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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-28 · 108 added, 115 removed, 190 unchanged (54% of the section changed)

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This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during each of the fiscal years in the two-year period ended December 31, 2025 .

Discussion and analysis of our financial condition and results of operations for fiscal year 2023 , and comparisons of fiscal years 2023 and 2022 can be found in Part II, Item 7.

Discussion and analysis of our financial condition and results of operations for fiscal year 2024 , and comparisons of fiscal years 2024 and 2023 can be

found in Part II, Item 7.

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

Year Ended December 31,

(In thousands, except per share data) 2025 2024

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Net earnings attributable to SMP 41,335 27,500

Per share data attributable to SMP – Diluted:

Net earnings per share data attributable to SMP – Diluted:

Continuing operations $ 3.52 $ 2.41

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Net earnings per common share $ 1.84 $ 1.24

Consolidated net sales for 2024 were $1,463.8 million , a increase of $105.6 million, or 7.8% c ompared to net sales of $1,358.3 million in 2023.

The increase in net sales in 2024 reflects the impact of multiple factors including:

• strong demand in our Temperature Control operating segment primarily reflecting the impact of warmer year-over-year seasonal weather conditions,

• net sales of $35.7 million for the period from acquisition to December 31, 2024 in our new segment, Nissens Automotive, created with the acquisition of Nissens Automotive, a leading European supplier of thermal management and engine efficiency products for the automotive aftermarket, on November 1, 2024,

• stable demand in our Vehicle Control aftermarket segment across our major product groups, and

• a slight increase in net sales in our Engineered Solutions operating segment with growth from business wins and successful cross-selling efforts offset by slowing customer production in the fourth quarter.

Consolidated net sales for 2025 were $1,791.2 million, an increase of $327.3 million, or 22.4% compared to net sales of $1,463.8 million in 2024.

The increase in net sales in 2025 refl ects the impact of multiple factors including:

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

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

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

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

Gross margin as a percentage of net sales in 2025 was 31.2% a s compared to 28.9% in 2024 .

Overall, the gross margin increase as a percentage of sales in 2024 primarily reflects the positive impact of higher sales volumes leading to higher fixed manufacturing cost absorption, improved operating performance including the impact of cost control measures, and increased pricing, which more than offset lingering inflationary increases in certain materials and labor costs .

We anticipate that the ongoing benefits from our cost-savings initiatives and strong gross margins in our newly acquired operating segment, Nissens Automotive, will mitigate continued pressure on margins resulting from inflationary headwinds.

Overall, the increase in gross margin as a percentage of sales in 2025 primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar.

In addition, we experienced the positive impact of higher sales volumes in our legacy segments lead to higher fixed manufacturing cost absorption, improved operating performance including the impact of cost control measures, and increased pricing primarily to incorporate higher tariffs on imports into the United States, which more than offset increases in certain materials and labor costs and a lag in the timing of updating pricing for the impact of higher tariffs.

We anticipate that the ongoing benefits from our cost-savings initiatives and synergies with our newly acquired operating segment, Nissens Automotive, will mitigate continued pressure on margins.

While our business in U.S.

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Operating margin as a percentage of net sales in 2025 wa s 7.6% as compared to 5.5% in 2024 .

Overall the increase in operating margin as a percentage of sales primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which resulted in improved gross margin, as well as lower acquisition related costs and restructuring expenses.

Included in our operating margin were selling, general and administrative expenses of $420.7 million , o r 23.5% of net sales in 2025 compared to $335.1 million , or 22.9% of net sales in 2024 .

The $41.5 million increase in selling, general and administrative expenses in 2024 is principally due to (i) $14.3 million of selling, general and administrative expenses for Nissens Automotive as the results of our new operating segment are consolidated into our financial statements for the two months from the close of the acquisition, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales, (iii) costs associated with our acquisition of Nissens Automotive, and (iv) increased rent and incremental expenses as we transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas.

The new larger distribution center will integrate new distribution technologies including a mechanized material handling system designed to deliver improved logistics capabilities, operational efficiencies, as well as enhanced employee, customer and supplier experiences and is expect to be fully operational later in 2025.

We will incur additional costs in 2025 during the phase-in period while we operate the two facilities.

Overall, our core automotive aftermarket business remains strong, and we are both excited and optimistic for the growth potential in our newly acquired operating segment, Nissens Automotive and the long-term growth potential of the complementary markets served in our Engineered Solutions operating segment.

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.

We recorded expenses of $7.1 million in 2024 , with additional expenses to be recorded of approximately $0.6 million in 2025, and $0.1 million in 2026 for an aggregate cost of approximately $7.7 million.

It is anticipated that the overall separation program will reduce operating expenses in 2025.

Expenses incurred pursuant to the program are recorded in restructuring and integration expenses in our statement of operations.

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

The global automotive aftermarket industry continues to be resilient with a growing number of older vehicles on the road.

Our global automotive aftermarket business remains strong with demand for our products driven by the quality, brand recognition and high levels of customer service that we provide.

We are optimistic about our business and are well positioned to capitalize on these favorable trends and the long-term growth potential in the coming years.

United States Trade Policy

Since February 2025, the United States government imposed new tariffs on imports to the United States from certain countries and regions, including Canada, Mexico, China, the European Union and many other countries.

Certain foreign governments have implemented retaliatory actions in response to the change in United States trade policy.

We operate manufacturing plants in, and rely on imports primarily from Canada, Mexico, China and the European Union to serve our customers in the United States, and therefore, we are exposed to the adverse impacts of higher tariffs on imported raw materials, components and finished goods.

In response, we have taken, and will continue to take actions to optimize our operations to minimize the impact of such tariffs and maintain our profitability through cost and pricing measures.

We believe our diverse global footprint provides a competitive advantage and resiliency within our supply chain.

More than one-half of our sales in the United States are from products manufactured in North America, which are currently mostly exempt from tariffs under the United States-Mexico-Canada Agreement.

Products sourced from China represent approximately one-quarter of our sales in the United States, with the remainder of our sales in the United States from products sourced from other regions of the world which are currently subject to lower tariffs.

Furthermore, our recent acquisition of Nissens Automotive provides sales diversification outside of the United States.

The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the United States and affected countries, retaliation imposed by other countries, tariff exemptions, and decisions to pause, reimpose or increase tariffs.

We will continue to actively monitor international trade developments and evaluate the potential impact on our results of operations and financial condition.

Results of Operations

Consolidated net sales for 2024 were $1,463.8 million , an increase o f $105.6 million, or 7.8%, c ompared to $1,358.3 million in 2023 , with the majority of our net sales to customers located in the United States.

Consolidated net sales increased in all our operating segments when compared to the prior fiscal year.

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

Consolidated net sales for 2025 were $1,791.2 million, an increase of $327.3 million, or 22.4%, compared to $1,463.8 million i n 2024 , with the majority of our net sales to customers located in the United States.

Consolidated net sales increased in all of our automotive aftermarket operating segments when compared to the prior fiscal year.

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

Year Ended December 31,

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Total Temperature Control 426,367 380,088

Nissens Automotive

Air Conditioning 126,727 9,214

Engine Cooling 126,389 19,287

Engine Efficiency 52,261 7,244

Total Nissens Automotive 305,377 35,745

Engineered Solutions

Light Vehicle 84,887 91,548

Commercial Vehicle 81,239 89,171

Construction/Agriculture 35,618 35,832

Light Vehicle 91,548 92,701

All Other 72,740 68,905

Total Engineered Solutions 274,484 285,456

Nissens Automotive

Engine Cooling 19,287 —

Air Conditioning 9,214 —

Engine Efficiency 7,244 —

Total Nissens Automotive 35,745 35,745 —

Intersegment sales (462) —

Total $ 1,791,158 $ 1,463,849

Vehicle Control’s net sales for 2025 increased $22.8 million, or 3%, to $785.4 million compared to $762.6 million in 2024 .

Demand in the Vehicle Control segment remained relatively stable across our major product groups.

Increases in net sales within engine management and electrical safety product groups reflected strong demand from customers, and was tempered by the continued secular decline in sales of wire sets.

Temperature Control’s net sales for 2025 increased $46.3 million, or 12%, to $426.4 million compared to $380.1 million in 2024.

The higher year-over-year Temperature Control net sales reflects higher customer demand due to the impact of warmer seasonal weather conditions in the U.S.

compared to 2023.

The higher year-over-year Temperature Control net sales reflects continued very strong customer demand compared to the same period in 2024 benefiting from a longer peak season, growth in certain product categories and gains in market share as our existing customers continued to grow.

Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.

Engineered Solutions’ net sales for 2024 increased $2.9 million , or 1% , to $285.5 million compared to $282.6 million in 2023 .

Overall, net sales in our Engineered Solutions operating segment showed year-over-year improvement driven by new

business wins as well as successful cross-selling efforts, partly offset by slowing customer production schedules in the fourth quarter.

Net sales of $35.7 million, o r 2.4% of total SMP's net sales, for our newly acquired operating segment, Nissens Automotive, are included in our consolidated results for the two months from the closing date of the acquisition.

We expect Nissens Automotive's net sales to follow a similar annual seasonal pattern as the Temperature Control segment, as demand for many of Nissens Automotive's products increase with warmer weather.

We also expect to benefit from revenue synergies resulting from the acquisition starting in 2026 and beyond.

Nissens Automotive's net sales for 2025 increased by $269.6 million from $35.7 million in 2024 to $305.4 million in 2025 due to a full year of sales activity as compared to two months from the acquisition date in 2024.

Nissens Automotive's net sales exceeded our expectations in 2025 reflecting gains in market share.

Demand for Nissens Automotive products follow a similar annual seasonal pattern as the Temperature Control segment, as demand for many products generally increases with warmer weather.

We expect to benefit from revenue synergies resulting from the acquisition in 2026 and beyond.

Engineered Solutions’ net sales for 2025 decreased $11.0 million, or 4%, to $274.5 million compared to $285.5 million in 2024 .

Overall, net sales in our Engineered Solutions operating segment declined year-over-year as growth from new business wins and successful cross-selling efforts, was more than offset by slower demand from existing customers.

We are optimistic that demand will stabilize in 2026.

Gross Margins.

Gross margins, as a percentage of consolidated net sales, increased to 31.2% f or 2025 , compared to 28.9% for 2024 .

The following table summarizes gross margins by segment for the years ended December 31, 2024 and 2023 , respectively (in thousands):

Nissens Automotive Other Total

The following table summarizes gross margins by segment (in thousands):

Nissens Automotive Engineered

Net sales $ 785,392 $ 426,367 $ 305,377 $ 274,484 $ (462) $ 1,791,158

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Gross margin percentage 32.0 % 31.0 % 32.2 % 17.5 % — 28.9 %

Compared to 2023 , gross margin percentage decreased from 32.3% to 32.0% at Vehicle Control , increased from 28.4% to 31.0% at Temperature Control, and decreased from 19.4% to 17.5% at Engineered Solutions.

Gross margin percentage for the Nissens Automotive segment was 32.2% for the two months from the closing date of the acquisition .

The gross margin percentage in our Vehicle Control operating segment remained relatively flat reflecting higher sales volume and higher fixed cost absorption due to higher production levels than those achieved in 2023, partially offset by inflationary cost increases.

The gross margin percentage increase in our Temperature Control operating segment reflected higher sales volume, some increased pricing, improved operating performance from cost savings initiatives, and favorable fixed cost absorption due to higher production levels than those achieved in 2023.

The gross margin percentage decrease at our Engineered Solutions operating segment is driven primarily by cost inflation and an unfavorable customer sales mix, partially offset by some higher pricing.

We expect some pressure on demand into 2025 for our Engineered Solutions products as production schedules at customers slow.

The gross margin percentage at our Nissens Automotive operating segment was negatively impacted by $3.1 million of amortization for inventory fair value adjustments related to the application of accounting for business combinations.

Amortization of the remaining inventory fair value adjustment will continue through Q2 2025.

While we anticipate continued margin pressure resulting from inflationary headwinds and a competitive market environment, we believe that our cost savings and product rationalization initiatives should mitigate much of this impact to our gross margins as well as, cost synergies related to our acquisition of Nissens Automotive.

Compared to 2024, gross margin percentage at our Temperature Control and Nissens Automotive operating segments increased by 3.0 percentage points from 31.0% to 34.0%, and 7.2% percentage points from 32.2% to 39.4%, respectively.

Gross margin percentage at our Vehicle Control and Engineered Solutions operating segments decreased slightly by 0.5 percentage points from 32.0% to 31.5% and 0.4 percentage points from 17.5% to 17.1%, respectively.

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

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

The gross margin percentage at our Nissens Automotive operating segment reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar.

Inventory fair value adjustments in 2025 of $4.6 million related to the application of accounting for business combinations were fully amortized by the end of the second quarter of 2025.

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

While we anticipate continued margin pressure resulting from a competitive market environment, we believe that our cost savings and product rationalization initiatives should mitigate much of this impact to our gross margins as well as, revenue and cost synergies related to the continued integration of our new segment, Nissens Automotive.

While our business in U.S.

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Selling, general and administrative expenses increased $85.6 million to $420.7 million, or 23.5% of consolidated net sales in 2025 , as compared to $335.1 million , or 22.9% of consolidated net sales in 2024 .

Excluding the $14.3 million impact of including Nissens Automotive into our financial statements for the two months from the acquisition date, the increase in selling, general and administrative expenses is principally due to the impact of (i) $10.5 million higher distribution and freight expenses in our legacy business primarily due to higher sales, (ii) $10.3 million of costs associated with our acquisition of Nissens Automotive, including $2.3 million of derivative losses on

forward foreign exchange contract used to economically hedge the purchase price, and (iii) $4.6 million of increased rent and incremental expenses as we transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas.

Restructuring and Integration Expenses.

Restructuring and integration expenses were $7.7 million in 2024 compared to $2.6 million in 2023 .

Restructuring and integration expenses incurred in 2024 relate primarily to the Separation Program announced in the second quarter of 2024, and expanded to encompass involuntary separations in the third quarter of 2024, as part of our commitment to optimizing our cost structure and providing professional development opportunities to our employees.

We anticipate that the program will be substantially complete by the end of 2027.

Restructuring and integration expenses in 2024 consist of $7.3 million of costs related to workforce reductions and severance costs, and $0.4 million for the relocation of machinery and equipment ;

while 2023 expenses primarily related to the Cost Reduction Initiative consist of $2 million of costs related to workforce reductions and severance costs, and $0.7 million for the relocation of machinery and equipment.

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

Restructuring Expenses.

Restructuring expenses of $2.6 million in 2025, primarily consisted of costs to relocate machinery and equipment within the Cost Reduction Initiative initiated in 2022, as compared to $7.7 million in 2024 which primarily consisted of severance and other benefit enhancements within the Separation Program initiated in 2024 .

Additional restructuring expenses related to these programs are expected to be immaterial.

Operating Income.

Operating income was $136.5 million, or 7.6% , of consolidated net sales in 2025 , compared to $80.6 million , or 5.5% , of consolidated net sales in 2024 .

The year-over-year decrease in operating income of $12.1 million is primarily the result of higher selling, general and administrative expenses, including costs associated with the acquisition of Nissens Automotive, and higher restructuring and integration expenses, partially offset, by the impact of higher net sales and improved gross margin percentage.

The year-over-year increase in operating income of $55.9 million primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which resulted in improved gross margin, as well as lower acquisition related costs and restructuring expenses, offset by higher selling, general and administrative expenses.

Other Non-Operating Income, Net.

Other non-operating income, net was $5.4 million in 2025, compared to $6.9 million in 2024.

The year-over-year increase in other non-operating income, net results from the increase in year-over-year equity income from our joint ventures, and the favorable impact of changes in foreign currency exchange rates.

Equity income from our joint ventures increased irrespective of the year-over-year decline in the equity income of Gwo Yng, reflecting the impact of our acquisition of an additional 15% equity interest in Gwo Yng in July 2023.

Commencing on the date of our equity interest increase, the financial results of Gwo Yng were no longer accounted for under the equity method of accounting.

Instead, Gwo Yng’s financial results are reported on a consolidated basis.

As such, other non-operating income, net includes equity income of Gwo Yng of $0.7 million in 2023.

The year-over-year decrease in other non-operating income, net primarily results from less favorable impact of changes in foreign currency exchange rates and a decrease in year-over-year equity income from our joint ventures.

Interest Expense.

Interest expense increased to $31.3 million in 2025 , compared to $13.5 million in 2024 .

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

We expect interest expense to increase in 2025 due to higher overall outstanding balances under our 2024 Credit Agreement connected to our acquisition of Nissens Automotive.

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

Income Tax Provision .

The income tax provision for 2025 was $30.6 million at an effective tax rate of 27.7%, compared to $19.4 million at an effective tax rate of 26.2% in 2024.

The higher effective tax rate in 2024 compared to 2023 reflects the impact of non-deductible transaction costs associated with our acquisition of Nissens Automotive, an increase in earnings from international as compared to U.S.

operations, and the effective tax rate impact of lower year-over-year pre-tax income.

The higher effective tax rate in 2025 compared to 2024 reflects an increase in earnings from international as compared to U.S.

operations, and an increase in future tax liabilities associated with unrepatriated earnings from international operations.

Loss From Discontinued Operations.

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During the years ended December 31, 2025 and 2024 , we recorded a net loss of $37.7 million and $26.1 million from discontinued operations, respectively.

The loss from discontinued operations for the year ended December 31, 2024 and 2023 includes (i) a $29.3 million and $23.8 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2024 and 2023 actuarial studies;

(ii) legal and other miscellaneous expenses, before taxes, of $4.8 million and $4.9 million for 2024 and 2023 , respectively, and (iii) a $10.5 million pre-tax provision in 2023 related to a breach of contract legal proceeding.

The loss from discontinued operations for the years ended December 31, 2025 and 2024 includes a $44.4 million and $29.3 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2025 and 2024 actuarial studies, and legal and other miscellaneous expenses, before taxes, of $5.2 million and $4.8 million for 2025 and 2024 , respectively.

As discussed more fully in Note 23 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.

Net Earnings Attributable to Noncontrolling Interest.

Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in our 70% owned joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”) and, in our 80% ownership in Gwo Yng, commencing in July 2023 upon the completion of our step acquisition.

Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in Trombetta Asia, Ltd., our 70% owned joint venture in Hong Kong, with operations in China and, in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co.

Ltd., our 80% owned joint venture in China.

Net earnings attributable to the noncontrolling interest were $0.9 million and $1.0 million during the years ended December 31, 2025 and 2024 , respectively.

For additional information on the Gwo Yng step acquisition, see Note 2, “Business Combinations,” in the Notes to Consolidated Financial Statements in Item 8 of this Report.

Restructuring and Integration Programs

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

Restructuring Programs

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

Liquidity and Capital Resources

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Net earnings during 2025 were $42.2 million compared to $28.5 million in 2024.

The decrease in cash provided by operating activities resulted primarily from an increase in inventories of $36.9 million compared to a decrease of $29.5 million in the prior year, as well as increases in other working capital accounts primarily due to higher net sales and preparation for pre-season orders in our Temperature Control segment, and lower net earnings.

During the year ended December 31, 2023, we generated significant operating cash flow by reducing our inventory to more normalized levels while actively managing our accounts receivable and accounts payable.

The decrease in cash provided by operating activities resulted primarily from an increase in inventories of $81.6 million compared to a increase of $36.9 million in the prior year, primarily due to higher net sales, additional tariff costs capitalized into inventory, preparation for and delivery timing of expected orders in early 2026.

We continue to actively manage our working capital to maximize our operating cash flow.

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Cash used in investing activities was $35.7 million in 2025 as compared to $418.7 million in 2024.

Investing activities during 2024 primarily consisted of (i) $372.5 million of cash paid for the acquisition of 100% of the shares of Nissens Automotive, net of cash acquired of $24.6 million, and (ii) capital expenditures of $44 million.

The year-over-year increase in capital expenditures primarily relates to the implementation of upgraded automation equipment, racking and other equipment, as we invest in the start-up of our new distribution facility in Shawnee, Kansas.

Cash used in investing activities during 2023 primarily consisted of (i) the payment of $4.0 million for our acquisition of an additional 15% equity interest in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co., Ltd.

(“Gwo Yng”) and (ii) capital expenditures of $28.6 million, partially offset by $6.8 million of cash acquired in the Gwo Yng step acquisition.

Investing activities during 2025 primarily consisted of capital expenditures of $38.7 million as compared to 2024 which primarily consisted of $372.5 million of cash paid for the acquisition of 100% of the shares of Nissens Automotive, net of cash acquired of $24.6 million, and capital expenditures of $44.0 million.

The year-over-year decrease in capital expenditures primarily relates to lower spending as our new distribution facility in Shawnee, Kansas reaches completion.

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

Financing Activities .

Cash provided by financing activities was $349.5 million in 2024 as compared to cash used in financing activities of $109.6 million in 2023 .

Cash used in financing activities was $0.3 million in 2025 as compared to cash provided by financing activities of $349.5 million in 2024 .

In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”).

Borrowings under the 2024 Credit Agreement were used to repay all outstanding borrowings under the 2022 Credit Agreement and to finance the Company's acquisition of Nissens Automotive and related transaction costs, and will be used for general corporate purposes of the Company and its subsidiaries.

During 2024, we (i) increased our borrowings under our 2024 Credit Agreement by $392 million, (ii) paid dividends to SMP shareholders of $25.3 million, and (iii) made cash payments for the repurchase of shares of our common stock of $10.4 million.

These activities were funded with cash provided by our operating activities, in addition to borrowings under our 2024 Credit Agreement.

During 2023, we (i) reduced our borrowings under our 2022 Credit Agreement by $83.5 million;

and (ii) paid dividends of $25.2 million and $0.7 million to SMP shareholders and shareholders of our noncontrolling interests, respectively.

Cash provided by our operating activities was used to reduce our borrowings under our 2022 Credit Agreement, fund our investing activities and pay dividend s.

Quarterly dividends were paid at a rate of $0.29 in 2024 and 2023 .

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

During 2024 , we increase d our borrowings by $392.0 million under our 2024 Credit Agreement;

and paid dividends of $25.3 million and $2.3 million to SMP shareholders and shareholders of our noncontrolling interests, respectively.

Cash provided by our operating activities in 2024 was used to reduce our borrowings under our 2022 Credit Agreement, fund our investing activities and pay dividend s.

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

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

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.

In May 2024 and July 2024, the Company amended it's then-existing Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders ("2022 Credit Agreement"), to transition from the Canadian Dollar Offered Rate to the Canadian Overnight Repo Rate Average for benchmark borrowings denominated in Canadian dollars and to provide for a new $125 million term loan and the use of funds available under the revolving credit facility to finance the acquisition of Nissens Automotive and related transaction costs.

For additional information on our agreement to acquire Nissens Automotive see Note 2, “Business Combinations,” in the Notes to Consolidated Financial Statements in Item 8 of this Report.

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(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.

and (iv) a 100 million euros delayed draw term loan facility.

(iii) a $200 million term loan facility in U.S.

and (iv) a 100 million euros term loan facility.

The revolving credit facility has a $25 million sublimit for the issuance of letters of credit, and a $30 million sublimit for the borrowing of swingline loans.

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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 million at December 31, 2024 and 2023, respectively.

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

December 31, 2025 December 31, 2024

Current maturities of debt $ 45.3 $ 25.2

Long-term debt 552.8 520.1

Total outstanding borrowings $ 598.1 $ 545.4

Letters of credit $ 4.6 $ 2.5

To manage the interest rate risk on the 2024 Credit Agreement, the Company has entered into interest rate swap agreements designated as cash flow hedges of a portion of the borrowings under the 2024 Credit Agreement to swap floating rate interest to a fixed rate.

For additional information see Note 17, "Derivative Financial Instruments" of the Notes to Consolidated Financial Statements in Item 8 of this Report.

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 million of 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 weighted average interest rate on borrowings under the 2024 Credit Agreement, adjusted for the impact of interest rate swap agreements, was 4.8% and 5.6% at December 31, 2025 and 2024 , respectively.

Interest rates primarily consist of Term SOFR for borrowings in U.S.

dollars and the Euro Interbank Offered Rate ("EURIBOR") for borrowings in euros.

The average daily alternative base rate swingline loan balance was $1.5 million and $0.7 million during the years ended December 31, 2025 and 2024 , respectively.

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

The 2024 Credit Agreement also contains customary events of default.

In 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.

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.

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.

In 2023, our Polish subsidiary, SMP Poland sp.

z.o.o., amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce to provide for borrowings of up to Polish zloty 30 million (approximately $8.3 million ) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $7.1 million ) if borrowings are in euros and/or U.S.

The overdraft facility automatically renews every three months until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period.

Borrowings under the amended overdraft facility bear interest at a rate equal to (i) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.0% for borrowings in Polish zloty, (ii) the one month EURIBOR + 1.0% for borrowings in Euros, and (iii) the Mid-Point of the Fed Target Range + 1.25% for borrowings in U.S dollars.

Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company.

There were no borrowings outstanding under the overdraft facility at both December 31, 2024 and December 31, 2023.

There were $3.6 million borrowings outstanding under the overdraft facility at December 31, 2025 and none at December 31, 2024.

In order to reduce our accounts receivable balances and improve our cash flow, we are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions.

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If the benchmark reference rate increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows.

In January 2023, one of our customers filed a petition for bankruptcy and we recorded a $7 million pre-tax charge in selling, general and administrative expenses in our consolidated statement of operations during the year ended December 31, 2022 to reduce our accounts receivable balance to our estimated recovery.

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.

In 2022 , our Board of Directors authorized the purchase of up to $30 million of our common stock under a stock repurchase program.

Stock will be purchased under the program from time to time, in the open market or through private transactions, as market conditions warrant.

To date, there have been 321,229 shares purchased for a total cost of $10.4 million, all of which occurred in 2024.

There were no purchases of our common stock in 2025 .

Material Cash Commitments

24 unchanged sentences

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.

1 unchanged sentence

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.

Intangible assets determined to have definite lives are amortized over their remaining useful lives generally on a straight-line basis.

We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions.

3 unchanged sentences

(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;

(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.

32 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis