 2024, $202.5 million or €195 million notional amount of euro-denominated debt is designated as a hedge of our net investment in Nissens Automotive's foreign operations whose functional currency is Danish kroner. Provided the net investment hedge is highly effective, gains/losses are recorded as a currency translation adjustment in accumulated other comprehensive income in the consolidated balance sheet. The gains/losses will subsequently be reclassified into earnings when the hedged net investment is either sold or substantially liquidated. We recognized a gain of $9.7 million as a currency translation adjustment in other comprehensive income in 2024. No gains or losses related to the net investment hedge were recognized in earnings in 2024.

Non-Designated Derivatives

In 2024, we realized losses of$2.5 million related to forward foreign exchange contracts that were used to economically hedge forecasted foreign currency transactions primarily related to our acquisition of Nissens Automotive. The losses were recorded inselling, general and administrative expenses in the consolidated statement of operations. There areno forward foreign exchange contracts outstanding at December 31, 2024 and 2023, respectively.

18. Fair Value Measurements

We follow a three-level fair value hierarchy that prioritizes the inputs to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect assumptions that market participants would use in pricing an asset or liability.

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The following is a summary of the estimated fair values, carrying amounts, and classification under the fair value hierarchy of our financial instruments at December 31, 2024 and December 31, 2023 (in thousands):

(a)As of December 31, 2024 cash and cash equivalents consist of cash of$44.4 million. Cash and cash equivalents at December 31, 2023 consist of cash of$29.5 million and cash equivalents of$3 million, which are classified as Level 1 and Level 2, respectively, under the fair value hierarchy.

Cash equivalents consist of certificates of deposit with original maturities of 3 months, or less. These securities are accounted for as held-to-maturity and recorded at amortized cost, which approximates their fair values at December 31, 2024. The fair value of the underlying assets held by the deferred compensation plan are based on the quoted market prices of the underlying funds which are held by registered investment companies. The carrying value of our variable rate short-term borrowings and long-term debt under our credit facilities approximates fair value as the variable interest rates in the facilities reflect current market rates. The fair value of our cash flow interest rate swap agreement is obtained from an independent third party, is based upon market quotes, and represents the net amount required to terminate the interest rate swap, taking into consideration market rates and counterparty credit risk. Long-term investments consist of certificates of deposit with original maturities in excess of twelve months. These securities are accounted for as held-to-maturity and recorded at amortized cost, which approximates their fair values at December 31, 2024.

19. Income Taxes

The income tax provision (benefit) consists of the following (in thousands):

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Reconciliations between taxes at the U.S. Federal income tax rate and taxes at our effective income tax rate on earnings from continuing operations before income taxes are as follows (in thousands):

The following is a summary of the components of the net deferred tax assets and liabilities recognized in the accompanying consolidated balance sheets (in thousands):

In assessing the realizability of the deferred tax assets, we consider whether it is more likely than not that some portion or the entire deferred tax asset will be realized. Ultimately, the realization of the deferred tax asset is dependent upon the generation of sufficient taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized. We consider the level of historical taxable income, scheduled reversal of temporary differences, carryback and carryforward periods, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted. We also consider cumulative losses in recent years as well as the impact of one-time events in assessing our pre-tax earnings. Assumptions regarding future taxable income require significant judgment. Our assumptions are consistent with estimates and plans used to manage our business.

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The valuation allowance of$4.8 million as of December 31, 2024 is intended to provide for uncertainty regarding the ultimate realization of our U.S. foreign tax credit carryovers of $4.6 million that will expire in varying amounts by 2032, and foreign net operating losses of $0.2 million. Based on these considerations, we believe it is more likely than not that we would realize the benefit of the net deferred tax asset of$13.2 million as of December 31, 2024, which is net of the remaining valuation allowance.

As related to the taxation of our foreign subsidiaries, we aggregate our foreign earnings and profits, and utilize allowable deductions and available foreign tax credits in computing our U.S. tax. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most of these earnings indefinitely outside of the U.S., and do not expect to incur any significant additional taxes related to such amounts.

We recognize in our financial statements only those tax positions that meet the more-likely-than-not recognition threshold. We establish tax reserves for uncertain tax positions that do not meet this threshold. During the years ended December 31, 2024, 2023 and 2022, we didnot establish a liability for uncertain tax positions.

We are subject to taxation in the U.S. and various state, local and foreign jurisdictions. As of December 31, 2024, the Company is no longer subject to U.S. Federal tax examinations for years before 2021. We remain subject to examination by state and local tax authorities for tax years 2020 through 2023. Foreign jurisdictions have statutes of limitations generally ranging from 2 to 6 years. Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2020 onward), Hong Kong (2019 onward), China (2022 onward), Mexico (2018 onward), Poland (2019 onward), Hungary (2019 onward), Germany (2020 onward), Denmark (2019 onward) and Slovakia (2019 onward). We do not presently anticipate that our unrecognized tax benefits will significantly increase or decrease over the next 12 months; however, actual developments in this area could differ from those currently expected.

20. Earnings Per Share

We present two calculations of earnings per common share. “Basic” earnings per common share equals net earnings attributable to SMP divided by weighted average common shares outstanding during the period. “Diluted” earnings per common share equals net earnings attributable to SMP divided by the sum of weighted average common shares outstanding during the period plus potentially dilutive common shares. Potentially dilutive common shares that are anti-dilutive are excluded from net earnings per common share.

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The following are reconciliations of the net earnings attributable to SMP and the shares used in calculating basic and dilutive net earnings per common share attributable to SMP (in thousands, except share and per share data):

The shares listed below were not included in the computation of diluted net earnings per common share attributable to SMP because to do so would have been anti-dilutive for the periods presented or because they were excluded under the treasury method (in thousands):

21. Industry Segment and Geographic Data

Our business is organized into four operating segments, Vehicle Control, Temperature Control, Engineered Solutions and Nissens Automotive, each of which focuses on a specific line of business. Our automotive aftermarket business is comprised of three operating segments, Vehicle Control, Temperature Control and Nissens Automotive, while our Engineered Solutions operating segment offers a broad array of conventional and future-oriented technologies. Nissens Automotive is a new operating segment created in the fourth quarter of 2024 comprising of our acquisition in November 2024.

The Vehicle Control operating segment includes sales from ignition emissions and fuel delivery, electrical and safety, and wire sets and other product categories to automotive aftermarket customers.

The Temperature Control operating segment includes sales from air conditioning system components and other thermal product categories to automotive aftermarket customers primarily in the United States, and is poised to benefit from the broader adoption of more complex air conditioning systems that will provide passenger comfort regardless of the vehicle's powertrain.

The Engineered Solutions operating segment includes sales of custom-engineered solutions to vehicle and equipment manufacturers in highly diversified global end-markets such as commercial and light vehicles, construction, agriculture, power sports and marine.

The Nissens Automotive operating segment includes sales of engine cooling, air conditioning system components and engine efficiency products to automotive aftermarket customers primarily in Europe.

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There are no intersegment sales among our operating segments. Other consists of financial information related to the activities of our corporate headquarters function.

We identify our operating segments based on how our chief operating decision maker ("CODM"), our President and Chief Executive Officer, allocates resources, assesses performance and makes decisions. The CODM uses operating income (loss) to allocate resources (including employees, property, and financial or capital resources) for each segment during the annual budget and forecasting process. The CODM considers budget-to-actual and year-over-year variances on a monthly basis for the significant measure when making decisions about allocating capital and personnel to the segments. The CODM also uses segment gross profit for evaluating product pricing and operating income (loss) to assess the performance for each segment by comparing the results with one another. In addition to these measures, the CODM tracks expenses at a disaggregated level to understand the drivers of total operating expenses. These include selling, general and administrative expenses, distribution expenses, supply chain financing expenses, restructuring and integration expenses, and any other special expense items. In tracking these expenses separately, the CODM is able to identify opportunities for adjusting how the business uses funds to achieve greater profitability.

The accounting policies of each segment are the same as those described in Note 1, "Summary of Significant Accounting Policies".

The following tables contain financial information for each reportable operating segment (in thousands):

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(a)Long-lived assets are attributed to countries based upon the location of the assets.

Our three largest individual customers accounted for approximately 60.7% of our consolidated net sales in 2024. During 2024, O’Reilly Auto Parts, AutoZone and NAPA accounted for 28.4%,18.8% and 13.5% of our consolidated net sales, respectively. Net sales from each of the customers were reported in our Vehicle Control and Temperature Control operating segments. The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them could have a material adverse impact on our business, financial condition and results of operations. In addition, any consolidation among our key customers may further increase our customer concentration risk.

For the disaggregation of our net sales from customers by major product group and geographic area within each of our operating segments, see Note 22, “Net Sales.”

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22. Net Sales

We disaggregate our net sales from contracts with customers by major product group and geographic area within each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our net sales are affected by economic factors.

Major Product Group

The Vehicle Control operating segment generates its revenues from core aftermarket sales of ignition, emissions, and fuel delivery, electrical and safety, and wire sets and other product categories primarily in the United States. The Temperature Control operating segment generates its revenue from aftermarket sales of air conditioning system components and other thermal products. The Engineered Solutions operating segment generates revenues from custom-engineered products to vehicle and equipment manufacturers in highly diversified global end-markets such as commercial and light vehicles, construction, agriculture, power sports and marine. The Nissens Automotive operating segment generates its revenues from aftermarket sales of engine cooling, air conditioning system components and engine efficiency products primarily in Europe.

The following table summarizes consolidated net sales by major product group within each operating segment for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Geographic Area

We sell our line of products primarily in the United States, with additional sales in Europe, Canada, Mexico, Asia and other foreign countries. Sales are attributed to countries based upon the location of the customer. Our sales are substantially denominated in U.S. dollars.

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The following tables provide disaggregation of net sales information by geographic area within each operating segment for the years ended December 31, 2024, 2023 and 2022 (in thousands):

23. Commitments and Contingencies

Warranties

We generally warrant our products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product. Accruals for estimated product warranty claims are included in accrued customer returns on the consolidated balance sheet.

The following table provides the changes in our product warranties (in thousands):

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Letters of Credit

As of December 31, 2024 and 2023, we had outstanding letters of credit with certain vendors aggregating approximately$2.5 million and $2.3 million, respectively. These letters of credit are being maintained as security for reimbursements to insurance companies and as security to the landlord of our administrative offices in Long Island City, New York. The contract amount of the letters of credit is a reasonable estimate of their value as the value for each is fixed over the life of the commitment.

Change of Control Arrangements

We have a change in control arrangement withone key officer. In the event of a change of control (as defined in the agreement), the executive will receive severance payments and certain other benefits as provided in his agreement.

Asbestos

In 1986, we acquired a brake business, which we subsequently sold in March 1998 and which is accounted for as a discontinued operation in the accompanying statement of operations. When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by the seller of the acquired brake business. In accordance with the related purchase agreement, we agreed to assume the liabilities for all new claims filed on or after September 2001. Our ultimate exposure will depend upon the number of claims filed against us on or after September 2001, and the amounts paid for settlements, awards of asbestos-related damages, and defense of such claims. At December 31, 2024, approximately 1,287 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2024, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately$91.4 million. We do not have insurance coverage for the indemnity and defense costs associated with the claims we face.

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

In accordance with our policy to perform an annual actuarial evaluation in the third quarter of each year, an actuarial study was performed as of August 31, 2024. The results of the August 31, 2024 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs, ranging from$99.6 million to$210.8 million for the period through 2065. The change from the prior year study, which was as of August 31, 2023, was a$15.6 million increase for the low end of the range and a$75.5 million increase for the high end of the range. The increase in the estimated undiscounted liability from the prior year study at both the low end and high end of the range reflects our actual experience, our historical data and certain assumptions with respect to events that may occur in the future.

Based upon the results of the August 31, 2024 actuarial study, in September 2024 we increased our asbestos liability to$99.6 million, the low end of the range, and recorded an incremental pre-tax provision of$29.3 million in earnings (loss) from discontinued operations in the accompanying statement of operations. Future legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2024 study, to range from$49.8 million to $115.9 million for the period through 2065. Total operating cash outflows related to discontinued operations, which include settlements, awards of asbestos-

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related damages and legal costs, net of taxes, were$15.3 million, $11 million and $12.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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

Other Litigation

In connection with the aforementioned former brake business, we were subject to a legal proceeding alleging a breach of contract claim of the related purchase agreement. In August 2023, we reached a final settlement in the amount of $10.5 million and payment was made in October 2023. The full amount of the settlement was recorded $10.5 million in earnings (loss) from discontinued operations in the accompanying statement of operations in 2023.

We are currently involved in various other legal claims and legal proceedings (some of which may involve substantial amounts), including claims related to commercial disputes, product liability, employment, and environmental. Although these legal claims and legal proceedings are subject to inherent uncertainties, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the ultimate outcome of these matters will not, either individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations. We may at any time determine that settling any of these matters is in our best interests, which settlement may include substantial payments. Although we cannot currently predict the specific amount of any liability that may ultimately arise with respect to any of these matters, we will record provisions when the liability is considered probable and reasonably estimable. Significant judgment is required in both the determination of probability and the determination as to whether an exposure can be reasonably estimated. As additional information becomes available, we reassess our potential liability related to these matters. Such revisions of the potential liabilities could have a material adverse effect on our business, financial condition or results of operations.