What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-23 · 211 added, 175 removed, 207 unchanged (65% of the section changed)

We are a leading manufacturer and distributor of premium replacement parts utilized in the maintenance, repair and service of vehicles in the automotive aftermarket industry.

In addition, we continue to increase our supplier capabilities with

a complementary focus on specialized original equipment parts for manufacturers across multiple industries such as agriculture, heavy duty, and construction equipment.

We believe that our extensive design and engineering capabilities have

afforded us opportunities to expand our product coverage in our aftermarket business and enter newer specialized markets that require application-specific knowledge, such as those mentioned above.

Our business strategy centers on providing our customers with full-line product coverage as well as a suite of services tailored to our customers’ needs.

This combination of broad product coverage along with specificity in our customer

service helps drive higher end-user demand for our products.

We sell our products primarily to automotive aftermarket 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.

The Automotive Aftermarket

The automotive aftermarket replacement parts business is a mature industry that primarily tends to follow trends, such as:

number of vehicles on the road;

average age of vehicles on the road;

total number of miles driven per year.

Other general trends including economic factors such as the level of light vehicle production can have a more indirect impact on the aftermarket, and a more direct impact on the specialized industries discussed above.

The automotive aftermarket industry is comprised of a large number of diverse manufacturers varying in product specialization and size.

In addition to manufacturing, aftermarket companies must allocate resources towards an efficient

distribution process in order to maintain the flexibility and responsiveness on which their customers depend.

Aftermarket manufacturers must be efficient producers of small lot sizes, and must distribute, with rapid turnaround times, products

for nearly all domestic and import vehicles on the road today.

In 2021, we completed three acquisitions that expanded our business into original equipment (OE) specialized markets that complement our core aftermarket business.

In addition to providing access to product technologies suitable to the

aftermarket, and manufacturing and engineering capabilities to support our operating strategy to bring more product manufacturing in-house, these acquisitions provide geographic expansion in Europe and Asia.

We are a leading manufacturer and distributor of premium automotive parts used in the maintenance, service and repair of vehicles in the automotive aftermarket industry.

Through organic growth and several recent acquisitions, described

further below, we have strengthened our capabilities as a supplier of custom-engineered products for on-highway (commercial and light vehicles) and off-highway (construction and agriculture, and all other) applications.

We sell our products

primarily to automotive aftermarket 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.

As of December 31, 2022, we managed our business pursuant to two operating segments, each focusing on a specific line of parts.

Our Engine Management segment generates revenue from the sale of automotive engine parts, including ignition,

emission control, fuel, electrical and safety related system products, and wire and cable parts.

Our Temperature Control segment generates revenue from the sale of automotive temperature control systems parts, including air conditioning

compressors and other climate control parts.

Beginning in the first quarter of 2023, our business will be organized into three operating segments – Engineered Solutions , Vehicle Control and Temperature Control .

Engineered Solutions is a new operating segment created by carving out all non-aftermarket business from our existing Engine Management and Temperature Control operating

segments, which will now solely reflect parts sales to aftermarket channels.

This will provide clarity regarding the unique dynamics and margin profiles of the markets served by each segment.

Our Engineered Solutions segment will supply

custom-engineered solutions to vehicle and equipment manufacturers in non-aftermarket end markets, such as-

Commercial and Light vehicles

Lawn & Garden

The Engineered Solutions segment sells into highly fragmented global end markets and is expected to provide a platform for future growth.

Our growth strategy is long-term

and we do not expect growth to be linear given the nature of customized engineering and the period of time between the awarding of new business and start of production.

Some of our growth drivers in this segment include:

Developing new customer relationships

Cross-selling opportunities with existing customers

Introducing new products to both new and existing customers

Increasing content per unit

Segment offerings include product categories from both of our legacy operating segments, and offer a broad array of conventional and future-oriented technologies, including those that are specific to vehicle

electrification as well as those that are powertrain-neutral.

Vehicle Control is the new name for our Engine Management operating segment;

it will include our core aftermarket business after the carve out of all non-aftermarket business

moved to the new Engineered Solutions operating segment.

Within the Vehicle Control segment there will be three new major product groups:

Ignition, Emissions & Fuel , which will include the traditional internal combustion engine (ICE) dependent categories;

Wire Sets & Other , which will include spark plug wire sets and other related products, and are product categories we have noted to be in secular decline based upon product life cycle;

Electrical & Safety , which will include powertrain neutral vehicle technologies such as electrical switches/relays, safety related products such as anti-lock brake and vehicle speed sensors,

tire pressure monitoring, park assist sensors, and advanced driver assistance components.

Our Temperature Control operating segment remains substantially unchanged, as only a small portion of its business will be moved to Engineered

Solutions , and this legacy aftermarket business segment is poised to benefit from the broader adoption of more complex AC systems.

Those systems will provide passenger comfort regardless of the vehicles powertrain propulsion, and are

being developed to cool batteries and other products used on electric vehicles.

Segment offerings will continue to provide thermal products in the aftermarket business under two major product groups:

AC System Components , which includes compressors, connecting lines, heat exchangers, and expansion devices

Other Thermal Components , which includes parts that provide engine, transmission, electric drive motor, and battery temperature management

This change will better align our operating segments with our strategic focus on diversification, and provide greater transparency into how we are positioned to capture growth opportunities of the future.

The change will also better reflect

the impact of our recent acquisitions.

The following table summarizes both our reporting structure during 2022 and our planned 2023 reporting structure:

Operating Segments as of 2022

Planned Operating Segments in 2023

Engine Management:

Vehicle Control (Aftermarket):

Ignition, Emissions, Fuel & Safety

Ignition, Emissions & Fuel

Wire and Cable

Wire Sets and Other

Electrical & Safety

Temperature Control:

Temperature Control (Aftermarket):

AC System Components

Other Climate Control Parts

Other Thermal Components

Engineered Solutions (non-Aftermarket):

Commercial Vehicle

Light Vehicle

Construction & Agriculture

Our Business Strategy

Our mission is to be the best full-line, full-service supplier of premium engine management and temperature control products .

The key elements of our strategy are as follows:

Maintain Our Strong Aftermarket Competitive Position in our Engine Management and Temperature Control Businesses .

We are a leading independent manufacturer and distributor serving North America

and other geographic areas in our core businesses of Engine Management and Temperature Control.

We believe that our success is attributable to our emphasis on product quality, the breadth and depth of our product lines for both domestic

and import vehicles, and our reputation for outstanding value-added services.

To maintain our strong competitive position, we remain committed to the following:

strengthening our capabilities as a leading manufacturer of parts and ensuring our global manufacturing footprint continues to meet the demands and expectations of our customers worldwide;

providing our customers with full-line coverage of high quality engine management and temperature control products and new technologies for most years, makes and models of vehicles on the road;

supporting our products with the highest level of value-added services;

supply chain excellence through supplier and customer focused initiatives, and continuing to maximize our production, supply chain and distribution efficiencies;

continuing to improve our cost position through increased global sourcing, increased manufacturing at our low-cost plants, and strategic transactions with manufacturers in low-cost regions;

focusing on our engineering development efforts including a focus on bringing more product manufacturing in-house;

further expanding our parts coverage to include a broader product mix in categories such as electrification, including electric vehicles (EVs) and hybrid electric vehicles (HEVs), and connectivity as well as safety-related systems,

such as various sensors including anti-lock brake (ABS), vehicle speed, tire pressure monitoring (TPMS), park assist and Advanced Driver Assistance Systems (ADAS) components to meet the growing needs of our customers.

Provide Superior Value-Added Services and Product Availability .

Our goal is to increase sales to existing and new customers by leveraging our skills in rapidly filling orders, maintaining high

levels of product availability and offering a product portfolio that provides comprehensive coverage for all vehicle applications.

Although the automotive industry continues to experience supply chain disruptions related to COVID-19

(particularly with respect to goods sourced from China), we believe that, with respect to product availability and fill rates, we have benefited from our geographically diversified manufacturing footprint and our strategy to bring more

product manufacturing in-house.

Our marketing support provides insightful customer category management, technical support and award-winning programs, and our technically skilled sales personnel provide our customers with product

selection, assortment and application support related to our products.

In addition, we have a team dedicated to providing in-person and virtual technical training on diagnosing and repairing vehicles equipped with complex systems.

Expand Our Product Lines .

Vehicle manufacturers continue to introduce new technologies and systems creating opportunities for us to expand our product lines.

In addition, we intend to increase

our sales by continuing to develop internally, or through potential acquisitions, the range of engine management and temperature control products that we offer to our customers.

We are committed to investing the resources necessary to

maintain and expand our technical capability to manufacture product lines that incorporate the latest technologies, including product lines relating to safety, advanced driver assistance and collision avoidance systems.

We believe that

the three complementary acquisitions consummated in 2021 (discussed above) and our internal product development efforts better position us to satisfy customer demand for both traditional, internal combustion engine (or ICE) applications,

and non-ICE (electric or hybrid electric) applications.

We estimate that approximately half of our product offering is powertrain neutral, or suitable for electric, hybrid electric and/or alternative energy vehicles.

Diversify our Business .

We seek to diversify our business primarily by (a) leveraging our manufacturing and distribution capabilities to secure additional business globally with original

equipment manufacturers;

(b) supporting the service part operations of vehicle and equipment manufacturers with value-added services and product support for the life of the part;

existing product offering and have the potential for high growth;

(d) expanding our product offering in the medium and heavy duty, commercial vehicle, construction and agricultural equipment, power sports, and other segments;

The automotive aftermarket is a mature industry with participants that manufacture, distribute and sell vehicle replacement parts to professional technicians and to individual consumers, who perform “do-it-yourself” repairs on their personal

While generally a stable industry, the aftermarket tends to be influenced by trends such as the number of vehicles on the road, the average age of vehicles on the road, and the total number of miles driven per year.

Weather extremes

like unseasonably hot or cool temperatures in the summer can also have an impact on aftermarket product demand.

Other economic factors such as the level of new vehicle sales and production rates, which more recently have been impacted by global supply chain disruptions, can have a more direct impact on the on-highway and off-highway end markets we

supply, such as commercial and light vehicles, construction, agricultural, power sports and others.

Typically, these economic factors have a more indirect impact on the aftermarket.

While approximately 80% of our business is to the automotive aftermarket, we seek to enhance and diversify our business through the following:

Leveraging our manufacturing and distribution capabilities to secure additional business globally

Supporting the service part operations of vehicle and equipment manufacturers with value-added services and product support for the life of the part

Developing new product lines that complement our existing product offering and that have the potential for high growth

Expanding our product offering in the medium and heavy duty, commercial vehicle, construction and agricultural equipment, power sports, and other end markets

Executing our acquisition strategy

Improve Operating Efficiency and Cost Position .

Our management places significant emphasis on improving our financial performance by achieving operating efficiencies and improving asset

utilization, while maintaining product quality and high customer order fill rates.

Cash Utilization .

We intend to apply any excess cash flow from operations and the management of working capital primarily to reduce our outstanding indebtedness, pay dividends to our

shareholders, expand our product lines by investing in new tooling and equipment, grow revenues through potential acquisitions, and repurchase shares of our common stock.

Environmental, Social & Governance .

We support and seek continuous improvement in the pursuit of environmental, social and corporate governance (ESG) practices that embody our culture and

what we believe it means to be a good corporate citizen.

In 2021, we completed three acquisitions that expanded our business into specialized non-aftermarket end markets that complement our core aftermarket business.

In addition to providing access to product technologies suitable to the

With over 100 years in business, we believe that our success is attributable to our focus on being a key strategic partner to our customers, and in doing so provide:

Professional grade products and solutions within our areas of expertise.

Comprehensive product coverage for all vehicles on the road through our offering of professional grade engine management and temperature control products.

Supplier and customer focused initiatives designed to improve order fill rate and maintain high levels of product availability

Expanding our product coverage to include a broader product mix in categories such as

Electrification, including electric vehicles (EVs) and hybrid electric vehicles (HEVs),

Connectivity and safety related products, such as

anti-lock brake (ABS)

vehicle speed sensors

tire pressure monitoring

park assist sensors

advanced driver assistance components to meet the needs of our customers

In 2022, we introduced approximately 2,400 new products to the aftermarket, of which approximately two-thirds were powertrain neutral.

We support our products with superior value-added services provided by our marketing and sales teams that

provides our customers with offerings such as data-driven category management, technical support as well as product selection, assortment and application support for all of our products.

In addition, we have a team dedicated to providing

technical training, in-person and virtually, on diagnosing and repairing vehicles equipped with complex systems.

We are committed to expanding our design, engineering and manufacturing capabilities, and vertically integrating production processes to bring more manufacturing in-house.

We engineer, tool and manufacture many of the products we offer for

sale and the components used in their assembly.

We have found this level of vertical integration, in combination with our manufacturing footprint in low cost regions, provides advantages in terms of the cost, quality and availability of our

Examples of vertically integrated processes:

➢ plastic molding operations

➢ automated electronics assembly

➢ stamping and machining operations

➢ design and fabrication of processing and test equipment

➢ wire extrusion

➢ teardown, diagnostics and rebuilding of remanufactured air conditioning compressors,

diesel injectors and diesel pumps

We also believe that our technical capabilities have afforded us opportunities to expand our product coverage in our core aftermarket business and in the non-aftermarket end markets we supply for on-highway and off-highway applications, and

have better positioned us to satisfy customer demand for both traditional, internal combustion engine (or ICE) applications, and non-ICE (electric or hybrid electric) applications.

Our manufacturing footprint is geographically diverse with a greater presence in North America and Europe compared to many of our peers.

We leverage our footprint to improve our cost position by locating labor-intensive processes within our

low-cost plants, and by investing in automation and undertaking continuous improvement initiatives in our domestic facilities.

Our Products & Services

The following describes our business more particularly under our existing operating segments as of December 31, 2022 – Engine Management and Temperature Control .

Our periodic reports for the first quarter of 2023 and reporting periods thereafter will focus on our new reporting structure and operating segments as of the first quarter of 2023 – Engineered Solutions , Vehicle Control and Temperature Control .

Engine Management Segment

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In 2014, we formed Foshan GWOYNG SMP Vehicle Climate Control & Cooling Products Co.

Ltd., a China-based joint venture

that manufactures light vehicle and heavy duty air conditioning accumulators, filter driers, hose assemblies, and switches;

in 2017, we formed Foshan FGD SMP Automotive Compressor Co., Ltd., a China-based joint venture that manufactures light

vehicle and heavy duty belt driven air conditioning compressors;

and in 2019, we acquired a minority interest ownership position in Foshan Che Yijia New Energy Technology Co., Ltd., a China-based manufacturer of electric air conditioning

We believe that these transactions will enhance our position as a basic low-cost manufacturer and a leading supplier of temperature control parts and allow an opportunity for growth in the China OE market, while providing key

complementary manufacturing capabilities and synergy opportunities with our other manufacturing facilities.

The synchronization and complimentary strategies between our operational and distribution facilities provides a more reliable supply of

products, and supports our customers’ needs for consistent and reliable service levels.

Ltd., a China-based joint venture that manufactures light vehicle and heavy duty air conditioning accumulators, filter driers,

hose assemblies, and switches.

In 2017, we formed Foshan FGD SMP Automotive Compressor Co., Ltd., a China-based joint venture that manufactures light vehicle and heavy duty belt driven air conditioning compressors.

In 2019, we acquired a minority interest ownership position in Foshan Che Yijia New Energy Technology Co., Ltd., a China-based manufacturer of electric air conditioning compressors.

We believe these transactions enhance our position as a basic low-cost manufacturer and leading supplier of temperature control products and create opportunity for growth in the China OE market.

The joint ventures also provide complementary

manufacturing capabilities and opportunities for synergy with our other manufacturing facilities, which we believe results in a more reliable supply of products, supporting our customers’ needs for consistent and reliable service levels.

In 2022, we acquired Kade Trading GmbH, a supplier of temperature control products throughout Europe.

We believe this acquisition provides synergies to our other recent acquisitions in 2021 into specialized end markets, and an entry point

into the European market for our temperature control products with a strong focus on the continuing electrification of thermal systems.

Compressors .

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$118.9 million, or 11%, of our consolidated net sales in 2020.

Financial Information About Our Operating Segments

For additional information related to our operating segments, and the disaggregation of operating segment net sales by geographic area, major product group and major sales channel, see Note 19 “Industry Segment and Geographic Data” and Note 20

“Net Sales”, respectively, of the Notes to Consolidated Financial Statements in Item 8 of this Report.

We believe that our brands are an important component of our value proposition, and serve to distinguish our premium engine management and temperature control products from those of our competitors.

We market and distribute our aftermarket

products under our own brands, such as:

We market and distribute our products under

our own brands, such as:

We also distribute our products to customers for resale under private labels and the following co-labels:

Engine Management

We have also developed our product offering and brand strategies to support our customers’ initiatives to market a tiered product assortment designed to satisfy end-user preferences for quality and value.

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Our three largest individual customers accounted for approximately 59% of our consolidated net sales in 2022.

During 2021, O’Reilly, NAPA and AutoZone accounted for 26%, 17%, and 14% of our consolidated net sales, respectively.

During 2022, O’Reilly, AutoZone and NAPA accounted for 27%, 17%, and 15% of our consolidated net sales, respectively.

Net sales from

each of these customers were reported in both our Engine Management and Temperature Control Segments.

The automotive aftermarket industry is comprised of a large number of diverse manufacturers varying in product specialization and size.

In addition to manufacturing, aftermarket companies must allocate resources towards a dynamic distribution

process in order to maintain the flexibility and responsiveness on which their customers depend.

Aftermarket manufacturers must be efficient producers of small lot sizes, and must distribute, with rapid turnaround times, products for nearly all

domestic and import vehicles on the road today.

We compete primarily on the basis of product quality, product availability, value-added services, product coverage, order turn‑around time, order fill rate, technical support and price.

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extensive market leading product coverage in conjunction with market leading brands;

knowledgeable category management, including inventory stocking recommendations for our distributors to get the right parts on the shelf for their marketplace needs;

knowledgeable category management, including inventory stocking recommendations for our distributors to get the right parts on the shelf for their marketplace;

rigorous product qualification standards to ensure that our parts meet or exceed exacting performance specifications;

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award-winning marketing programs, sales support and technical training.

We offer a variety of strategic customer discounts, allowances and incentives to increase customer purchases of our products.

For example, we offer cash discounts for paying invoices in accordance with the specified discounted terms of the

We also offer rebates and discounts to customers as advertising and sales force allowances, and allowances for warranty and overstock returns are also provided.

These discounts, allowances and incentives are a common practice

throughout the automotive aftermarket industry, and we intend to continue to offer them in response to competitive pressures and to strategically support the growth of all our products.

We are one of the leading independent manufacturers and distributors serving North America and other geographic areas in our core businesses of Engine Management and Temperature Control.

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16,000 technicians who are registered to participate in such sessions through our online platform.

We offer a variety of strategic customer discounts, allowances and incentives to increase customer purchases of our products.

For example, we offer cash discounts for paying invoices in accordance with the specified discounted terms of the

We also offer rebates and discounts to customers as advertising and sales force allowances, and allowances for warranty and overstock returns are also provided.

We believe these discounts, allowances and incentives are a common

practice throughout the automotive aftermarket industry, and we intend to continue to offer them in response to competitive pressures and to strategically support the growth of all our products.

Historically, our operating results have fluctuated by quarter, with the greatest sales occurring in the second and third quarters of the year and revenues generally being recognized at the time of shipment.

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In addition to this seasonality, the demand for our Temperature Control products during the second and third quarters of the year

may vary significantly with the summer weather and customer inventories.

Ordinarily, a warm summer, as we experienced in 2021, would increase the demand for our Temperature Control products, while a somewhat mild summer, as we experienced in

2019, may lessen such demand.

While the COVID-19 pandemic caused large shifts in sales demand between quarters in 2020, our business returned to a more normalized pattern of seasonality and variability in demand of our Temperature Control

products in 2021.

may vary significantly with the summer weather and customer inventories, as evidenced by the strong customer demand in 2022 fueled by the record heat across the country in 2022 and the replenishment of customer inventory levels after very warm

summer conditions in 2021.

in 2022 and 2021.

As such, our working capital typically peaks near the end of the second quarter, as the inventory build-up of air conditioning products was converted to sales, and payments on the receivables associated with such sales were yet

to be received.

During this period, our working capital requirements were funded by borrowing from our revolving credit facility.

During this period, our working capital requirements were funded by borrowing from our revolving credit facility in our Credit Agreement.

Working Capital and Inventory Management

Automotive aftermarket companies have been under increasing pressure to provide broad SKU (stock keeping unit) coverage due to parts and brand proliferation.

In response to this, we have made, and continue to make, changes to our inventory

management system designed to reduce inventory requirements.

We have a pack‑to‑order distribution system, which permits us to retain slow moving items in a bulk storage state until an order for a specific branded part is received.

reduces the volume of a given part in inventory.

We also expanded our inventory management system to improve inventory deployment, enhance our collaboration with customers on forecasts and inventory assortments, and further integrate our supply

chain both to customers and suppliers.

We seek continuous improvements in our inventory management system, which are designed to reduce inventory requirements and enhance our ability to compete on the basis of product availability, product coverage, order turn‑around time and order

We have a pack‑to‑order distribution system, which permits us to retain slow moving items in a bulk storage state until a related order is received.

This system reduces the volume of a given part in inventory.

We also expanded our

inventory management system to improve inventory deployment, enhance our collaboration with customers on forecasts and inventory assortments, and further integrate our supply chain with both our customers and suppliers.

We face inventory management issues as a result of overstock returns.

We 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.

In addition, the seasonality of our Temperature Control Segment requires that we increase our inventory during the winter season in preparation of the summer selling

season and customers purchasing such inventory have the right to make returns.

We accrue for overstock returns as a percentage of sales after giving consideration to recent returns history.

We permit our customers to return new, undamaged products 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.

In addition, the seasonality of our Temperature Control Segment requires that we increase our inventory during the winter season in preparation of the summer selling season.

accrue for overstock returns as a percentage of sales after giving consideration to recent returns history.

Our profitability and working capital requirements are seasonal due to our sales mix of Temperature Control products.

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conditioning products is converted to sales and payments on the receivables associated with such sales have yet to be received.

These increased working capital requirements are funded by borrowings from our revolving credit facility.

Production and Engineering

An important component of our business strategy is to invest the resources necessary to expand our technical capabilities and bring more product manufacturing in-house.

We engineer, tool and manufacture many of the products that we offer for

sale and the components used in the assembly of those products, and we continue to evaluate opportunities to bring new product categories in-house.

For example, we perform our own plastic molding operations, stamping and machining operations,

wire extrusion, automated electronics assembly and a wide variety of other processes.

In the case of remanufactured components, we conduct our own teardown, diagnostics and rebuilding for air conditioning compressors, diesel injectors, and

diesel pumps.

We have found this level of vertical integration, in combination with our manufacturing footprint in low cost regions, provides advantages in terms of cost, quality and availability.

These increased working capital requirements are funded by borrowings from our revolving credit facility in our

Credit Agreement.

In 2022, we strategically increased inventory levels to help offset potential supply chain risks associated with extended lead times and delays transporting our product.

We source materials through a global network of suppliers to ensure a consistent, high quality and low cost supply of materials and key components for our product lines.

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We believe there is an adequate supply of primary raw materials and cores;

however, disruptions in the global economy in 2020 and the lingering impacts into 2021 have impeded global supply chains, resulting in longer lead times and delays in

procuring component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation.

In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to

take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including initiating cost savings initiatives and the pass through of higher costs to our

customers, which began in the fourth quarter of 2021.

We believe that we have also benefited from our geographically diversified manufacturing footprint and our strategy to bring more product manufacturing in-house, especially with respect to

product availability and fill rates.

however, disruptions in the global economy have impeded global supply chains, resulting in longer lead times and delays in procuring component parts and raw materials,

and inflationary cost increases in certain raw materials, labor and transportation.

In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by

working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including initiating cost savings initiatives and the pass through of higher costs to our customers, which began in the fourth quarter of

We believe that we have also benefited from our geographically diversified manufacturing footprint and our strategy to bring more product manufacturing in-house, especially with respect to product availability and fill rates.

Environmental, Social and Governance (ESG) and Human Capital

We support and seek continuous improvement in the pursuit of environmental, social and corporate governance (ESG) practices that embody our culture and what we believe it means to be a good corporate citizen.

Our Company was founded in 1919 on the values of integrity, common decency and respect for others.

These values continue to this day and are embodied in our Code of Ethics, which has been adopted by the Board of Directors of the Company to

serve as a statement of principles to guide our decision-making and reinforce our commitment to these values in all aspects of our business.

These values also serve as the foundation for our increased focus on many important environmental,

social and governance issues, such as environmental stewardship and our efforts to identify and implement practices that reduce our environmental impact while achieving our business goals;

our attention to diversity, equity and inclusion,

employee development, retention, and health and safety;

These values are embodied in our Code of Ethics, which has been adopted by the Board of Directors of the Company to serve as a statement of

principles to guide our decision-making and reinforce our commitment to these values in all aspects of our business.

These values also serve as the foundation for our continued focus on many important environmental, social and governance issues,

such as environmental stewardship and our efforts to identify and implement practices that reduce our environmental impact while achieving our business goals;

our attention to diversity, equity and inclusion, employee development, retention, and

health and safety;

and our community engagement initiatives, to name a few.

We have made significant strides building awareness of the environmental impact of our operations, and challenging ourselves to

reduce our impact by reducing our consumption of energy and generation of waste, as well as enhancing our recycling efforts.

Environmental Stewardship

We have made significant strides building awareness of the environmental impact of our operations, and challenging ourselves to reduce our impact by reducing our consumption of energy, including electricity, natural gas and propane;

our generation of waste and increasing the percentage of waste recycled;

reducing our use of water and reducing our Scope 1 and Scope 2 greenhouse gas emissions.

We are also focused on several initiatives that are intended to promote a more environmentally-friendly car parc.

Through our remanufacturing processes, we divert certain types of used automotive products from traditional waste streams and

reprocess them for their original purpose.

We remanufacture key product categories within our product portfolio, such as air conditioning compressors, diesel injectors and diesel pumps, resulting in the production of premium automotive products

within these categories through processes that we believe save energy and reduce waste.

We also bring to market emission control system products, which are designed to reduce emissions and improve fuel economy during vehicle operation, and

alternative energy products, which utilize cleaner burning fuels or are designed for electric or hybrid electric vehicles.

We have made significant strides with respect to our ESG initiatives, building awareness of the environmental impact of our operations, and challenging ourselves to reduce our impact by reducing our usage of energy and water, reducing our

generation of waste, increasing our recycling efforts and reducing our Scope 1 and Scope 2 greenhouse gas emissions (“GHG”).

As a leading manufacturer and distributor of premium parts used in the maintenance, service and repair of vehicles, we are proud of the role our parts play in replacing failed components that are necessary for vehicles to operate safely and

efficiently, and in extending the service life of vehicles on the road.

We believe our product offering also contributes to a greener car parc through several key product categories that are critical components in automotive systems designed to

improve fuel economy and reduce harmful emissions, such as fuel injectors, exhaust gas recirculation valves, sensors and tubes, and evaporative emission control system components.

We also bring to market alternative energy products, which utilize

cleaner burning fuels or are designed for electric or hybrid electric vehicles.

Our remanufacturing processes divert certain types of used automotive products from traditional waste streams and reprocess them for their original purpose.

We remanufacture key product categories within our offering, such as air conditioning

compressors, diesel injectors and diesel pumps, resulting in the production of premium automotive products within these categories through processes that we believe save energy and reduce waste.

Human Capital

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relations with our union and non‑union employees are good.

Diversity, Equity and Inclusion.

We believe that a diverse workforce is critical to our success, and we continue to focus on the hiring, retention and advancement of women and underrepresented

Diversity, Equity, Inclusion, and Belonging.

We believe that a diverse workforce is critical to our success, and we continue to focus on the hiring, retention and advancement of women and

underrepresented populations.

Our recent efforts have been focused in three areas:

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expanding our efforts to recruit and hire world-class diverse talent;

and identifying strategic partners to

accelerate our inclusion and diversity programs.

and identifying strategic

partners to accelerate our inclusion and diversity programs.

Over the last 5 years, approximately 50+% of our hires and promotions have been women or racially diverse individuals.

To further our commitment to diversity, in 2021, we established a Diversity,

Equity and Inclusion steering committee to develop key structures within our organization to promote equality, inclusion and awareness among our employees.

To further our commitment to diversity, in 2021, we established

a Diversity, Equity, Inclusion, and Belonging steering committee to develop key structures within our organization to promote equality, inclusion and awareness among our employees.

Health, Safety and Wellness .

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and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees and which comply with government regulations.

These include providing employees with flexible working

arrangements, including where appropriate the ability to work from home, and implementing a number of safety policies and practices at all of our facilities.

Compensation and Benefits.

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We invest significant resources to develop the talent of our high potential employees.

We deliver numerous training opportunities, provide rotational assignment opportunities, have

expanded our focus on continuous learning and development, and implemented methodologies to manage performance, provide feedback and develop talent.

We deliver numerous training opportunities, provide rotational assignment opportunities,

offer continuous learning and development, and implement methodologies to manage performance, provide feedback and develop talent opportunities for talent.

Our talent development programs are designed to provide employees with the resources they need to help achieve their career goals, build management skills and lead their organizations.

We provide a series of employee workshops that support

professional growth and development.

We provide a series of employee workshops and mentoring

programs that support professional growth and development.

Our annual review process encourages manager and employee conversations throughout the year to enhance growth and development.

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We believe that building connections between our employees, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace.

Through our SMP Cares® initiative, we sponsor corporate giving and volunteering

programs to encourage our employees to connect with our local communities and engage in the local causes that they are passionate about.

Our volunteering efforts include organizing blood drives with the American Red Cross, and fundraising for the March of Dimes, United Way, the Salvation Army, and many others.

In 2021, we collaborated with our employees to donate over $50,000

to local community organizations, hospitals, schools, shelters, and universities.

We are a lifetime trustee of the University of the Aftermarket Foundation (“UAF”), and we donate $10,000 annually to fund scholarships to support the next

generation of technicians and automotive professionals, which we believe is an important way to sustain and give back to our industry.

We are also proud to sponsor annual scholarship contests for future automotive technicians, including our

Women in Auto Care scholarship that aims to empower women entering the automotive industry.

Through our SMP Cares ® initiative, we sponsor corporate giving and

volunteering programs to encourage our employees to connect with our local communities and engage in the local causes that they are passionate about.

Our volunteering efforts include organizing blood drives with the American Red Cross, and fundraising for the March of Dimes, United Way, and many others.

In 2022, we collaborated with our employees to donate over $135,000 to local community

organizations, schools, shelters, Ukraine, Project Hope, AACF, Habitat for Humanity, Love Independence, local parks, and Toys for Tots.

We are a lifetime trustee of the University of the Aftermarket Foundation (“UAF”), and we donate $10,000

annually to fund scholarships to support the next generation of technicians and automotive professionals, which we believe is an important way to sustain and give back to our industry.

We are also proud to sponsor annual scholarship contests for

future automotive technicians, including our Women in Auto Care scholarship that aims to empower women entering the automotive industry.

Since our first scholarship contest in 2015, we have awarded $275,000 in scholarships.

We have continued to expand our scholarship program, and in 2021,

we awarded ten students each with a $5,000 scholarship.

We continue to encourage participation in these initiatives as we believe they are essential in the support of our core values.

We have continued to

expand our scholarship program, and in 2022, we awarded four students each with a $5,000 scholarship to Women in AutoCare and to Blue Streak Better Then, Better Now Scholarship.

We continue to encourage participation in these initiatives as we

believe they are essential in the support of our core values.

Our commitment to ESG is spearheaded by our Board of Directors.

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and other fields to push our ESG initiatives ahead from all angles.

Continued Commitment

With each year, we intend to further our commitment to ESG initiatives, improving our environmental stewardship, finding ways to give back to our communities, and enhancing the diversity and inclusion of our workforce while offering

opportunities for development.

Information on our ESG initiatives can be found in our most current sustainability report and on our corporate website at ir.smpcorp.com under “Environmental & Social

Responsibility” and at smpcares.smpcorp.com.

Information in our sustainability report and on our corporate websites regarding our ESG initiatives are referenced for general information only and are not

incorporated by reference in this Report.

Available Information

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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 1. Business