What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-23 · 773 added, 625 removed, 992 unchanged (58% of the section changed)

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preparation and presentation, and may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the

degree of compliance with the policies or procedures may deteriorate.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that

the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

During 2021, the Company acquired Trumpet Holdings, Inc, (“Trombetta”) and Stabil Operative Group GmbH (“Stabil”), and have

excluded from our assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Trombetta’s and Stabil’s internal control over financial reporting associated with 13.8% of total assets and

3.5% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021.

In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the

Treadway Commission (COSO) in the 2013 Internal Control - Integrated Framework.

Based on our assessment using those criteria, and after consideration of the aforementioned exclusion, we concluded that,

as of December 31, 2021, our internal control over financial reporting is effective.

In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway

Commission (COSO) in the 2013 Internal Control - Integrated Framework.

Based on our assessment using those criteria, we concluded that, as of December 31, 2022, our internal control over financial

reporting is effective.

Our independent registered public accounting firm, KPMG LLP, has audited our consolidated financial statements as of and for the year ended December 31, 2022 and has also audited the effectiveness of our internal control over financial

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Financial Statements and Supplementary Data.”

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM –

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM –

INTERNAL CONTROL OVER FINANCIAL REPORTING

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Opinion on Internal Control Over Financial Reporting

We have audited Standard Motor Products, Inc.

’s and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission .

In our opinion, the Company maintained,

in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the

Committee of Sponsoring Organizations of the Treadway Commission.

We have audited Standard Motor Products, Inc and Subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission .

In our opinion, the Company maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the

Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated

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Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 22, 2023 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Trumpet Holdings, Inc.

(“Trombetta”) and Stabil Operative Group GmbH, (“Stabil”) during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as

of December 31, 2021, Trombetta and Stabil’s internal control over financial reporting associated with 13.8% of total assets and 3.5% of total revenues included in the consolidated financial statements of the Company as of and for the year ended

December 31, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Trombetta and Stabil.

Basis for Opinion

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We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in

all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the

design and operating effectiveness of internal control based on the assessed risk.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained

in all material respects.

the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for

We believe that our audit provides a reasonable

basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established

in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2022 expressed an unqualified opinion on

the effectiveness of the Company’s internal control over financial reporting.

in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2023 expressed an unqualified opinion

on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered

with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm

registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to

accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on

the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The communication of a critical audit matter does not alter in any way our opinion

on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Asbestos liability and litigation

As discussed in Notes 1 and 23 to the consolidated financial statements, the Company is involved in asbestos litigation and has a potential asbestos liability.

As of December 31, 2021, the accrued asbestos liability

was $60.5 million.

The Company’s asbestos liability represents the low end of the actuarially determined range of the undiscounted liability for settlement payments and awards of asbestos related damages, excluding legal costs and any potential

recovery from insurance carriers.

As of December 31, 2022, the accrued asbestos

liability was $68 million.

potential recovery from insurance carriers.

We identified the assessment of the asbestos liability recorded as a critical audit matter.

This required subjective auditor judgment, due to the nature of the estimate and assumptions, including the applicability of

those assumptions to the current facts and circumstances, as well as judgments about future events and uncertainties.

This required subjective auditor judgment, due to the nature of the estimate and assumptions, including the applicability

of those assumptions to the current facts and circumstances, as well as judgments about future events and uncertainties.

Specialized skills were needed to evaluate the Company’s key assumptions.

The key assumptions included future claim filings,

closed with pay ratios, closed with pay lag patterns, settlement values, large claims, and ratios of allocated loss adjustment exposure (ALAE) to indemnity.

Minor changes to these key assumptions could have had a significant effect on the

Company’s assessment of the accrual for the asbestos liability.

The key assumptions included future claim

filings, closed with pay ratios, closed with pay lag patterns, settlement values, large claims, and ratios of allocated loss adjustment exposure (ALAE) to indemnity.

Minor changes to these key assumptions could have had a significant effect on

the Company’s assessment of the accrual for the asbestos liability.

The following are the primary procedures we performed to address this critical audit matter.

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against the Company’s future claim filing assumption, and (2) the closed with pay ratios, closed with pay lag patterns, settlement values, large claims, and ratios of ALAE to indemnity by comparing them to the Company’s historical experience.

Fair value of acquisition date intangible assets

As discussed in Note 2 in the consolidated financial statements, in May 2021, the Company acquired Trumpet Holdings, Inc., (“Trombetta) for a purchase price of $111.7 million.

As a result of the transaction, the

Company acquired certain intangible assets, including customer relationship intangible assets with an acquisition date fair value of $39.4 million.

We identified the evaluation of the fair value of the acquisition date customer relationship intangible assets acquired in the Trombetta transaction as a critical audit matter.

A high degree of subjective auditor

judgment was required to evaluate the key assumptions used to determine the acquisition-date fair value of the acquired customer relationship assets.

The key assumptions developed by the Company included the following for which there was limited

observable market information, and the calculated fair value of such assets was sensitive to possible changes to these key assumptions:

forecasted revenues attributable to existing customers

forecasted earnings before interest and taxes (EBIT) margins

customer attrition rate

discount rate.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s

acquisition-date valuation process, including the controls over the development of the key assumptions listed above.

We evaluated the Company’s forecasted revenues attributable to existing customers and EBIT margins by comparing these forecasted

assumptions to historical information of Trombetta.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating (1) the estimated annual attrition rate by comparing it to historical data of the Company,

and (2) the Company’s discount rate by comparing the rate against a discount rate range that was independently developed using publicly available market data for comparable companies.

We have served as the Company’s auditor since 2010.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF

Year Ended December 31,

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

Year Ended December 31,

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Foreign currency translation adjustments

Derivative instruments

Pension and postretirement plans

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AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

BALANCE SHEETS

(Dollars in thousands,

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CURRENT LIABILITIES:

Notes payable

Current portion of other debt

Current portion of revolving credit facility

Current portion of term loan and other debt

Accounts payable

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Stockholders’ equity:

Common Stock - par value $ 2.00

Common Stock - par value $ 2.00 per share:

Authorized 30,000,000

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF

Year Ended December 31,

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CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net earnings to net cash provided by operating activities:

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Depreciation and amortization

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Increase (decrease) to inventory reserves

Customer bankruptcy charge

Intangible asset impairment

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Stock-based compensation

(Increase) decrease in deferred income taxes

(Increase) in deferred income taxes

Increase in tax valuation allowance

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Net changes in other assets and liabilities

Net cash provided by operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions of and investments in businesses, net of cash acquired

Net proceeds from sale of Grapevine, Texas facility

Acquisitions of and investments in businesses

Capital expenditures

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CASH FLOWS FROM FINANCING ACTIVITIES:

Net borrowings (repayments) under line-of-credit agreements

Net borrowings (repayments) of other debt and lease obligations

Borrowings under term loan

Repayments of term loan

Net borrowings (repayments) under revolving credit facilities

Net borrowings (repayments) of other debt and capital lease obligations

Purchase of treasury stock

Dividends paid

Payments of debt issuance costs

Increase (decrease) in overdraft balances

Dividends paid

Dividends paid to noncontrolling interest

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

Years Ended December 31, 2022, 2021 and 2020

Excess of Par

Comprehensive

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BALANCE AT DECEMBER 31, 2019

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

Cash dividends paid ($ 0.50

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BALANCE AT DECEMBER 31, 2020

Other comprehensive income, net of tax

Noncontrolling interest in business acquired

Other comprehensive loss, net of tax

Cash dividends paid ($ 1.00

Purchase of treasury stock

Dividends paid to noncontrolling interest

Stock-based compensation

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BALANCE AT DECEMBER 31, 2021

Noncontrolling interest in business acquired

Other comprehensive loss, net of tax

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Purchase of treasury stock

Dividends paid to noncontrolling interest

Stock-based compensation

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Standard Motor Products, Inc.

and subsidiaries (referred to hereinafter in these notes to the consolidated financial statements as “we,” “us,” “our,” “SMP,” or the “Company”) is a leading automotive parts

manufacturer and distributor of engine management and temperature control systems of motor vehicles in the automotive aftermarket industry with a complementary focus on the heavy duty, industrial equipment and original equipment service markets.

The consolidated financial statements include our accounts and all domestic and international companies in which we have more than a 50 % equity ownership, except in instances where the minority shareholder maintains substantive participating rights, in which case we follow the equity method of accounting.

In instances where

we have more than a 50 % equity ownership and the minority shareholder does not maintain substantive participating rights, our

consolidated financial statements include the accounts of the company on a consolidated basis with its net income and equity reported at amounts attributable to both our equity position and that of the noncontrolling interest.

Investments in

unconsolidated affiliates are accounted for on the equity method, as we do not have a controlling financial interest but have the ability to exercise significant influence.

All significant inter-company items have been eliminated .

and subsidiaries (referred to hereinafter in these notes to the consolidated financial statements as “we,” “us,” “our,” “SMP,” or the “Company”) is a leading manufacturer

and distributor of premium replacement parts utilized in the maintenance, repair and service of vehicles in the automotive aftermarket industry with a complementary focus on specialized equipments parts for manufacturers across multiple

industries around the world.

In instances where we have more than a 50 % equity ownership and the minority shareholder does not maintain substantive

participating rights, our consolidated financial statements include the accounts of the company on a consolidated basis with its net income and equity reported at amounts attributable to both our equity position and that of the noncontrolling

Investments in unconsolidated affiliates are accounted for on the equity method, as we do not have a controlling financial interest but have the ability to exercise significant influence.

All significant inter-company items have been

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported

amounts of revenue and expenses during the reporting periods.

The preparation of consolidated financial

statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the

date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.

We have made a number of estimates and assumptions in the preparation of these consolidated financial statements.

We can give no assurances that actual results will not differ from those estimates.

Although we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates, or in the assumptions that we

use in calculating the estimates, the uncertain future effects, if any, of the COVID -19 pandemic, and other unforeseen changes in the industry, or business, could materially

impact the estimates, and may have a material adverse effect on our business, financial condition and results of operations.

Some of the more significant estimates include allowances for doubtful accounts, cash discounts, valuation of inventory,

valuation of long-lived assets, goodwill and other intangible assets, depreciation and amortization of long-lived assets, product liability exposures, asbestos, environmental and litigation matters, valuation of deferred tax assets, share based

compensation and sales returns and other allowances.

can give no assurances that actual results will not differ from those estimates.

Although we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates, or in the assumptions that we use in

calculating the estimates, the uncertain future effects, if any, of disruptions in the supply chain caused by the COVID-19 pandemic, Russia’s invasion of the Ukraine and resultant sanctions imposed by the U.S.

and other governments, future

increases in interest rates, inflation, macroeconomic uncertainty, and other unforeseen changes in the industry, or business, could materially impact the estimates, and may have a material adverse effect on our business, financial condition and

results of operations.

Some of the more significant estimates include allowances for expected credit losses, cash discounts, valuation of inventory, valuation of long-lived assets, goodwill and other intangible assets, depreciation and

amortization of long-lived assets, product liability exposures, asbestos, environmental and litigation matters, valuation of deferred tax assets, share based compensation and sales returns and other allowances.

Reclassification

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Allowance for Expected Credit Losses and Cash Discounts

We do not generally require collateral for our trade accounts receivable.

Accounts receivable have been reduced by an allowance for amounts that may become uncollectible

in the future.

These allowances are established based on a combination of write-off history, supportable forecasts, aging analysis, and specific account evaluations.

When a receivable balance is known to be uncollectible, it is written off against

the allowance for expected credit losses.

We do not generally

require collateral for our trade accounts receivable.

Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future.

These allowances are established based on a combination of write-off history,

supportable forecasts, aging analysis, and specific account evaluations.

When a receivable balance is known to be uncollectible, it is written off against the allowance for expected credit losses.

In January 2023, one of our customers filed a petition for bankruptcy.

In connection with the bankruptcy filing, we evaluated our potential risk and exposure as related

to our outstanding accounts receivable balance from the customer as of December 31, 2022, and estimated our anticipated recovery.

As a result of our evaluation, we recorded a $ 7 million pre-tax charge during the year ended December 31, 2022 to reduce our accounts receivable balance to our estimated recovery.

We will continue to monitor the circumstances

surrounding the bankruptcy in determining whether additional provisions may be necessary.

Cash discounts are provided based on an overall average experience rate applied to qualifying accounts receivable balances.

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The historical volatility of such estimates has been minimal.

We maintain provisions for inventory reserves of $ 46.2 million and

$ 49.4 million as of December 31, 2021 and 2020, respectively .

We maintain provisions for inventory reserves of $ 42.5 million

and $ 46.2 million as of December 31, 2022 and 2021, respectively .

We utilize cores (used parts) in our remanufacturing processes for air conditioning compressors, diesel injectors, and diesel pumps.

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In addition, many of our customers can return inventory to us based upon customer warranty and overstock arrangements within customer specific limits.

At the time products

are sold, we accrue a liability for product warranties and overstock returns and record as unreturned customer inventory our estimate of anticipated customer returns.

Estimates are based upon historical information on the nature, frequency and

probability of the customer return.

products are sold, we accrue a liability for product warranties and overstock returns and record as unreturned customer inventory our estimate of anticipated customer returns.

Estimates are based upon historical information on the nature,

frequency and probability of the customer return.

Unreturned core, warranty and overstock customer inventory is recorded at standard cost.

Revision to these estimates is made when necessary, based upon changes in these factors.

We regularly study trends of such

study trends of such claims.

STANDARD MOTOR PRODUCTS, INC.

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Property, Plant and Equipment

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

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

Estimated Life

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accrued expenses, and noncurrent operating lease liabilities on our consolidated balance sheet for leases with a term longer than twelve months.

Finance leases are reported on our consolidated balance sheets in property, plant and equipment, current

portion of other debt, and long-term debt.

Finance leases are reported on our consolidated balance sheets in property, plant and equipment,

current portion of other debt, and long-term debt.

Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments over the

Our ROU assets represent the right to use an underlying leased asset over the existing lease term, and the corresponding lease liabilities represent our obligation to make lease payments arising from the lease agreement.

As most of our

leases do not provide for an implicit rate, we use our secured incremental borrowing rate based on the information available when determining the present value of our lease payments.

Our lease terms may include options to terminate, or extend, our

lease when it is reasonably certain that we will execute the option.

our leases do not provide for an implicit rate, we use our secured incremental borrowing rate based on the information available when determining the present value of our lease payments.

Our lease terms may include options to terminate, or extend,

our lease when it is reasonably certain that we will execute the option.

Lease agreements may contain lease and non-lease components, which are generally accounted for separately.

Operating lease expense is recognized on a straight-line basis over the

Operating lease expense is recognized on a straight-line basis

over the lease term.

Valuation of Long-Lived and Intangible Assets and Goodwill

acquisition, we estimate and record the fair value of purchased intangible assets, which primarily consist of customer relationships, trademarks and trade names, patents, developed technology and intellectual property, and non-compete agreements.

Intangible assets acquired through business combinations are subject to potential adjustments within the measurement period, which is up to one year from the acquisition date.

Valuing intangible assets requires the use of significant estimates and

Valuing intangible assets requires the use of

significant estimates and assumptions.

As related to valuing customer relationships, significant estimates and assumptions used include but are not limited to:

(1) forecasted revenues attributable to existing customers;

(2) forecasted earnings before interest and taxes

(“EBIT”) margins;

(2) forecasted earnings

before interest and taxes (“EBIT”) margins;

(3) customer attrition rates;

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Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

Goodwill and certain other intangible assets

having indefinite lives are not amortized to earnings, but instead are subject to periodic testing for impairment.

Intangible assets determined to have definite lives are amortized over their remaining useful lives.

We believe that the fair value

of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions.

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

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

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We assess the impairment of long‑lived assets, identifiable intangibles assets and goodwill whenever events or changes in circumstances indicate that the carrying value may

not be recoverable.

With respect to goodwill and identifiable intangible assets having indefinite lives, we test for impairment on an annual basis or in interim periods if an event occurs or circumstances change that may indicate the fair value is

below its carrying amount.

We assess the impairment of long‑lived assets, identifiable intangibles assets and goodwill whenever events or changes in circumstances indicate that the carrying value

may not be recoverable.

is below its carrying amount.

Factors we consider important, which could trigger an impairment review, include the following:

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We review the fair values using the discounted cash flows method and market multiples.

When performing our evaluation of goodwill for impairment, if we

conclude qualitatively that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then a quantitative impairment test would not be required.

If we are unable to reach this conclusion, then we

would perform a goodwill quantitative impairment test.

When performing our evaluation of goodwill for impairment, if

we conclude qualitatively that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then a quantitative impairment test would not be required.

If we are unable to reach this conclusion, then

we would perform a goodwill quantitative impairment test.

In performing the quantitative test, the fair value of the reporting unit is compared to its carrying amount.

A charge for impairment is recognized by the amount by which the reporting unit’s

carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

A charge for impairment is recognized by the amount by which the reporting

unit’s carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Identifiable intangible assets having indefinite lives are

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compare the carrying value of such assets to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.

When the estimated undiscounted future cash flows are less than their carrying amount, an

impairment loss is recognized equal to the difference between the assets fair value and their carrying value.

There are inherent assumptions and estimates used in developing

future cash flows requiring our judgment in applying these assumptions and estimates to the analysis of identifiable intangibles and long‑lived asset impairment including projecting revenues, interest rates, tax rates and the cost of capital.

of the factors used in assessing fair value are outside our control and it is reasonably likely that assumptions and estimates will change in future periods.

When the estimated undiscounted future cash flows are less than their carrying amount,

an impairment loss is recognized equal to the difference between the assets fair value and their carrying value.

There are inherent assumptions and estimates used in

developing future cash flows requiring our judgment in applying these assumptions and estimates to the analysis of identifiable intangibles and long‑lived asset impairment including projecting revenues, interest rates, tax rates and the cost of

Many of the factors used in assessing fair value are outside our control and it is reasonably likely that assumptions and estimates will change in future periods.

These changes can result in future impairments.

In the event our planning assumptions

were modified resulting in impairment to our assets, we would be required to include an expense in our statement of operations, which could materially impact our business, financial condition and results of operations.

In the event our

planning assumptions were modified resulting in impairment to our assets, we would be required to include an expense in our statement of operations, which could materially impact our business, financial condition and results of operations.

Foreign Currency Translation

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Foreign currency transaction gains or losses are recorded in the statement of operations under the caption “other non-operating income (expense), net.”

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Revenue Recognition

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period end when we estimate and recognize revenue for the core deposits not expected to be returned.

We estimate and record provisions for cash discounts, quantity rebates, sales returns and warranties in the period the sale is recorded, based upon

our prior experience and current trends.

We estimate and record provisions for cash discounts, quantity rebates, sales returns and warranties in the period the sale is recorded, based

upon our prior experience and current trends.

Significant management judgments and estimates must be made and used in estimating sales returns and allowances relating to revenue recognized in any accounting period.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Product Warranty and Overstock Returns

Many of our products carry a warranty ranging from a 90 -day limited warranty to a lifetime limited warranty, which generally covers defects in materials or workmanship

and failure to meet industry published specifications and/or the result of installation error.

In addition to warranty returns, we also permit our customers to return new, undamaged products to us within customer-specific limits (which are

generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories.

At the time products are sold, we accrue

a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency and

average cost of the claim and the probability of the customer return.

Many of our products carry a warranty ranging from a 90 -day limited warranty to a lifetime limited warranty, which generally covers defects in materials or

workmanship and failure to meet industry published specifications and/or the result of installation error.

In addition to warranty returns, we also permit our customers to return new, undamaged products to us within customer-specific limits

(which are generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories.

At the time products are

sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature,

frequency and average cost of the claim and the probability of the customer return.

At the same time, we record an estimate of anticipated customer returns as unreturned customer inventory.

Significant judgments and estimates must be made and used in

connection with establishing the sales returns and other allowances in any accounting period.

Significant judgments and estimates must be made and

used in connection with establishing the sales returns and other allowances in any accounting period.

Revision to these estimates is made when necessary, based upon changes in these factors.

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customers, are included in distribution expenses as part of selling, general and administration expenses.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred Financing Costs

Deferred financing costs represent costs incurred in conjunction with our debt financing activities.

Deferred financing costs related to our revolving credit facility are

capitalized and amortized over the life of the related financing arrangement.

Deferred financing costs related to our revolving credit facility

are capitalized and amortized over the life of the related financing arrangement.

If the debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired and are recorded in the statement of

operations under the caption other non-operating income (expense), net.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accounting for Income Taxes

Income taxes are calculated using the asset and liability method.

Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary

differences between the financial statement carrying amounts and the tax bases of assets and liabilities, as measured by the current enacted tax rates.

Deferred tax assets and liabilities are determined based on the estimated future tax effects of

temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, as measured by the current enacted tax rates.

We maintain valuation allowances when it is more likely than not that all or a portion of a deferred asset will not be realized.

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level of valuation allowance which could materially impact our business, financial condition and results of operations.

The valuation allowance of $ 2.1 million as of December 31, 2021 is intended to provide for the uncertainty regarding the ultimate realization

The valuation allowance of $ 3.2 million as of December 31, 2022 is intended to provide for the uncertainty regarding the ultimate realization of our U.S.

foreign tax credit carryovers and foreign net operating loss carryovers.

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and accrue our liabilities resulting from such matters based upon a variety of factors including the assessments of environmental engineers and consultants who provide estimates of potential liabilities and remediation costs.

Such estimates are not

discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

Such estimates are

not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

Potential recoveries from insurers or other third parties of environmental remediation

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(1) historical data available from publicly available studies;

analysis of our recent claims history to estimate likely filing rates into the future;

an analysis of our recent claims history to estimate likely filing rates into the future;

(3) an analysis of our currently pending claims;

(4) an analysis of our settlements and awards of asbestos-related damages to date;

and (5) an analysis of closed

claims with pay ratios and lag patterns in order to develop average future settlement values.

Based on the information contained in the actuarial study and all other available information considered by us, we have concluded that no amount within

the range of settlement payments and awards of asbestos-related damages was more likely than any other and, therefore, in assessing our asbestos liability we compare the low end of the range to our recorded liability to determine if an adjustment

and (5) an analysis of

closed claims with pay ratios and lag patterns in order to develop average future settlement values.

Based on the information contained in the actuarial study and all other available information considered by us, we have concluded that no amount

within the range of settlement payments and awards of asbestos-related damages was more likely than any other and, therefore, in assessing our asbestos liability we compare the low end of the range to our recorded liability to determine if an

adjustment is required.

Future legal costs are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations.

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We record provisions when the liability is considered probable and reasonably estimable.

Significant judgment is required for both the determination of probability and the determination as to whether an exposure can

be reasonably estimated.

Significant judgment is required for both the determination of probability and the determination as to whether an exposure

can be reasonably estimated.

We maintain an ongoing monitoring and identification process to assess how the activities are progressing against the accrued estimated costs.

As additional information becomes available, we reassess our potential liability

related to these matters.

As additional information becomes available, we reassess our potential

liability related to these matters.

Adjustments to the liabilities are recorded in the statement of operations in the period when additional information becomes available.

Such revisions of the potential liabilities could have a material adverse effect on

our business, financial condition or results of operations.

Such revisions of the potential liabilities could have a material adverse

effect on our business, financial condition or results of operations.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments and accounts receivable.

Financial instruments that potentially subject us to

significant concentrations of credit risk consist principally of cash investments, accounts receivable and derivative financial instruments used to reduce our market risk for changes in interest rates on our variable rate borrowings.

our cash investments with high quality financial institutions and limit the amount of credit exposure to any one institution.

Although we are directly affected by developments in the vehicle parts industry, management does not believe significant

credit risk exists.

With respect to accounts receivable, such receivables are primarily from warehouse distributors and major retailers in the automotive aftermarket industry located in the

Derivative financial instruments used to reduce our market risk for changes in interest rates on our variable rate

borrowings are entered into with high quality financial institutions, with their credit worthiness reviewed on a quarterly basis.

Although we are directly affected by developments in the vehicle parts industry, management does not believe

significant credit risk exists.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

With respect to accounts receivable, such receivables are primarily from warehouse distributors and major

retailers in the automotive aftermarket industry located in the U.S.

We perform ongoing credit evaluations of our customers’ financial conditions.

A significant portion of our net sales are concentrated from our three largest individual customers.

The loss of one or more of these customers or,

a significant reduction in purchases of our products from any one of them, could have a materially adverse impact on our business, financial condition and results of operations.

For further information on net sales to our three largest customers and our concentration our customer risk, see Note 19 , “Industry Segment and Geographic Data.”

The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of

them, could have a materially adverse impact on our business, financial condition and results of operations.

In January 2023, one of our customers filed a petition for bankruptcy.

In connection with the bankruptcy filing, we evaluated our potential risk and exposure as related to our outstanding

accounts receivable balance from the customer as of December 31, 2022, and estimated our anticipated recovery.

As a result of our evaluation, we recorded a $ 7 million pre-tax charge during the year ended December 31, 2022 to reduce our accounts receivable balance to our estimated recovery.

The $ 7 million pre-tax charge is included in selling, general and administrative expenses in our consolidated statement of operations.

We will continue to monitor the circumstances surrounding

the bankruptcy in determining whether additional provisions may be necessary.

For further information on net sales to

our three largest customers and our concentration our customer risk, see Note 21, “Industry Segment and Geographic Data.”

Foreign Cash Balances

Substantially all of the cash and cash equivalents, including foreign cash balances, at December 31, 2021 and

2020 were uninsured.

Foreign cash balances at December 31, 2021 and 2020 were $ 16.8 million and $ 16.4 million , respectively.

Substantially all of the cash and cash equivalents, including foreign cash balances, at December 31, 2022

and 2021 were uninsured.

Foreign cash balances at December 31, 2022 and 2021 were $ 18.5 million and $ 16.6 million ,

respectively.

Derivative Instruments and Hedging Activities

We occasionally use derivative financial instruments to reduce our market risk for changes in interest rates on our variable rate

Derivative financial instruments are recorded at fair value in other current and long-term assets, and other current and long-term liabilities in the consolidated balance sheets.

For derivative financial instruments that have been

formally designated as cash flow interest rate hedges (“interest rate swap agreements”), provided that the hedging instrument is highly effective, the entire change in the fair value of the derivative will be deferred and recorded in

accumulated other comprehensive income (“AOCI”) in the consolidated balance sheets.

When the underlying hedged transaction is realized (i.e., when the interest payments on the underlying borrowing are recognized in the consolidated statements

of operations), the gain/loss included in AOCI is recorded in earnings and reflected on the same line as the gain/loss on the hedged item attributable to the hedged risk (i.e., interest expense).

At the inception of each transaction, we

formally document the hedge relationship, including the identification of the hedge instrument, the related hedged items, the effectiveness of the hedge, as well as its risk management objectives and strategies.

STANDARD MOTOR PRODUCTS, INC.

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Standards that were adopted

Effects on the financial

statements or other

significant matters

ASU 2019-12 , Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

This standard is intended to simplify the accounting for income taxes by removing certain ASC Topic 740 exceptions in performing intra-period tax allocations among

income statement components, in calculating certain deferred tax liabilities related to outside basis differences, and in calculating income taxes in interim periods with year-to-date losses.

In addition, this standard is also intended to

improve consistency and add simplification by clarifying and amending the reporting of franchise taxes and other taxes partially based on income, the recognition of deferred income taxes related to the step-up in tax basis goodwill, and the

reporting in interim periods of the recognition of the enactment of tax laws or rate changes.

January 1, 2021

The adoption of the technical clarifications in the standard did not materially impact our accounting for income taxes, our consolidated financial statements and

related disclosures.

Standards that are not yet adopted as of December 31, 2021

The following table provides a brief description of recently issued accounting pronouncements that have not

yet been adopted as of December 31, 2021 , and that could have an impact on our financial statements:

Effects on the financial

statements or other

significant matters

ASU 2020-04 , Reference Rate Reform (Topic 848):

Date of adoption / Effective date

Effects on the financial statements or other significant matters

ASU 2022 - 06 /ASU 2020-04, Reference Rate Reform

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

This standard is intended to provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference

rate reform on financial reporting.

The new standard is applicable to contracts that reference LIBOR, or another reference rate, expected to be discontinued due to reference rate reform.

Effective March 12, 2020 through December 31, 2022

The new standard may be applied as of the beginning of an interim period that includes March 12, 2020

through December 31, 2022 .

As certain of our contracts reference LIBOR, including our revolving credit facility and supply chain financing arrangements, we are currently

reviewing the optional guidance in the standard to determine its impact upon the discontinuance of LIBOR.

At this time, we do not believe that the new guidance, nor the discontinuance of LIBOR, will have a material impact on our

consolidated financial statements and related disclosures.

These standards are intended to provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of)

reference rate reform on financial reporting.

The new standards are applicable to contracts that reference LIBOR, or another reference rate, expected to be discontinued due to reference rate reform.

ASU 2020-04 effective March 12, 2020 through December 31, 2022, with sunset date extended to December 31, 2024 by ASU 2022–06.

During the year ended December 31, 2022, we entered into a new credit agreement and new supply chain financing arrangements that no longer used LIBOR as the reference rate.

In connection with these new agreements, the adoption of the

optional guidance provided in the new standards did not materially impact our accounting, consolidated financial statements and related disclosures.

Standards that are not yet adopted as of December 31, 2022

There are no recently issued accounting pronouncements not yet been adopted as of December 31, 2022 that

could have a material impact on our financial statements.

Business Acquisitions and Investments

2022 Increase in Equity Investment

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

In August 2019, we

acquired an approximate 29 % minority interest in Foshan Che Yijia New Energy Technology Co., Ltd.

(“CYJ”) for approximately $ 5.1 million.

CYJ is a manufacturer of automotive electric air conditioning compressors and is located in China.

We determined, at that time, that

due to a lack of a voting majority and other qualitative factors, we do not control the operations of CYJ and accordingly, our investment in CYJ would be accounted for under the equity method of accounting.

In October 2022, we

acquired an additional 3.55 % equity interest in CYJ for RMB 1.7 million (approximately $ 242,000 ), increasing our minority

ownership interest in CYJ from an approximate interest of 29 % to 33 %.

The additional acquired ownership interest in CYJ was paid for in cash funded by borrowings under our Credit Agreement with JPMorgan Chase Bank, N.A., as agent.

will continue to account for our minority interest in CYJ using the equity method of accounting.

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Business Acquisitions and Investments

2022 Business Acquisitions

Acquisition of Capital Stock of Kade Trading GmbH (“Kade”)

In October 2022, we

acquired 100 % of the capital stock of Kade Trading GmbH (“Kade”) headquartered in Glinde, Germany for Euros 2.7 million (approximately $ 2.7

million), inclusive of closing balance sheet adjustments, plus a Euros 0.5 million (approximately $ 0.5 million) earn-out based upon Kade’s performance in 2024 and 2025.

Kade is a supplier across Europe of mobile temperature control components to

commercial vehicle, passenger car and specialty equipment markets and has been a distributor of CYJ products including electric compressors, hose assemblies and receiver dryers, with annual sales of approximately $ 6 million.

The acquired Kade business, to be reported as part of our Temperature Control segment, was paid for with cash.

The following table presents the allocation of the purchase price to the

assets acquired and liabilities assumed based on their fair values (in thousands):

Purchase price

Assets acquired and liabilities assumed:

Other current assets (1)

Property, plant and equipment, net

Operating lease right-of-use assets

Intangible assets

Current liabilities

Noncurrent operating lease liabilities

Deferred income taxes

Net assets acquired

The other current assets balance includes $ 1 million of cash acquired.

Intangible assets

acquired of $ 2.4 million consist of customer relationships that will be amortized on a straight-line basis over the estimated useful

life of 15 years .

Incremental revenues

from the acquired Kade business included in our consolidated statement of operations from the acquisition date through December 31, 2022 were $ 1.3

2021 Business Acquisitions

Acquisition of Capital Stock of Stabil Operative Group GmbH (“Stabil”)

In September 2021, we acquired 100 % of the capital stock of

Stabil Operative Group GmbH, a German company (“Stabil”), for Euros 13.7 million, or $ 16.3 million, subject to certain post-closing adjustments.

Stabil is a manufacturer and distributor of a variety of components, including electronic sensors, control units, and

clamping devices to the European Original Equipment (“OE”) market, serving both commercial and light vehicle applications.

The acquired Stabil business was paid for with cash funded by borrowings under our revolving credit facility with JPMorgan

Chase Bank, N.A., as agent, and is headquartered on the outskirts of Stuttgart, Germany with facilities in Germany and Hungary.

The acquisition, to be reported as part of our Engine Management Segment, aligns with our strategy of expansion beyond our

core aftermarket business into complementary areas, and gives us exposure to a diversified group of blue chip European commercial and light vehicle OE customers.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values, subject to final agreement

of post-closing adjustments, which we do anticipate will be significant (in thousands):

In September 2021, we acquired 100 % of the capital stock

of Stabil Operative Group GmbH, a German company (“Stabil”), for Euros 13.7 million, or $ 16.3 million.

Stabil is a manufacturer and distributor of a variety of components, including electronic sensors, control units, and clamping devices to the European Original

Equipment (“OE”) market, serving both commercial and light vehicle applications.

The acquired Stabil business was paid for with cash funded by borrowings under our revolving credit facility with JPMorgan Chase Bank, N.A., as agent, and is

headquartered on the outskirts of Stuttgart, Germany with facilities in Germany and Hungary.

The acquisition, reported as part of our Engine Management Segment, aligns with our strategy of expansion beyond our core aftermarket business into

complementary areas, and gives us exposure to a diversified group of blue chip European commercial and light vehicle OE customers.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values (in thousands):

Purchase price

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customer relationships that will be amortized on a straight-line basis over the estimated useful life of 20 years .

Goodwill of $4.8

million was allocated to the Engine Management Segment.

The goodwill reflects relationships, business specific knowledge and the replacement cost of an assembled workforce associated with personal reputations.

The intangible assets and goodwill are

not deductible for tax purposes.

Revenues from the acquired business included in our consolidated statement of operations from the acquisition date through December 31, 2021 were $ 7.2 million.

Goodwill of $ 4.8 million was allocated to the Engine Management Segment.

The goodwill reflects relationships, business specific knowledge and the replacement cost

of an assembled workforce associated with personal reputations.

The intangible assets and goodwill are not deductible for tax purposes.

Incremental revenues from the acquired Stabil business included in our consolidated statement of operations for the year ended December 31, 2022 were $ 14.9 million.

Acquisition of Capital Stock of Trumpet Holdings, Inc.

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In May 2021, we acquired 100 % of the capital stock of

Trumpet Holdings, Inc., a Delaware corporation, (more commonly known as “Trombetta”), for $ 111.7 million, subject to certain post-closing

In December 2021, the post-closing adjustments were finalized at approximately $ 30,000 , thereby reducing the purchase price.

Trombetta is a leading provider of power switching and power management products to Original Equipment (“OE”) customers in various markets.

The acquired Trombetta business was paid for in cash funded by borrowings under our revolving credit facility

with JPMorgan Chase Bank, N.A., as agent, and has manufacturing facilities in Milwaukee, Wisconsin;

Sheboygan Falls, Wisconsin;

Tijuana, Mexico, as well as a 70 % ownership in a joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”).

The acquisition, to be reported as part of our Engine Management Segment,

aligns with our strategy of expansion into the OE heavy duty market.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values, subject to finalization of

amounts related to deferred income taxes, which we do not anticipate will be significant (in thousands):

Trumpet Holdings, Inc., a Delaware corporation, (more commonly known as “Trombetta”), for $ 111.7 million.

Trombetta is a leading provider

of power switching and power management products to Original Equipment (“OE”) customers in various markets.

The acquired Trombetta business was paid for in cash funded by borrowings under our revolving credit facility with JPMorgan Chase Bank,

N.A., as agent, and has manufacturing facilities in Milwaukee, Wisconsin, Sheboygan Falls, Wisconsin, Tijuana, Mexico, as well as a 70 %

ownership in a joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”).

The acquisition, to be reported as part of our Engine Management Segment, aligns with our strategy of expansion into non-aftermarket

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values, (in thousands):

Purchase price

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The other current assets balance includes $ 4.6 million of cash acquired.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Intangible assets acquired of $ 54.7 million consist of

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and a trade name of $ 1.9 million that will be amortized on a straight-line basis over the estimated useful life of 10 years .

Goodwill of $ 49.3 million was allocated to the Engine Management

Goodwill of $ 49.3 million was allocated to the Engine

Management Segment.

The goodwill reflects relationships, business specific knowledge and the replacement cost of an assembled workforce associated with personal reputations.

The intangible assets and goodwill are not deductible for tax purposes.

Revenues from the acquired business included in our consolidated statement of operations from the acquisition date through December 31, 2021 were $ 37.8 million.

Incremental revenues from the acquired Trombetta business included in our consolidated statement of operations for the year ended December 31, 2022 were $ 27.4 million.

Acquisition of Particulate Matter Sensor Business of Stoneridge, Inc.

(“Soot Sensor”)

In March 2021, we agreed to acquire certain Soot Sensor product lines from Stoneridge, Inc.

The product lines to be acquired manufacture sensors used in the exhaust and

emission systems of diesel engines.

In March 2021 and

November 2021, we agreed to acquire certain Soot Sensor product lines from Stoneridge, Inc for $ 2.9 million.

The acquired product

lines were paid for with cash funded by borrowings under our revolving credit facility with JPMorgan Chase Bank, N.A.

The assets acquired include inventory, machinery, and equipment and certain intangible assets.

The product lines

acquired are used to manufacture sensors used in the exhaust and emission systems of diesel engines.

The product lines acquired were located in Stoneridge’s facilities in Lexington, Ohio and Tallinn, Estonia.

We are not acquiring these facilities, nor any of Stoneridge’s employees, and will be relocating the

production lines to our engine management plants in Independence, Kansas and Bialystok, Poland, respectively.

The acquisition, to be reported as part of our Engine Management Segment, aligns with our strategy of expansion into the OE heavy duty

We did not acquire these

facilities, nor any of Stoneridge’s employees, and have substantially completed the relocation of the acquired inventory, machinery and equipment related to the production lines to our engine management plants in Independence, Kansas and

Bialystok, Poland, respectively.

The acquisition, reported as part of our Engine Management Segment, aligns with our strategy of expansion into the OE heavy duty market.

Customer relationships to be acquired include Volvo, CNHi and Hino.

The product lines located in Stoneridge’s facility in Lexington, Ohio were acquired in March 2021 for $ 2.1 million, while the product lines located in Stoneridge’s facility in Tallinn, Estonia were acquired in November 2021 for $ 0.8 million.

The acquired product lines were paid for with cash funded by borrowings under our revolving credit facility with JPMorgan Chase Bank, N.A.

The assets acquired

include inventory, machinery & equipment and certain intangible assets.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values (in thousands):

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consist of customer relationships that will be amortized on a straight-line basis over the estimated useful life of 10 years .

Revenues from the acquired business included in our consolidated statement of operations from the acquisition date through December 31, 2021 were $ 9.3 million.

Incremental revenues from the acquired Soot Sensor business included in our consolidated statement of operations for the year ended December 31, 2022 were $ 2.3 million.

STANDARD MOTOR PRODUCTS, INC.

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liability at December 31 , 2020

Restructuring and

integration costs:

Amounts provided

for during 2020 (1)

Restructuring

and integration costs:

provided for during 2021

Cash payments

Reclassification

of environmental liability (1)

Exit activity

liability at December 31 , 2021

Restructuring and

integration costs:

Amounts provided

for during 2021

Restructuring

and integration costs:

provided for during 2022 (1)

Cash payments

Reclassification of environmental and other liabilities

Exit activity

liability at December 31 , 2022

Included in restructuring and integration costs in 2020 is a $ 0.3 million increase in environmental cleanup costs related to ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long

Island City, New York location.

Included in restructuring and integration costs in 2022 is a $ 0.2 million increase in environmental cleanup costs related to ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations

at our Long Island City, New York location.

The environmental liability has been reclassed to accrued liabilities as of December 31, 2022.

Integration Costs

Particulate Matter Senso r (“Soot Sensor”) Product Line Relocation

In connection with our acquisitions in March 2021 and November 2021 of certain

soot sensor product lines from Stoneridge, Inc., we incurred certain integration expenses in connection with the relocation of certain inventory, machinery, and equip ment from Stoneridge’s facilities in Lexington,

Ohio and Tallinn, Estonia to our existing facilities in Independence, Kansas and Bialystok, Poland, respectively.

Integration expenses recognized and cash payments made of $ 392 ,000, during the year ended December 31, 2021, related to these relocation activities in our Engine Management segment.

Total relocation expenses of approximately $ 600 ,000 are expected to be incurred related to the relocations.

We anticipate that the soot sensor product line relocation will be completed by the end of the second quarter of 2022.

Restructuring Costs

Cost Reduction Initiative

During the fourth quarter of 2022, to further our ongoing efforts to improve operating efficiencies and reduce costs, we announced plans for a reduction

in our sales force, and initiated plans to relocate certain product lines from our Independence, Kansas manufacturing facility in our Engine Management segment and from our St.

Thomas, Canada manufacturing facility in our Temperature Control

segment to our manufacturing facilities in Reynosa, Mexico.

Total restructuring expenses related to the initiative of approximately $ 1.5 million were incurred during the year ended December 31, 2022 consisting of (1) expenses of approximately $ 0.9

million related to our sales force reduction, and (2) expenses of approximately $ 0.6 million consisting of employee severance related

to our product line relocations.

Total future restructuring costs related to the initiative and expected to be incurred are approximately $ 3.4

We anticipate that the Cost Reduction Initiative will be completed by the end of 2023.

Plant Rationalization Programs

The 2016 Plant Rationalization Program, which included the shutdown and sale of our Grapevine, Texas facility, and the 2017 Orlando Rationalization

Program, which included the shutdown of our Orlando, Florida facility, has been completed.

Cash payments made of $ 16 ,000 and $ 100 ,000 during the years ended December 31, 2022 and 2021, respectively, consists of severance payments to former employees terminated in connection

with these programs.

There is no remaining aggregate liability related to these programs as of December 31, 2022.

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Pollak Relocation

In connection with our April 2019 acquisition of certain assets and

liabilities of the Pollak business of Stoneridge, Inc., we incurred certain integration expenses in connection with the relocation of certain inventory, machinery, and equipment from Pollak’s distribution and manufacturing facilities in El Paso,

Texas, Canton, Massachusetts, and Juarez, Mexico, to our existing facilities in Disputanta, Virginia, Reynosa, Mexico and Independence, Kansas.

The Pollak Relocation has been completed.

Integration expense recognized and

cash payments made of $ 214 ,000 during the year ended December 31, 2020 related to residual relocation activities in our Engine Management

There is no remaining aggregate liability related to the Pollak Relocation as of December 31, 2020.

Restructuring Costs

Plant Rationalization Programs

The 2016 Plant Rationalization Program, which included the shutdown and sale of our

Grapevine, Texas facility, and the 2017 Orlando Rationalization Program, which included the shutdown of our Orlando, Florida facility, have been substantially completed.

Cash payments made of $ 100 ,000 and $ 157 ,000 during the years ended December 31, 2021 and

2020, respectively, and the remaining aggregate liability related to the programs as of December 31, 2021 of $ 79 ,000 consists of severance

payments to former employees terminated in connection with these programs.

Integration Costs

Particulate Matter Senso r (“Soot Sensor”) Product Line Relocation

In connection with our acquisitions in March 2021 and November 2021 of

certain soot sensor product lines from Stoneridge, Inc., we incurred certain integration expenses in connection with the relocation of certain inventory, machinery, and equip ment from Stoneridge’s facilities in

Lexington, Ohio and Tallinn, Estonia to our existing facilities in Independence, Kansas and Bialystok, Poland, respectively.

Integration expenses recognized and cash payments made of $ 144 ,000 and $ 392 ,000, during the years ended December 31, 2022 and 2021,

respectively, related to these relocation activities in our Engine

Management segment.The soot sensor product line relocation has been substantially completed and there is no remaining aggregate

liability related to the soot sensor product line relocation as of December 31, 2022.

Sale of Receivables

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Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables, and do not service the receivables after the sale .

As such, these transactions are

being accounted for as a sale.

As such, these transactions

are being accounted for as a sale.

Pursuant to these agreements, we sold $ 813.7 million and $ 818.8 million of receivables for the years ended December 31, 2022 and 2021, respectively.

Receivables presented at financial institutions and not yet

collected as of December 31, 2021 and December 31, 2020 were approximately $ 1.3 million and $ 50 million, respectively, and remained in our accounts receivable balance for those periods.

All receivables sold were reflected as a reduction of accounts receivable in the

consolidated balance sheet at the time of sale.

A charge in the amount of $ 11.5 million, $ 12.2 million and $ 22 million related to the sale of receivables is

included in selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019, respectively.

collected as of December 31, 2021 were $ 1.3 million and remained in our accounts receivable balance as of that date.

There were no receivables presented at financial institutions and not yet collected as of December 31, 2022.

All receivables sold were reflected as a reduction of

accounts receivable in the consolidated balance sheet at the time of sale.

A charge in the amount of $ 32 million, $ 11.5 million and $ 12.2 million related to

the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020, respectively.

To the extent that these arrangements are terminated, our financial condition, results of operations, cash flows and liquidity could be adversely affected by extended

payment terms, delays or failures in collecting trade accounts receivables.

The utility of the supply chain financing arrangements also depends upon the LIBOR rate, as it is a component of the discount rate applicable to each arrangement.

LIBOR 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.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The utility of the supply chain financing arrangements also depends upon a benchmark reference rate for the purpose of determining the discount rate applicable to each

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 thousands)

4 unchanged sentences

Total inventories

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, Plant and Equipment

11 unchanged sentences

Quantitative Lease Disclosures

We have operating and finance leases for our manufacturing facilities, warehouses, office space, automobiles,

and certain equipment.

Our leases have remaining lease terms of up to ten years , some of which may include one or more five-year renewal options.

We have included the five-year renewal option for one of our leases in our operating lease payments as we concluded that it is reasonably certain that we will exercise

Leases with an initial term of twelve months or less are not recorded on the balance sheet.

Operating lease expense is recognized on a straight-line basis over the

Finance leases are not material.

We have operating and finance leases for our manufacturing facilities, warehouses, office space,

automobiles, and certain equipment.

Our leases have remaining lease terms of up to eleven years , some of which may include one or more five-year renewal options.

We have not included any of the renewal options in our operating lease payments, as we concluded that it is not reasonably certain that we will exercise any of these renewal options.

Leases with an initial term of

twelve months or less are not recorded on the balance sheet.

Operating lease expense is recognized on a straight-line basis over the lease term.

Finance leases are not

STANDARD MOTOR PRODUCTS, INC.

2 unchanged sentences

The following tables provide quantitative disclosures related to our operating leases and includes all

operating leases acquired in the Stabil and Trombetta acquisitions from the date of the acquisition (in thousands) :

operating leases acquired from the date of the acquisition (in thousands) :

Balance Sheet Information

18 unchanged sentences

31, 2022 and 2021, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less, which is not material.

Includes $ 8.8 million of

right-of-use assets obtained in business acquisitions during the year ended December 31, 2021.

Includes $ 21.6 million

of right-of-use assets related to the lease modification and extension for our executive offices in Long Island City, New York during year ended December 31, 2022, and right-of-use assets obtained in business acquisitions of $ 0.4 million and $ 8.8 million

during the years ended December 31, 2022 and 2021, respectively.

Minimum Lease Payments

2 unchanged sentences

Present value of lease liabilities

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill and Other Intangible Assets

7 unchanged sentences

If we are unable to reach this conclusion, then we would perform a goodwill quantitative impairment test.

In performing the quantitative test, the fair value

of the reporting unit is compared to its carrying amount.

A charge for impairment is recognized by the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting

As of December 31, 2021, we performed a qualitative assessment of the likelihood of a goodwill impairment for both the Engine Management and Temperature Control reporting

Based upon our qualitative assessment, we determined that it was not more likely than not that the fair value of the each of the Engine Management and Temperature Control reporting units was less than their respective carrying amounts.

such, we concluded that the quantitative impairment test would not be required, and that there would be no required goodwill impairment charge as of December 31, 2021 at each of the Engine Management and Temperature Control reporting units.

concluded that we did not have a goodwill impairment charge as of December 31, 2021, and we do not believe that future impairments are probable, we will need to maintain the current ongoing performance levels at each of the Engine Management and

Temperature Control reporting units in future periods to sustain their goodwill carrying values.

In performing the quantitative test, the fair

value of the reporting unit is compared to its carrying amount.

A charge for impairment is recognized by the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the

reporting unit.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In light of the negative year-over-year impact on our company’s performance in the year ended December 31, 2022 of inflationary cost increases in raw materials, labor,

transportation and freight costs, and the increase in interest rates, and the recent decline in our stock price, we elected to bypass the qualitative assessment at December 31, 2022 and have decided to perform a quantitative impairment test for

goodwill at both the Engine Management and Temperature Control reporting units.

The fair values of the Engine Management and Temperature Control reporting units were determined based upon the Income Approach, which estimates the fair value based

on future discounted cash flows, and the Market Approach, which estimates the fair value based on market prices of comparable companies.

We base our fair value estimates on projected financial information which we believe to be reasonable.

also considered our total market capitalization as of December 31, 2022.

Our December 31, 2022 annual goodwill impairment analysis did not result in an impairment charge as it was determined that the fair values of our Engine Management and

Temperature Control reporting units were in excess of their carrying amounts.

While the fair values exceed the carrying amounts at the present time and we do not believe that impairments are probable, we will need to maintain the ongoing

performance of the business at current projected levels in future periods to sustain their carrying values.

Changes in the carrying values of goodwill by operating segment during the years ended December 31, 2022 and 2021 are as follows (in thousands):

2 unchanged sentences

Activity in 2021

Acquisition of Trombetta

Acquisition of Stabil

Foreign currency exchange rate change

2 unchanged sentences

Activity in 2022

Acquisition of Trombetta

Acquisition of Stabil

Acquisition of Kade

Foreign currency exchange rate change

17 unchanged sentences

related trademark/trade name totaling $ 2.6 million, which has an indefinite useful life and, as such, is not being amortized.

In December 2020, a large retail customer informed us of its decision to pursue a private brand strategy for its engine management product line.

As a result of this

development, revenues sold under the BWD trademark were significantly reduced.

In connection with the decision, in 2020, we recorded an impairment charge of $ 2.6

million to write-off the BWD intangible asset trademark.

Total amortization expense for acquired intangible assets was $ 8.7

million for the year ended December 31, 2021, $ 8.2 million for the year ended December 31, 2020, and $ 8 million for the year ended December 31, 2019.

Based on the current estimated useful lives assigned to our intangible assets, amortization expense is

estimated to be $ 8.5 million for 2022, $ 8.4

million in 2023, $ 8.2 million in 2024, $ 8.2

million in 2025 and $ 69.4 million in the aggregate for the years 2026 through 2041.

Total amortization expense for acquired

intangible assets was $ 8.6 million for the year ended December 31, 2022, $ 8.7 million for the year ended December 31, 2021, and $ 8.2 million for the year

ended December 31, 2020.

Based on the current estimated useful lives assigned to our intangible assets, amortization expense is estimated to be $ 8.5

million for 2023, $ 8.4 million in 2024, $ 8.4

million in 2025, $ 8.4 million in 2026 and $ 62.7

million in the aggregate for the years 2027 through 2041.

For information related to identified

intangible assets acquired in the Stabil, Trombetta, and Soot Sensor acquisitions, see Note 2, “Business Acquisitions and Investments,” of the notes to our consolidated financial statements.

intangible assets acquired in the Stabil, Trombetta, Soot Sensor and Kade acquisitions, see Note 2, “Business Acquisitions and Investments,” of the notes to our consolidated financial statements.

Other Intangible Assets

4 unchanged sentences

Computer software is amortized

over its estimated useful life of 3 to 10

Amortization expense for computer software was $ 0.3 million, $ 0.3 million and $ 0.4 million for the years ended December 31, 2021, 2020 and

2019, respectively.

Fully amortized computer software, no longer in use, of $ 0.2 million was written-off during each of the years ended December 31, 2021 and 2020.

over its estimated useful life of 3 to 10 years .

Amortization expense for computer software was $ 0.7 million, $ 0.3 million and $ 0.3 million for the years ended December 31,

2022, 2021 and 2020, respectively.

Investments in Unconsolidated Affiliates

9 unchanged sentences

In August 2019, we acquired an

approximate 29 % minority interest in Foshan Che Yijia New Energy

Technology Co., Ltd.

approximate 29 % minority interest in Foshan Che Yijia New

Energy Technology Co., Ltd.

(“CYJ”) for approximately $ 5.1 million .

is a manufacturer of automotive electric air conditioning compressors and is located in China.

CYJ is a manufacturer of automotive electric air conditioning compressors and is located in China.

Our minority interest in CYJ is accounted for using the equity method of accounting.

In December 2021, Standard

Motor Products (Hong Kong), Ltd., (“SMP HK”), a subsidiary of Standard Motor Products, Inc., entered into an unsecured loan agreement with CYJ.

Under the terms of the loan agreement, CYJ shall have the right to borrow from SMP HK, as lender, up to

an aggregate principal amount of $ 4 million, with interest calculated on the basis of simple interest of five percent ( 5 %) per annum and a maturity date of November 30, 2023 ,

In December 2021,

Standard Motor Products (Hong Kong), Ltd., (“SMP HK”), a subsidiary of Standard Motor Products, Inc., entered into an unsecured loan agreement with CYJ.

Under the terms of the loan agreement, CYJ shall have the right to borrow from SMP HK, as

lender, up to an aggregate principal amount of $ 4 million, with interest calculated on the basis of simple interest of five percent ( 5 %) per annum and a maturity date of November 30, 2023 ,

subject to extension by SMP HK at its sole discretion.

At December 31, 2021, there was no outstanding borrowings under the loan

During the years ended December 31, 2021 and 2020, purchases we made from CYJ were not material.

At December 31, 2022, outstanding borrowings under the loan agreement were $ 4

In October 2022, we

acquired an additional 3.55 % equity interest in CYJ for RMB 1.7 million (approximately $ 242,000 ), increasing our minority ownership

interest in CYJ from an approximate interest of 29 % to 33 %.

We will continue to account for our minority interest in CYJ using the equity method of accounting.

During the years ended December 31, 2022 and 2021, purchases we made from CYJ

were not material.

Investment in Foshan FGD SMP Automotive Compressor Co.

3 unchanged sentences

approximately $ 12.5 million.

We determined that due to a lack of a voting majority, and other qualitative factors, we do not control the

operations of the joint venture and accordingly, our investment in the joint venture is accounted for under the equity method of accounting.

During the years ended December 31, 2021 and 2020, we made purchases from the joint venture of approximately $ 32.2 million and $ 17.4 million, respectively.

We determined that due to a lack of a voting majority, and other qualitative factors, we do not control

the operations of the joint venture and accordingly, our investment in the joint venture is accounted for under the equity method of accounting.

During the years ended December 31, 2022 and 2021, we made purchases from the joint venture of

approximately $ 53.3 million and $ 32.2 million, respectively.

Investment in Foshan GWOYNG SMP Vehicle Climate Control & Cooling Products Co.

1 unchanged sentence

Ltd., a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd.

(“Gwo Yng”), a

China-based manufacturer of automotive air conditioner accumulators, filter driers, hose assemblies and switches .

a China-based manufacturer of automotive air conditioner accumulators, filter driers, hose assemblies and switches .

We acquired our 50 % interest in the joint venture for $ 14 million.

We determined,

at that time, that due to a lack of a voting majority and other qualitative factors, we do not control the operations of the joint venture and accordingly, our investment in the joint venture was accounted for under the equity method of accounting.

In March 2018, we acquired an additional 15 % equity interest

in the joint venture for approximately $ 4.2 million, thereby increasing our equity interest in the joint venture to 65 %.

Although we increased our equity interest in the joint venture to 65 %, the minority shareholder maintained participating rights that allowed it to participate in certain significant financial and operating decisions that occur in the ordinary course of business.

As a result of the

existence of these substantive participating rights of the minority shareholder, we continued to account for our investment in the joint venture under the equity method of accounting.

During the years ended December 31, 2021 and 2020, we made

purchases from the joint venture of approximately $ 15.9 million and $ 12.4 million, respectively.

Investment in Orange Electronic Co.

In January 2013, we acquired an approximate 25 % minority

interest in Orange Electronic Co., Ltd.

(“Orange”) for $ 6.3 million.

Orange is a manufacturer of tire pressure monitoring system sensors

and is located in Taiwan.

As of December 31, 2021, our minority interest in Orange of 19.4 % is accounted for using the equity method of

accounting as we have the ability to exercise significant influence.

During the years ended December 31, 2021 and 2020, we made purchases from Orange of approximately $ 7.8 million and $ 4.4 million, respectively.

determined, at that time, that due to a lack of a voting majority and other qualitative factors, we do not control the operations of the joint venture and accordingly, our investment in the joint venture was accounted for under the equity method

of accounting.

In March 2018, we acquired an additional 15 % equity

interest in the joint venture for approximately $ 4.2 million, thereby increasing our equity interest in the joint venture to 65 %.

ordinary course of business.

As a result of the existence of these substantive participating rights of the minority shareholder, we continued to account for our investment in the joint venture under the equity method of accounting.

years ended December 31, 2022 and 2021, we made purchases from the joint venture of approximately $ 16.1 million and $ 15.9 million, respectively.

STANDARD MOTOR PRODUCTS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Investment in Orange Electronic Co.

In January 2013, we acquired a minority interest in Orange Electronic Co., Ltd.

(“Orange”) for $ 6.3 million.

Orange is a manufacturer of tire pressure monitoring system sensors and is located in Taiwan.

As of December 31, 2022, our minority interest in Orange of 19.4 % is accounted for using the equity method of accounting as we have the ability to exercise significant influence.

During the years ended December

31, 2022 and 2021, we made purchases from Orange of approximately $ 4.1 million and $ 7.8 million, respectively.

(In thousands)

Deferred compensation

Noncurrent portion of interest rate swap fair value

Long term receivables

Deferred financing costs, net

4 unchanged sentences

(In thousands)

Revolving credit facilities

Credit facility – term loan due 2027

Credit facility – revolver due 2027

Senior secured facility – revolver due 2023

Current maturities of debt

Long-term debt

Other includes borrowings under our Polish overdraft

facility of Zloty 12.3 million (approximately $ 3 million) and Zloty 0.4 million (approximately $ 0.1 million) as of December 31, 2021 and 2020, respectively.

Maturities of long-term debt are not material for the year ended December 31, 2021 and beyond.

Revolving Credit Facility

We have entered into an

amended credit Agreement with JPMorgan Chase Bank, N.A., as agent, and a syndicate of lenders.

The amended credit agreement provides for a senior secured revolving credit facility with a line of credit of up to $ 250 million (with an additional $ 50 million

accordion feature) and extends the maturity date to December 2023 .

The line of credit under the amended credit agreement also allows for

a $ 10 million line of credit to Canada as part of the $ 250 million available for borrowing.

Direct borrowings under the amended credit agreement bear interest at LIBOR plus a margin ranging from 1.25 % to 1.75 % based on our borrowing availability, or floating at

the alternate base rate plus a margin ranging from 0.25 % to 0.75 % based on our borrowing availability, at our option.

The amended credit agreement is guaranteed by certain of our subsidiaries and secured by certain of our assets.

Borrowings under the amended credit agreement are secured by substantially all of our assets, including accounts receivable, inventory and certain fixed assets, and those

of certain of our subsidiaries.

Availability under the amended credit agreement is based on a formula of eligible accounts receivable, eligible drafts presented to the banks under our supply

chain financing arrangements and eligible inventory.

After taking into account outstanding borrowings under the amended credit agreement, there was an additional $ 122.1 million available for us to borrow pursuant to the formula at December 31, 2020.

The loss of business of

one or more of our key customers or, a significant reduction in purchases of our products from any one of them, could adversely impact availability under our revolving credit facility.

Other includes borrowings under our Polish

overdraft facility of Zloty 12.3 million (approximately $ 3 million) as of December 31, 2021.

There were no borrowings under

the Polish overdraft facility at December 31, 2022.

Term Loan and Revolving Credit Facilities

In March 2022, the

Company and its wholly owned subsidiaries, SMP Motor Products Ltd.

and Trumpet Holdings, Inc., entered into an amendment to our existing Credit Agreement, dated as of October 28, 2015, as amended (the “2015 Credit Agreement”), with JP Morgan

Chase Bank, N.A., as agent, and a syndicate of lenders for our senior secured revolving credit facility.

The amendment provided for the drawdown of an additional $ 50 million from the agreement’s accordion feature to increase the line of credit under the revolving credit facility from $ 250 million to $ 300 million, and updated the benchmark provisions to replace

LIBOR with Term SOFR as the reference rate.

STANDARD MOTOR PRODUCTS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Outstanding borrowings under the credit agreement, which are classified as current liabilities, were $ 125.3 million and $ 10 million at December 31, 2021 and 2020,

respectively ;

while letters of credit outstanding under the credit agreement were $ 2.6 million and $ 2.8 million at December 31, 2021 and 2020, respectively.

Borrowings under the credit agreement have been classified as current liabilities based upon accounting rules and certain provisions in the agreement.

At December 31, 2021, the weighted average interest rate on our amended credit agreement was 1.4 % , which consisted of $ 125 million in direct borrowings at 1.4 % and an alternative base rate loan of $ 0.3 million at 3.5 %.

At December 31, 2020, the weighted average interest rate on our amended credit agreement was 1.4 %, which consisted of $ 10 million in direct borrowings.

average daily alternative base rate loan balance was $ 1.1 million and $ 1.5 million during 2021 and 2020, respectively.

At any time that our borrowing availability is less than the greater of either (a) $ 25 million, or 10 % of the commitments if fixed assets are not included in the borrowing base, or (b) $ 31.25 million, or 12.5 % of the commitments

if fixed assets are included in the borrowing base, the terms of the amended credit agreement provide for, among other provisions, a financial covenant requiring us, on a consolidated basis, to maintain a fixed charge coverage ratio of 1 :1 at the end of each fiscal quarter (rolling four quarters).

As of December 31, 2021, we were not subject to these covenants.

The amended credit

agreement permits us to pay cash dividends of $ 20 million and make stock repurchases of $ 20 million in any fiscal year subject to a minimum availability of $ 25

Provided specific conditions are met, the amended credit agreement also permits acquisitions, permissible debt financing, capital expenditures, and cash dividend payments and stock repurchases of greater than $ 20 million.

In June 2022, the Company entered into a new Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (the “Credit

The Credit Agreement provides for a $ 500 million credit facility comprised of a $ 100 million term loan facility (the “term loan”) and a $ 400

million multi-currency revolving credit facility available in U.S.

Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the administrative agent and the lenders (the “revolving facility”).

Agreement replaces and refinances the 2015 Credit Agreement.

Borrowings under the Credit Agreement were used to repay all outstanding borrowings under the 2015 Credit Agreement, and pay certain fees and expenses incurred in connection with the Credit

Agreement, with future borrowings used for other general corporate purposes of the Company and its subsidiaries.

The term loan amortizes in quarterly installments of 1.25 % in each of the first four years, and quarterly installments of 2.5 % in the fifth year of the Credit Agreement.

The revolving facility has a $ 25 million sub-limit for the issuance of letters of credit and a $ 25

million sub-limit for the borrowing of swingline loans.

The maturity date is June 1, 2027 .

The Company may request up to two one-year extensions of the

maturity date.

The Company may, upon the agreement of one or more then existing lenders or of additional financial institutions not currently party to the Credit

Agreement, increase the revolving facility commitments or obtain incremental term loans by an aggregate amount not to exceed (x) the greater of (i) $ 168

million or (ii) 100 % of consolidated EBITDA (as defined in the Credit Agreement) for the four fiscal quarters ended most recently

before such date, plus (y) the amount of any voluntary prepayment of term loans, plus (z) an unlimited amount so long as, immediately after giving effect thereto, the pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement)

does not exceed 2.5 to 1.0.

Term loan and revolver facility borrowings in U.S.

Dollars bear interest, at the Company’s election, at a rate per annum equal to Term SOFR plus 0.10 % plus an applicable margin, or an alternate base rate plus an applicable margin, where the alternate base rate is the greater of the prime

rate, the federal funds effective rate plus 0.50 %, and one-month Term SOFR plus 0.10 % plus 1.00 %.

Term loan borrowings are being made at one-month

The applicable margin for the term benchmark borrowings ranges from 1.0 % to 2.0 %, and the applicable margin for alternate base rate borrowings ranges from 0 %

to 1.0 %, in each case, based on the total net leverage ratio of the Company and its restricted subsidiaries.

The Company may select

interest periods of one, three or six months for Term SOFR borrowings.

Interest is payable at the end of the selected interest

period, but no less frequently than quarterly.

The Company’s obligations under the Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority

perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions.

The collateral security described above also secures certain banking services

obligations and interest rate swaps and currency or other hedging obligations of the Company owing to any of the then existing lenders or any affiliates thereof.

Concurrently with the Company’s entry into the Credit Agreement, the Company also

entered into a seven year interest rate swap agreement with Wells Fargo Bank, N.A., Co-Syndication Agent and lender under the Credit

Agreement, on $ 100 million of borrowings under the Credit Agreement.

The interest rate swap agreement matures in May 2029.

Outstanding borrowings at December 31, 2022 under the Credit Agreement were $ 239.5

million, consisting of current borrowings of $ 55 million and long-term debt of $ 184.5 million;

while outstanding borrowings at December 31, 2021 under the 2015 Credit Agreement were $ 125.3 million, consisting of current borrowings.

Letters of credit outstanding under the Credit Agreement were $ 2.4 million at December 31, 2022, and $ 2.6 million under the 2015 Credit

Agreement at December 31, 2021.

Borrowings at December 31, 2021 under the 2015 Credit Agreement have been classified as current liabilities based upon accounting rules and certain provisions in the agreement.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2022, the weighted average interest rate under our Credit Agreement was 5.2 %, which consisted of $ 237 million in borrowings at 5.2 % under Term SOFR, adjusted for the impact of the interest rate swap agreement on $ 100 million of borrowings, and an alternative base rate borrowing of $ 2.5

million at 8 %.

At December 31, 2021, the weighted average interest rate on our 2015 Credit Agreement was 1.4 %, which consisted of $ 125 million

in direct borrowings at 1.4 % and alternative base rate loan of $ 0.3 million at 3.5 %.

During the year ended December 31, 2022, our average

daily alternative base rate loan balance was $ 5.6 million, compared to a balance of $ 1.1 million for the year ended December 31, 2021.

The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers,

consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.

The Credit Agreement also contains customary events of default.

Polish Overdraft Facility

In February 2022, our Polish subsidiary, SMP Poland sp.

z.o.o., amended its an overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce, formerly HSBC France (Spolka Akcyjna)

Oddzial w Polsce.

The amended overdraft facility provides for borrowings of up to Zloty 30 million (approximately $ 8 million).

Availability under the amended facility commences in March 2022 and ends in June 2022 , 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

Borrowings under the overdraft facility will bear interest at a rate equal to WIBOR + 1.5 % and are guaranteed by Standard Motor

Products, Inc., the ultimate parent company.

At December 31, 2021 and 2020, borrowings under the overdraft facility were Zloty 12.3

million (approximately $ 3 million) and Zloty 0.4

million (approximately $ 0.1 million), respectively.

I n October 2022, 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 under the facility in Euros and U.S.

Under the amended terms, the overdraft facility provides for

borrowings of up to Zloty 30 million (approximately $ 6.8 million) if borrowings are solely in Zloty, or up to 85 % of the Zloty 30 million limit (approximately $ 5.8

million) if borrowings are in Euros and/or U.S.

The overdraft facility has an initial maturity date in December 2022, with automatic three-month

renewals until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the

commencement of the three-month renewal period.

Borrowings under the amended overdraft facility will bear interest at a rate equal to (1) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.5 % for borrowings in Polish Zloty, (2) the one month Euro Interbank Offered Rate (“EURIBOR”) + 1.5 % for borrowings in Euros, and (3) the Mid-Point of the Fed Target Range + 1.75 %

for borrowings in U.S Dollars.

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

At December 31, 2021 borrowings under the overdraft facility were Zloty 12.3 million (approximately $ 3

There were no borrowings outstanding under the overdraft facility at December 31, 2022 .

Maturities of Debt

As of December 31, 2022, maturities of debt

through 2027, assuming no prepayments, are as follows (in thousands):

Revolving Credit Facility

Term Loan Facility

Polish Overdraft Facility and Other Debt

current maturities

Long-term debt

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred Financing Costs

We have deferred financing costs of approximately $ 0.4

million and $ 0.7 million as of December 31, 2021 and 2020, respectively.

Deferred financing costs as of December 31, 2021 are related to

our revolving credit facility.

Scheduled amortization for future years, assuming no prepayments of principal is as follows:

We have deferred financing costs of approximately $ 2.1 million and $ 0.4 million as of December 31, 2022 and 2021, respectively.

Deferred financing costs are related to our term loan and revolving credit facilities.

In connection with the amendment to the 2015 Credit Agreement entered into in March 2022 and the Credit Agreement entered into in June 2022 with JPMorgan Chase Bank, N.A., as agent, we incurred and capitalized approximately $ 0.2 million, and $ 1.9 million,

respectively, of deferred financing costs related to bank, legal, and other professional fees which are being amortized, along with certain preexisting deferred financing costs, through June 2027, the term of the Credit Agreement.

upon entering into the Credit Agreement, we wrote-off $ 40,000 of unamortized deferred financing costs associated with the 2015 Credit

Unamortized deferred financing costs written-off in June 2022 were recorded in other non-operating income (expense), net in our consolidated statement of operations.

Deferred financing costs as of December

31, 2022, assuming no prepayments, are being amortized as follows:

(In thousands)

Total amortization

Accumulated Other Comprehensive Income

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

Postretirement

Benefit Costs

Balance at December 31, 2020 attributable to SMP

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive income

Other comprehensive income, net

Balance at December 31, 2021 attributable to SMP

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive income

Other comprehensive income, net

Balance at December 31, 2022 attributable to SMP

Consists of the unrecognized

gain relating to the change in fair value of the cash flow interest rate hedge of $ 5.2 million ($ 3.8 million, net of tax), net of cash settlements payments of $ 42,000 ($ 31,000 , net of tax) in the year ended

December 31, 2022.

STANDARD MOTOR PRODUCTS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Reclassifications Out of Accumulated Other Comprehensive Income (in thousands):

Year Ended December 31,

Details About Accumulated Other Comprehensive Income Components

Derivative cash flow hedge:

Unrecognized gain (loss) (1)

Postretirement Benefit Plans:

Unrecognized gain (loss) (2)

Total before income tax

Income tax expense (benefit)

Total reclassifications attributable to SMP

Unrecognized accumulated other

comprehensive income (loss) related to the cash flow interest rate hedge is reclassified to earnings and reported as part of interest expense in our consolidated statements of operations when the interest payments on the underlying

borrowings are recognized.

Unrecognized accumulated other comprehensive income (loss) related to our post retirement plans is reclassified to earnings and included in the computation of net periodic postretirement benefit costs, which are

included in other non-operating income (expense), net in our consolidated statements of operations (see Note 15, “Employee Benefits,” for additional information).

Stockholders’ Equity

7 unchanged sentences

senior to our common stock as to dividends and liquidation rights and has voting rights.

Each share of the Series A Preferred Stock shall entitle the holder to one thousand votes on all matters

submitted to a vote of the stockholders of the Company.

Each share of the Series A Preferred Stock shall entitle the holder to one thousand votes on all

matters submitted to a vote of the stockholders of the Company.

No such shares were outstanding at December 31, 2022 and 2021.

5 unchanged sentences

Stock repurchases under this program, during the year ended December 31, 2021, were 464,992 shares of our common stock at a total cost of $ 20

million, thereby completing the 2021 Board of Directors authorization.

million, thereby completing the February 2021 Board of Directors authorization.

In October 2021, our Board of Directors authorized the purchase of up to an additional $ 30 million of our common stock under a stock repurchase program.

Stock will be purchased under the program from time to time, in the open market or

through private transactions, as market conditions warrant.

Stock repurchases under this program, during the year ended December 31, 2021, were 7,000

shares of our common stock, at a total cost of $ 0.3 million.

As of December 31, 2021, there was approximately $ 29.7 million available for future stock purchases under the program.

During the period from January 1, 2022 through February 17, 2022, we have

repurchased an additional 64,482 shares of our common stock at a total cost of $ 3.1 million, thereby reducing the availability under the program to $ 26.6

Stock repurchases under this program, during the year ended December 31, 2021 and

2022 were 7,000 and 692,067

shares of our common stock, respectively, at a total cost of $ 0.3 million and $ 29.7 million, respectively, thereby completing the October 2021 Board of Directors authorization.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In July 2022, our Board of Directors authorized the purchase of up to an

additional $ 30 million of our common stock under a new stock repurchase program.

Stock will be purchased under the program from time

to time, in the open market or through private transactions, as market conditions warrant.

To date, there have been no repurchases

of our common stock under the program.

Stock-Based Compensation Plans

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In addition, members of our Board of Directors participate in our stock-based compensation program in connection with their service on our board.

In May 2016, our Board of Directors and Shareholders approved the 2016 Omnibus Incentive

The 2016 Omnibus Incentive Plan supersedes the 2006 Omnibus Incentive Plan, which terminated in May 2016.

The 2016 Omnibus Incentive Plan is the only remaining plan available to provide stock-based incentive compensation to our employees,

directors and other eligible persons.

In May 2021, our Board of Directors and Shareholders approved an amendment and restatement to the 2016 Omnibus Incentive Plan (the “Plan”).

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Shares issued under the Plan that are cancelled, forfeited or expire by their terms are eligible to be granted again under the Plan.

Awards previously granted under the 2006

Omnibus Incentive Plan are not affected by the plan’s termination, while shares not yet granted under the plan are not available for future issuance.

We account for our stock-based compensation plans in accordance with the provisions of ASC 718, Stock Compensation , which requires that a company measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The service period is the period of

time that the grantee must provide services to us before the stock-based compensation is fully vested.

The grant-date fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in our consolidated

statements of operations.

The 2016 Omnibus Incentive Plan is the

only remaining plan available to provide stock-based incentive compensation to our employees, directors and other eligible persons.

Awards previously granted under the 2006 Omnibus Incentive Plan remain outstanding, while shares not yet granted

under the plan are not available for future issuance.

We account for our stock-based compensation plans in accordance with the provisions of FASB ASC 718, Stock Compensation , which requires that a company measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The service period is

the period of time that the grantee must provide services to us before the stock-based compensation is fully vested.

The grant-date fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in

our consolidated statements of operations.

Forfeitures are estimated at the time of grant based on historical trends in order to estimate the amount of share-based awards that will ultimately vest.

We monitor actual forfeitures for any subsequent adjustment to

forfeiture rates.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We monitor actual forfeitures for any subsequent

adjustment to forfeiture rates.

Restricted Stock and Performance Share Grants

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Each period we evaluate the probability of achieving the applicable targets, and we adjust our accrual accordingly.

Restricted shares (other than long-term retention restricted

shares) and performance shares issued to certain key executives and directors are subject to a one or two year holding period upon the lapse of the vesting period.

Restricted shares (other than

long-term retention restricted shares) and performance shares issued to certain key executives and directors are subject to a one or two year holding period upon the lapse of the vesting period.

Forfeitures on stock grants are estimated at 5 % for employees and 0 % for executives and directors based

upon our evaluation of historical and expected future turnover.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Prior to the time a restricted share becomes fully vested or a performance share is issued, the awardees cannot transfer, pledge, hypothecate or encumber such shares.

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Assumptions used in calculating the discount for the lack of marketability include an estimate of stock volatility, risk-free interest rate, and a dividend yield.

As related to restricted and performance stock shares, we recorded compensation expense of $9.1 million ($6.9 million, net of tax), $7.8 million ($5.8 million, net of tax) and $6.5 million ($4.9 million, net of tax),

for the years ended December 31, 2021, 2020 and 2019, respectively.

The unamortized compensation expense related to our restricted and performance-based shares was $ 16.6 million and $ 15.2 million at December 31, 2021 and 2020, respectively and is expected to be

recognized over a weighted average period of 4.7 years and 0.4 years for employees and directors, respectively, as of December 31, 2021 and over a weighted average period of 4.6 years and 0.3 years for employees and directors, respectively, as of

As related to restricted and performance stock shares, we recorded compensation expense of $ 7.6 million ($ 5.7 million, net of tax), $ 9.1 million ($ 6.9 million, net of tax)

and $ 7.8 million ($ 5.8

million, net of tax), for the years ended December 31, 2022, 2021 and 2020, respectively.

The unamortized compensation expense related to our restricted and performance-based shares was $ 14.9 million and $ 16.6 million at December 31, 2022 and 2021, respectively and

is expected to be recognized over a weighted average period of 4.3 years and 0.3 years for employees and directors, respectively, as of December 31, 2022 and over a weighted average period of 4.7 years and 0.4 years for employees and directors, respectively, as of

December 31, 2021.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our restricted and performance-based share activity was as follows for the years ended December 31, 2022 and 2021:

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Balance at December 31 , 2020

Forfeited (1)

Balance at December 31 , 2021

Performance Shares Target Adjustment

Balance at December 31 , 2022

Due to the lack of achievement of performance targets, performance-based shares forfeited in the year ended December 31, 2020 were 50,250 shares.

The weighted-average grant date fair value of restricted and performance-based shares outstanding as of December 31, 2021, 2020 and 2019 was $ 28.2 million (or $ 34.92 per share), $ 29.2 million (or $ 34.77 per share), and $ 30.1 million (or $ 35.26 per share),

respectively.

The weighted-average grant date fair value

of restricted and performance-based shares outstanding as of December 31, 2022, 2021 and 2020 was $ 28 million (or $ 31.79 per share), $ 28.2 million (or $ 34.92 per share), and $ 29.2 million (or $ 34.77 per share), respectively.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Employee Benefits

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We maintain various defined contribution plans, which include profit sharing, and provide retirement benefits for substantially all of our employees.

Matching obligations,

in connection with the plans which are funded in cash and typically contributed to the plans in March of the following year, are as follows (in thousands):

obligations, in connection with the plans which are funded in cash and typically contributed to the plans in March of the following year, are as follows (in thousands):

Year ended December 31,

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compensation and, in addition, we may at our discretion make contributions to the plan on behalf of the employees.

In March 2021 and 2020, contributions of $ 0.5

million and $ 0.3 million were made related to calendar year 2020 and 2019, respectively.

As of December 31, 2021, we have recorded an

obligation of $ 0.8 million for 2021.

In March 2022 and 2021, contributions of $ 0.8 million and $ 0.5 million were made related to calendar year 2021 and 2020,

respectively.

As of December 31, 2022, we have recorded an obligation of $ 0.8 million for 2022.

We also have an Employee Stock Ownership Plan and Trust (“ESOP”) for employees who are not covered by a collective bargaining agreement.

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We are authorized to instruct the trustees to distribute such shares toward the satisfaction of our future obligations under the plan.

The shares held in trust are

not considered outstanding for purposes of calculating earnings per share until they are committed to be released.

The shares held in trust

are not considered outstanding for purposes of calculating earnings per share until they are committed to be released.

The trustees will vote the shares in accordance with its fiduciary duties.

During 2021, we contributed to the trust an additional 61,800 shares from our treasury and released 61,800

shares from the trust leaving 200 shares remaining in the trust as of December 31, 2021.

The provision for expense in connection with the

ESOP was approximately $ 2.5 million in 2021, $ 2.3

million in 2020 and $ 2.5 million in 2019.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During 2022, we contributed to the trust an

additional 48,200 shares from our treasury and released 48,200 shares from the trust leaving 200 shares remaining in the trust as of

December 31, 2022.

The provision for expense in connection with the ESOP was approximately $ 2.3 million in 2022, $ 2.5 million in 2021 and $ 2.3 million in

Defined Benefit Pension Plan

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2022, 2021 and 2020 were not material.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other Non-Operating Income (Expense), Net

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Equity income from joint ventures

Loss on foreign exchange

Gain (loss) on foreign exchange

Other non-operating income, net

Total other non-operating income, net

Derivative Financial

Interest Rate Swap

We occasionally use

derivative financial instruments to reduce our market risk for changes in interest rates on our variable rate borrowings.

The principal financial instruments used for cash flow hedging purposes are interest rate swap agreements.

The interest rate

swaps effectively convert a portion of our variable rate borrowings under our existing facilities to a fixed rate based upon determined notional amount.

We do not enter into interest rate swap agreements, or other financial instruments, for

trading or speculative purposes.

2022, we entered into a seven year interest rate swap agreement with a notional amount of $ 100 million that is to mature in May 2029 .

rate swap agreement has been designated as a cash flow hedge of interest payments on $ 100 million of borrowings under our Credit

Under the terms of the swap agreement, we will receive monthly variable interest payments based on one month Term SOFR

and will pay interest based upon a fixed rate of 2.683 % per annum, adjusted upward for the credit spread adjustment in the Credit

Agreement of 0.10 % and the loan margin in the Credit Agreement of 1.50 % at December 31, 2022.

The fair value of the

interest rate swap agreement as of December 31, 2022 was an asset of $ 5.2 million, which has been deferred and recorded in accumulated

other comprehensive income, net of income taxes, in our consolidated balance sheet.

When the interest expense on the underlying borrowing is recognized, the deferred gain/loss in accumulated other comprehensive income is recorded in earnings as

interest expense in the consolidated statements of operations.

We perform quarterly hedge effectiveness assessments and anticipate that the interest rate swap will be highly effective throughout its term.

Fair Value Measurements

The carrying value of our financial instruments consisting of cash and cash equivalents, deferred compensation, and short term borrowings approximate their fair value.

each instance, fair value is determined after considering Level 1 inputs under the three-level fair value hierarchy.

For fair value purposes, the carrying value of cash and cash equivalents approximates fair value due to the short maturity of those

The fair value of the assets held by the deferred compensation plan are based on the quoted market prices of the underlying funds which are held in registered investment companies.

The carrying value of our revolving credit facilities,

classified as short term borrowings, equals fair market value because the interest rate reflects current market rates.

We follow a three-level

fair value hierarchy that prioritizes the inputs to measure fair value.

This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair

value are as follows:

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

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market

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

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following is a summary of the estimated

fair values, carrying amounts, and classification under the fair value hierarchy of our financial instruments at December 31, 2022 and December 31, 2021 (in thousands):

December 31, 2022

December 31, 2021

Cash and cash equivalents

Deferred compensation

Short term borrowings

Long-term debt

Cash flow interest rate swap

The carrying value of cash and cash

equivalents approximates fair value due to the short maturity of those investments.

The fair value of the underlying assets held by the deferred compensation plan are based on the quoted market prices of the underlying funds which are held by

registered investment companies.

The carrying value of our variable rate short-term borrowings and long-term debt under our credit facilities approximates fair value as the variable interest rates in the facilities reflect current market rates.

The fair value of our cash flow interest rate swap agreement obtained from two independent third parties, is based upon market quotes,

and represents the net amount required to terminate the interest rate swap, taking into consideration market rates and counterparty credit risk.

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

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Reconciliations between taxes at the U.S.

Federal income tax rate and taxes at our effective income tax rate on earnings from continuing operations before income taxes are

as follows (in thousands):

Federal income tax rate and taxes at our effective income tax rate on earnings from continuing operations before income taxes

are as follows (in thousands):

Year Ended December 31,

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State and local income taxes, net of federal income tax benefit

Income tax (tax benefit) attributable to foreign income

Income tax (benefit) attributable to foreign income

Other non-deductible items, net

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Provision for income taxes

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Intangible assets acquired, net of amortization

Interest rate swap agreement

Total deferred tax liabilities

Net deferred tax assets

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In assessing the realizability of the deferred tax assets, we consider whether it is more likely than not that some portion or the entire deferred tax asset will be

Ultimately, the realization of the deferred tax asset is dependent upon the generation of sufficient taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized.

We consider the level of historical taxable income, scheduled reversal of temporary differences, carryback and carryforward periods, tax planning strategies and projected future taxable income in determining whether a valuation allowance is

is warranted.

We also consider cumulative losses in recent years as well as the impact of one-time events in assessing our pre-tax earnings.

Assumptions regarding future taxable income require significant judgment.

Our assumptions are consistent with

estimates and plans used to manage our business.

Our assumptions are consistent

with estimates and plans used to manage our business.

The valuation allowance of $ 3.2 million as of December 31,

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At December 31, 2022, we have foreign tax credit carryforwards of approximately $ 3 million that will expire in varying amounts

As related to the taxation of our foreign subsidiaries, we aggregate our foreign earnings and profits, and utilize allowable deductions and available foreign tax credits in

computing our U.S.

As related to the taxation of our foreign subsidiaries, we aggregate our foreign earnings and profits, and utilize allowable deductions and available foreign tax credits

in computing our U.S.

Notwithstanding the U.S.

taxation of these amounts, we intend to continue to invest most or all of these earnings indefinitely outside of the U.S., and do not expect to incur any significant additional taxes related to such

taxation of these amounts, we intend to continue to invest most, or all, of these earnings indefinitely outside of the U.S., and do not expect to incur any significant additional taxes related to

such amounts.

In accordance with generally accepted accounting practices, we recognize in our financial statements only

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As of December 31, 2022, the Company is no longer subject to U.S.

examinations for years before 2018.

Federal tax examinations

for years before 2019.

We remain subject to examination by state and local tax authorities for tax years 2018 through 2021 .

Foreign jurisdictions have statutes of limitations generally ranging from 2 to 6 years.

Years still open to examination by foreign tax authorities in major jurisdictions include Canada ( 2017 onward), Hong Kong ( 2016 onward), China ( 2017 onward) Mexico ( 2017 onward), Poland

( 2016 onward), and Hungary ( 2015

We do not presently anticipate that our unrecognized tax benefits will significantly increase or decrease over the next 12 months;

jurisdictions have statutes of limitations generally ranging from 2 to 6 years.

Years still open to examination by foreign tax authorities in major jurisdictions include Canada ( 2018 onward), Hong Kong ( 2017 onward), China ( 2020 onward), Mexico ( 2018 onward),

Poland ( 2017 onward), Hungary ( 2016

onward) and Germany ( 2019 onward).

We do not presently anticipate that our unrecognized tax benefits will significantly increase or

decrease over the next 12 months;

however, actual developments in this area could differ from those currently expected.

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We present two calculations of earnings per common share.

“Basic” earnings per common share equals net earnings attributable to SMP divided by weighted average common

shares outstanding during the period.

“Diluted” earnings per common share equals net earnings attributable to SMP divided by the sum of weighted average common shares outstanding during the period plus potentially dilutive common shares.

“Basic” earnings per common share equals net earnings attributable to SMP divided by weighted average

common shares outstanding during the period.

“Diluted” earnings per common share equals net earnings attributable to SMP divided by the sum of weighted average common shares outstanding during the period plus potentially dilutive common

Potentially dilutive common shares that are anti-dilutive are excluded from net earnings per common share.

The following are reconciliations of the net earnings attributable to SMP and the shares used in calculating basic and dilutive net earnings per common share attributable

to SMP (in thousands, except per share data):

The following are reconciliations of the net earnings attributable to SMP and the shares used in calculating basic and dilutive net earnings per common share

attributable to SMP (in thousands, except per share data):

Year Ended December 31,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The shares listed below were not included in the computation of diluted net earnings per common share attributable to SMP because to do so would have been anti-dilutive for

the periods presented or because they were excluded under the treasury method (in thousands):

The shares listed below were not included in the computation of diluted net earnings per common share attributable to SMP because to do so would have been anti-dilutive

for the periods presented or because they were excluded under the treasury method (in thousands):

Restricted and performance shares

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We have two major reportable operating segments, each of

which focuses on a specific line of automotive parts in the automotive aftermarket with a complementary focus on the heavy duty, industrial equipment and original equipment service markets.

which focuses on a specific line of automotive parts in the automotive aftermarket with a complementary focus on the non-aftermarket, industrial equipment and original equipment service markets.

Our Engine Management Segment manufactures and

remanufactures ignition and emission parts, ignition wires, battery cables, fuel system parts and sensors for vehicle systems.

Our Temperature Control Segment manufactures and remanufactures air conditioning compressors, air conditioning and heating

parts, engine cooling system parts, power window accessories and windshield washer system parts.

Our Temperature Control Segment manufactures and remanufactures air conditioning compressors, air conditioning and

heating parts, engine cooling system parts, power window accessories and windshield washer system parts.

The accounting policies of each segment are the same as those described in the summary of significant accounting policies (see Note 1).

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intersegment sales in our Engine Management and Temperature Control segments.

Other consists of the elimination of intersegment sales from our Engine Management and Temperature Control segments, as well as items pertaining to our Canadian business

unit that does not meet the criteria of a reportable operating segment and our corporate headquarters function.

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other consists of the elimination of intersegment sales from our Engine Management and Temperature Control segments, as well as items pertaining to our Canadian

business unit that does not meet the criteria of a reportable operating segment and our corporate headquarters function.

Reconciliation of segment operating income to net earnings:

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upon the location of the assets.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our three largest individual customers accounted for

approximately 59 % of our consolidated net sales in 2022.

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

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

Net sales from each of the customers were

reported in both our Engine Management and Temperature Control Segments.

The loss of one or more of these customers or, a significant reduction in purchases of our products from any one

of them, such as the decision, announced in December 2020, of a large retail customer to pursue a private brand strategy for its engine management product line, could have a

materially adverse impact on our business, financial condition and results of operations.

The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them could have a material adverse impact on our business,

financial condition and results of operations.

In addition, any consolidation among our key customers may further increase our customer concentration risk.

For the disaggregation of our net sales from customers by geographic area, major product group and major sales channels for each of our segments, see Note 20, “Net Sales.”

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the disaggregation of our net sales from customers by geographic area, major product group and major sales channels for each of our segments, see Note 22, “Net

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

This change in operating segments 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.

Disaggregation of Net Sales

We disaggregate our net sales from customers by geographic area, major product group, and major sales channels for each of our segments, as we believe it best depicts how

the nature, amount, timing and uncertainty of our net sales are affected by economic factors.

We disaggregate our net sales from customers by geographic area, major product group, and major sales channels for each of our segments, as we believe it best depicts

how the nature, amount, timing and uncertainty of our net sales are affected by economic factors.

The following tables provide disaggregation of net sales information for the years ended December 31, 2022, 2021 and 2020 (in thousands):

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Major Sales Channel:

Segment net sales

include intersegment sales in our Engine Management and Temperature Control segments .

sales include intersegment sales in our Engine Management and Temperature Control segments .

Other consists of the elimination of intersegment sales from our Engine

Management and Temperature Control segments as well as sales from our Canadian business unit that does not meet the criteria of a reportable operating segment.

Intersegment wire and cable sales for the year ended December 31, 2021 exceeded

third party sales from our Canadian business unit.

Intersegment wire and cable sales for the years ended December 31, 2022 and

2021 exceeded third party sales from our Canadian business unit.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Geographic Area

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Our sales are substantially denominated in U.S.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Major Product Group

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professional technicians and to “do-it-yourselfers” who perform automotive repairs on their personal vehicles.

In the Original Equipment (“OE”) and Original Equipment Service (“OES”) channel, we sell our products to original equipment manufacturers

who redistribute our products within their distribution network, independent dealerships and service dealer technicians.

In the Specialized Original Equipment (“OE”) and Original Equipment Service (“OES”) channel, we sell our products to original

equipment manufacturers who redistribute our products within their distribution network, independent dealerships and service dealer technicians.

Lastly, in the Export channel, our domestic entities sell to customers outside the United States.

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Total rent expense for the three years ended December 31, 2022 was as follows (in thousands):

In cludes expenses of approximately $ 2 million and $ 2.5 million

for the years ended December 31, 2021 and 2020, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less, which is no t

In cludes expenses of approximately $ 2.7 million and $ 2

million for the years ended December 31, 2022 and 2021, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less, which

is no t material.

For our operating lease minimal rental payments that we are obligated to make, see Note 7, “Leases.”

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Warranty expense for each of the years 2022, 2021 and 2020 were $ 112.5 million, $ 91.9 million and $ 87.1 million, respectively.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table provides the changes in our product warranties:

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Balance, end of period

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Letters of Credit

At December 31, 2022, we had outstanding letters of credit with certain vendors aggregating approximately $ 2.4 million.

These letters of credit are being maintained as security for reimbursements to insurance companies and as security to the landlord of our administrative offices in

Long Island City, New York.

These letters of credit are being maintained as security for reimbursements to insurance companies and as security to the landlord of our administrative offices

in Long Island City, New York.

The contract amount of the letters of credit is a reasonable estimate of their value as the value for each is fixed over the life of the commitment.

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

I n 1986, we acquired a brake business, which we subsequently sold in March 1998 and which is accounted for as

a discontinued operation in the accompanying statement of operations.

When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by the seller of the

acquired brake business.

I n 1986, we acquired a brake business, which we subsequently sold in March 1998 and which is accounted

for as a discontinued operation in the accompanying statement of operations.

When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by the

seller of the acquired brake business.

In accordance with the related purchase agreement, we agreed to assume the liabilities for all new claims filed on or after September 2001.

Our ultimate exposure will depend upon the number of claims filed against us on or

after September 2001, and the amounts paid for settlements, awards of asbestos-related damages, and defense of such claims.

At December 31, 2021, 1,554

cases were outstanding for which we may be responsible for any related liabilities.

Since inception in September 2001 through December 31, 2021, the amounts paid for settled claims and

awards of asbestos-related damages, including interest, were approximately $ 53.8 million.

We do not have insurance coverage for

the indemnity and defense costs associated with the claims we face.

Our ultimate exposure will depend upon the number of claims filed

against us on or after September 2001, and the amounts paid for settlements, awards of asbestos-related damages, and defense of such claims.

At December 31, 2022, approximately 1,530 cases were outstanding for which we may be responsible for any related liabilities.

Since inception in

September 2001 through December 31, 2022, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $ 64.6 million.

We do not have insurance coverage for the indemnity and defense costs associated with the claims we face.

In evaluating our potential asbestos-related liability, we have considered various factors including, among other things, an actuarial study of the asbestos related

liabilities performed by an independent actuarial firm, our settlement amounts and whether there are any co-defendants, the jurisdiction in which lawsuits are filed, and the status and results of such claims.

As is our accounting policy, we consider

the advice of actuarial consultants with experience in assessing asbestos-related liabilities to estimate our potential claim liability;

and perform an actuarial evaluation in the third quarter of each year and whenever events or changes in

circumstances indicate that additional provisions may be necessary.

As is our accounting policy, we

consider the advice of actuarial consultants with experience in assessing asbestos-related liabilities to estimate our potential claim liability;

and perform an actuarial evaluation in the third quarter of each year and whenever events or changes

in circumstances indicate that additional provisions may be necessary.

The methodology used to project asbestos-related liabilities and costs in our actuarial study considered:

(1) historical data available from publicly available studies;

analysis of our recent claims history to estimate likely filing rates into the future;

an analysis of our recent claims history to estimate likely filing rates into the future;

(3) an analysis of our currently pending claims;

(4) an analysis of our settlements and awards of asbestos-related damages to date;

and (5) an analysis of closed

claims with pay ratios and lag patterns in order to develop average future settlement values.

Based on the information contained in the actuarial study and all other available information considered by us, we have concluded that no amount within the

range of settlement payments and awards of asbestos-related damages was more likely than any other and, therefore, in assessing our asbestos liability we compare the low end of the range to our recorded liability to determine if an adjustment is

In accordance with our policy to perform an annual actuarial evaluation in the third quarter of each year, an actuarial study was performed as of August 31, 2021 .

The results of the August 31,

2021 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs and any potential recovery from

insurance carriers, ranging from $ 60.9 million to $ 100.2 million for the period through 2065 .

The change from the updated prior year study, which was in December of 2020, was a $ 2.1 million decrease

for the low end of the range and a $ 1.1 million increase for the high end of the range.

The change in the estimated undiscounted liability

from the updated prior year study at both the low end and high end of the range reflects our actual experience, our historical data and certain assumptions with respect to events that may occur in the future.

and (5) an analysis of

closed claims with pay ratios and lag patterns in order to develop average future settlement values.

Based on the information contained in the actuarial study and all other available information considered by us, we have concluded that no amount

adjustment is required.

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Based upon the results of the August 31, 2021 actuarial study, in September 2021 we increased our asbestos liability to $ 60.9 million , the low end of the range, and recorded an incremental pre-tax provision of $ 5.3 million in earnings (loss) from discontinued operations in the accompanying statement of operations.

legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2021 study, to range from $ 49.4 million to $ 99.3 million for the period through 2065 .

Total operating cash outflows related to discontinued operations, which include settlements, awards of asbestos-related damages and legal costs, net of taxes, were $ 8.8 million , $ 16.4

million and $ 7.6 million for the years ended December 31, 2021, 2020 and 2019 , respectively.

We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future and whenever events or changes in circumstances indicate

that additional provisions may be necessary.

In accordance with our policy to perform an annual actuarial evaluation in the third quarter of each year, an actuarial study was performed as of August 31, 2022 .

T he results of the August 31,

2022 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs, ranging from $ 68.8 million to $ 111.6 million for the period through 2065 .

The change from the prior year study, which was as of August 31, 2021, was a $ 7.9 million increase for the low end of the range

and a $ 11.4 million increase for the high end of the range.

The increase in the estimated undiscounted liability from the prior year

study at both the low end and high end of the range reflects our actual experience, our historical data and certain assumptions with respect to events that may occur in the future.

Based upon the results of the August 31, 2022 actuarial study, in September 2022 we increased our asbestos liability to $ 68.8 million , the low end of the range, and recorded an incremental pre-tax provision of $ 18.5 million in earnings (loss) from discontinued operations in the accompanying

statement of operations.

Future legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2022 study, to

range from $ 53.2 million to $ 105.7 million for the period through 2065 .

Total operating cash outflows related to discontinued operations, which include settlements, awards of asbestos-related damages and legal costs, net of taxes, were $ 12 million , $ 8.8 million and $ 16.4 million for the years ended December 31, 2022, 2021 and 2020 , respectively.

We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future and whenever events or changes in circumstances

indicate that additional provisions may be necessary.

Given the uncertainties associated with projecting such matters into the future and other factors outside our control, we can give no assurance that additional provisions will not be required.

continue to monitor events and changes in circumstances surrounding these potential liabilities in determining whether to perform additional actuarial evaluations and whether additional provisions may be necessary.

At the present time, however, we

do not believe that any additional provisions would be reasonably likely to have a material adverse effect on our liquidity or consolidated financial position.

We will continue to monitor events and changes in circumstances surrounding these potential liabilities in determining whether to perform additional actuarial evaluations and whether additional provisions may be necessary.

At the present time,

however, we do not believe that any additional provisions would be reasonably likely to have a material adverse effect on our liquidity or consolidated financial position.

Other Litigation

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Although these legal claims and legal proceedings are subject to inherent uncertainties, based on our understanding and

evaluation of the relevant facts and circumstances, we believe that the ultimate outcome of these matters will not, either individually or in the aggregate, have a material adverse effect on our business, financial condition or results of

of operations .

We may at any time determine that settling any of these matters is in our best interests, which settlement may include substantial payments.

1 unchanged sentence

currently predict the specific amount of any liability that may ultimately arise with respect to any of these matters, we will record provisions when the liability is considered probable and reasonably estimable.

Significant judgment is required in

both the determination of probability and the determination as to whether an exposure can be reasonably estimated.

Significant judgment is required

in both the determination of probability and the determination as to whether an exposure can be reasonably estimated.

As additional information becomes available, we reassess our potential liability related to these matters.

Such revisions of the

potential liabilities could have a material adverse effect on our business, financial condition or results of operations.

Such revisions of

the potential liabilities could have a material adverse effect on our business, financial condition or results of operations.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures .

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and

reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow

timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule

13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act, as of the end of the period covered by this Report.

This evaluation also included consideration of our internal controls and procedures for the preparation of our financial

statements as required under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were

effective as of the end of the period covered by this Report.

Management’s Report on Internal Control Over Financial Reporting .

Pursuant to Section 404 of the Sarbanes-Oxley Act, as part of this Report we have furnished a report regarding our internal control over financial reporting as of December 31, 2021.

During 2021, we acquired Trumpet Holdings, Inc,

(“Trombetta”) and Stabil Operative Group GmbH (“Stabil”), and have excluded from our assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Trombetta’s and Stabil’s internal control

over financial reporting associated with 13.8% of total assets and 3.5% of total revenues included in the consolidated financial statements of the Company as of and for year ended December 31, 2021.

The report is under the caption “Management’s

Report on Internal Control Over Financial Reporting” in “Item 8.

Financial Statements and Supplementary Data,” which report in included herein.

Attestation Report of Independent Registered Public Accounting Firm .

KPMG LLP, our independent registered public accounting firm, has issued an opinion as to the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

The opinion is under the caption “Report of

Independent Registered Public Accounting Firm−Internal Control Over Financial Reporting” in “Item 8.

Financial Statements and Supplementary Data” for this attestation report, which is included herein.

Changes in Internal Control Over Financial Reporting .

During the quarter ended December 31, 2021 and subsequent to that date, we have not made changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal

control over financial reporting.

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 8. Financial Statements and Supplementary Data