What changed in this filing

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Item 1. Business

2024-02-22 compared with 2023-02-22 · 292 added, 374 removed, 44 unchanged (94% of the section changed)

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

Through organic growth and several recent acquisitions, described

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

We sell our products

primarily to automotive aftermarket retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin American countries.

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

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

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

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

compressors and other climate control parts.

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

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

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

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

Our Engineered Solutions segment will supply

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

Commercial and Light vehicles

Lawn & Garden

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

Our growth strategy is long-term

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

Some of our growth drivers in this segment include:

Developing new customer relationships

Cross-selling opportunities with existing customers

Introducing new products to both new and existing customers

Increasing content per unit

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

electrification as well as those that are powertrain-neutral.

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

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

moved to the new Engineered Solutions operating segment.

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

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

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

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

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

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

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

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

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

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

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

We are a leading manufacturer and distributor of premium replacement parts in the automotive aftermarket and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets.

Our automotive

aftermarket business is comprised of two segments, Vehicle Control and Temperature Control , while our Engineered Solutions

Segment offers a broad array of conventional and future-oriented technologies in markets for commercial and light vehicles, construction, agriculture, power sports, marine, hydraulics and lawn and garden.

We sell our products primarily to

retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin America countries.

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

This operating segment structure better aligns our operations with our strategic focus on diversifying our business, provides greater transparency into our positioning to capture opportunities for growth in the future, and provides clarity

regarding the unique dynamics and margin profiles of the markets served by each segment.

Our Vehicle Control Segment services our core automotive aftermarket customers through its offering of premium replacement parts within the following major

product groups:

Engine Management , which includes components for the ignition, emissions and fuel delivery systems of vehicles utilizing an internal combustion engine.

Product categories include air injection

and induction components, air management valves, regulators and solenoids, exhaust gas recirculation (EGR) components, fuel injectors and related components, fuel valves, ignition coils, connectors and sockets, modules, pumps, relays and

fuses, starting and charging system parts, and vapor and purge components.

Electrical & Safety , which includes components for the electrical and safety systems of vehicles, and are powertrain neutral vehicle technologies.

Product categories include electrical

switches and actuators, chassis and drivetrain sensors such as anti-lock brake and vehicle speed sensors, fluid level sensors, pressure sensors such as tire pressure monitoring, temperature sensors, and sensors for advanced driver

assistance systems (ADAS), along with battery cables, pigtails, sockets and a wide range of electrical wire, terminals, connectors, and tools for servicing a vehicle’s electrical system.

Wire Sets & Other , which includes spark plug wire sets, coil on plug boots and accessories servicing vehicle’s ignition system.

Certain product categories within this group are in secular

decline based upon product life cycle.

Many Vehicle Control systems use on-board computers to monitor inputs from sensing devices located throughout the vehicle.

As the complexity of these systems continues to develop and proliferate, we

expect to benefit from increased demand for our sensors, switches, actuators, valves, solenoids and related parts, which are designed to function with these systems.

We also expect to benefit from government regulations regarding vehicle safety and emissions.

For example, we believe emissions laws and fuel economy regulations have had a positive impact on sales of our ignition, emissions control and fuel

delivery parts since vehicles not meeting emissions inspection standards may require repairs utilizing parts sold by us.

Similarly, as government-mandated safety devices, such as anti-lock braking systems and ADAS, proliferate with new vehicle

production, we anticipate increased replacement opportunities for many of our products such as ABS sensors, TPMS sensors, traction control products and ADAS replacement parts.

Our Temperature Control Segment also services our core automotive aftermarket customers through its offering of premium replacement parts within the following

major product groups:

AC System Components , which includes compressors, air conditioning repair kits, connecting lines, heat exchangers, and expansion devices.

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

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

The change will also better reflect

the impact of our recent acquisitions.

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

Operating Segments as of 2022

Planned Operating Segments in 2023

Engine Management:

Vehicle Control (Aftermarket):

Ignition, Emissions, Fuel & Safety

Ignition, Emissions & Fuel

Wire and Cable

Wire Sets and Other

Electrical & Safety

Temperature Control:

Temperature Control (Aftermarket):

AC System Components

Other Climate Control Parts

Other Thermal Components

Engineered Solutions (non-Aftermarket):

Commercial Vehicle

Light Vehicle

Construction & Agriculture

We believe our Temperature Control Segment is poised to benefit from the broader adoption of more complex air conditioning systems that will provide passenger comfort regardless of the vehicle’s

For example, in addition to cabin comfort, powertrains such as electric vehicles will require cooling systems for the batteries, electronics, motors and other applications.

The Engineered Solutions Segment services our vehicle and equipment manufacturing customers across diverse global end markets, including on-highway and off-highway applications such as commercial and

light vehicles, construction, agriculture, power sports, marine, hydraulics and lawn and garden, through an offering of custom-engineered solutions within the following product categories:

Thermal Management Products , which are designed to control the operating temperature of HVAC, battery and heat exchange systems, such as electrical compressors, fans, motors and pumps.

Sensors , covering applications in speed, position, temperature, pressure, level and particulate matter, among others.

Switches , covering applications in electrical performance, position, temperature, pressure, tilt and fluid levels, among others.

Power Distribution , covering applications in power switching, industrial solenoids, and voltage regulators.

Electrification & Electronics , which includes controller area network (CAN) devices, CAN bus wiring and splitting devices, and electronic controls, transmitters and components.

Injection & Fuel Delivery , covering an extensive array of applications in transportation, such as gasoline, diesel and alternative fuels, such as compressed natural gas, liquefied natural gas,

liquefied petroleum gas, and hydrogen.

Ignition & Emissions , which includes wire, ignition coils and positive crankcase ventilation valves.

Clamping Devices , covering automotive and industrial applications.

Our Business Strategy

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

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

Weather extremes

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

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

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

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

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

Leveraging our manufacturing and distribution capabilities to secure additional business globally

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

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

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

Executing our acquisition strategy

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

In addition to providing access to product technologies suitable to the

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

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

Professional grade products and solutions within our areas of expertise.

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

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

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

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

Connectivity and safety related products, such as

anti-lock brake (ABS)

vehicle speed sensors

tire pressure monitoring

park assist sensors

advanced driver assistance components to meet the needs of our customers

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

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

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

In addition, we have a team dedicated to providing

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

Our Corporate Mission is to be a leading global supplier of parts and services to diverse end markets for the vehicles of yesterday, today and tomorrow, while leveraging our

heritage of integrity and respect for all of our stakeholders.

We sell our products in the automotive aftermarket primarily to retailers and warehouse distributors, who buy directly from us and sell directly to jobber stores, professional technicians and to individual consumers who perform “do-it-yourself”

repairs on their personal vehicles.

We believe that our value proposition is a key competitive advantage in maintaining our position as a strategic partner to our customers and a leader in the automotive aftermarket.

In the automotive aftermarket, our mission is to be the best full-line, full-service supplier of premium Vehicle Control and Temperature Control products.

Our Aftermarket Value Proposition

■ Premium Quality Products

■ Premium Brands

■ Full-Line Coverage

■ Supply Chain Excellence

■ Field Sales Support

■ Marketing Support

■ World-Class Training

■ Basic Manufacturing

Premium Quality Products .

We offer professional grade products intended to fit, form and function to standards that meet or exceed the original equipment (“OE”) product it replaces.

Our products undergo rigorous product qualification, testing our products against

exacting specifications and performance criteria.

In some cases, we have successfully identified and implemented improvements in the durability of our products through the evaluation and analysis of OE product failures in the field.

Premium Brands .

We believe that our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors.

We market and distribute our products under our own brands, such as:

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

In some cases, we have developed our product offering and brand strategies to support our customers’ initiatives to market a tiered product assortment designed to satisfy end-user preferences for quality and value.

We believe that this

alignment makes us an invaluable business partner to our customers.

Full-Line Coverage .

Our product offering is designed to ensure our automotive aftermarket customers have the parts they need to maintain, service and repair the wide range of vehicles in operation.

We offer a full line of critical components for most years, makes,

models and engine sizes.

Our product offering is a reflection of the vehicles in operation, the adoption rates of new vehicle technologies by original equipment manufacturers, the number of miles driven, and the failure rates of parts in service.

We continuously look to expand our coverage through the addition of late-model applications in existing product categories as well as new product categories in response to evolving vehicle technologies, or that otherwise complement our existing

offering and have potential for high growth.

We focus on expanding our product coverage in advanced powertrain technologies, including start and stop technology, cylinder deactivation, variable valve timing, turbochargers, electronic throttle bodies, diesel exhaust emissions control,

gasoline direct injection, active grill shutters;

electrification, such as battery cooling fans, drive battery charging cables and adapters, and electric coolant pumps;

and safety related categories, such as anti-lock brake, vehicle speed sensors,

tire pressure monitoring, park assist sensors and advanced driver assistance components, including blind spot detection sensors, cruise control distance sensors, lane departure sensor cameras and park assist backup cameras.

In December 2023, we offered over 79,000 total stock keeping units (SKUs) to the automotive aftermarket.

Approximately 2,600 of these SKUs were newly introduced in 2023, of which more than half were powertrain neutral vehicle technologies, such

as cruise control distance sensors, park assist cameras and electronic parking brake actuators.

Our Vehicle Control offering includes more than seventy product categories for hybrid electric vehicles.

We are committed to strategically expanding our product offerings for electric and hybrid vehicles

to service this important segment.

Supply Chain Excellence .

Product availability, including order turn-around time and fill rates, are critical measures of performance in the automotive aftermarket, and we partner with our suppliers and customers, to implement focused initiatives designed to achieve high

levels of performance against these key metrics.

For example, we manage forecasting responsibilities for our major retail customers, and provide twelve month projections to our suppliers to assist in their raw material and capacity planning to

ensure continuity of supply.

In 2023, we announced plans to open a new distribution center in Shawnee, Kansas.

The new facility, which is expected to have a phased opening beginning in 2024 and be fully operational in early 2025, will expand our total distribution network square footage to meet our growing demands in the automotive

aftermarket, and integrate state-of-the-art technologies to deliver improved logistics capabilities, operational efficiencies, as well as enhanced employee, customer and supplier experiences.

The new Shawnee, Kansas distribution facility will also

bring our Vehicle Control products geographically closer to our Midwest and West Coast customers, reducing transportation lead-time, and will ultimately provide disaster recovery capabilities for automotive

aftermarket products across our divisions.

Field Sales Support .

We believe our technically-trained salesforce is a key competitive advantage.

Our field sales support focuses on educating parts professionals ( e.g.

, customer team members) and professional technicians

in highly technical product categories.

Our customers depend on our sales personnel as a reliable source for technical information and to assist with sales to their customers ( e.g.

, jobber stores,

professional technicians and individual consumers performing “do-it-yourself” repairs).

We direct a significant portion of our sales efforts to our customers’ customers to generate demand for our products.

The structure of our salesforce

facilitates these efforts, enabling us to implement our sales and marketing programs uniformly throughout the distribution channel.

Marketing Support .

We support our customers with superior value-added services such as data-driven category management based on vehicles in operation, sophisticated parts catalogs, available online and through our mobile application, and technical support,

including selection, assortment and application support for all of our products.

We also grant our customers royalty-free licenses to use certain intellectual property rights to advertise, market and sell our products.

The licenses primarily

cover vehicle application data, which is used to identify the parts necessary to service any particular vehicle make, model, year and/or engine size, product information data, including product interchanges, part numbers, attributes, high

resolution images and videos, dimensions, specifications and other technical descriptions of parts and components.

World-Class Training .

We generate demand for our products through our technical training program, which offers training seminars to professional automotive technicians.

Our training program is accredited by the National Institute for Automotive Service Excellence

(ASE) Training Managers Council.

Our seminars are taught by ASE certified instructors, and are available in-person and online through webinars and on-demand seminars.

Our seminars cover approximately 150 different topics, offered in both English

Through our training program, we typically teach approximately 60,000 technicians annually how to diagnose and repair vehicles equipped with complex systems related to our products, and we have approximately 16,000 technicians and

7,000 of our customers’ store employees and sales team members who are registered to participate in such sessions through our online platform.

Basic Manufacturing .

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

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

sale and the components used in their assembly.

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

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

and the components used in their assembly.

We believe this level of vertical integration, in combination with our manufacturing footprint in low cost regions, is a key competitive advantage in terms of the quality, cost and availability of our

Examples of vertically integrated processes:

4 unchanged sentences

➢ wire extrusion

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

diesel injectors and diesel pumps

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

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

➢ teardown, diagnostics and rebuilding of remanufactured air conditioning compressors, diesel injectors and diesel pumps

As of December 31, 2023, all of our principal manufacturing facilities maintained quality management systems that were ISO 9001 and/or TS 16949 certified, and ten of our principal manufacturing and distribution facilities maintained

environmental management systems that were ISO 14001 certified.

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

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

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

Our Products & Services

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

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

Engine Management Segment

Our Engine Management Segment manufactures and distributes a full line of critical components for most years, makes and models of vehicles on the road, including new technologies.

Key product categories within our engine management portfolio

(i) ignition, such as electronic ignition control modules, camshaft and crankshaft position sensors, ignition wires and coils;

(ii) electrical, such as switches and relays;

(iii) emissions, such as exhaust gas recirculation valves,

pressure and temperature sensors and variable valve timing (VVT) components;

(iv) fuel, such as mass airflow sensors, fuel pressure sensors, electronic throttle bodies and fuel injectors, including diesel injectors and pumps (new and

remanufactured);

and (v) safety-related systems, such as various sensors including anti-lock brake (ABS), vehicle speed, tire pressure monitoring (TPMS) and park assist sensors.

We continuously look to expand our product offering.

Recently, we have done so by adding late-model coverage for existing product categories, and new product categories in response to new and evolving vehicle technologies, including diesel

control modules, pumps and components, turbochargers, evaporation emission control system components, exhaust gas temperature sensors, active grill shutters, battery current sensors, and Advanced Driver Assistance Systems (ADAS) components,

including blind spot detection sensors, cruise control distance sensors, lane departure sensor cameras and park assist backup cameras.

For example, our offering includes more than seventy product categories for one of the first mass-produced

hybrid electric vehicles (HEVs).

As more HEVs enter the aftermarket, we intend to expand our product offering to service this important segment.

Ignition, Emission Control, Fuel & Safety Related System Products .

Replacement parts for ignition, emission, fuel and safety related systems accounted for $824.7 million, or 60%, of our

consolidated net sales in 2022, $786.5 million, or 61%, of our consolidated net sales in 2021, and $691.7 million, or 61%, of our consolidated net sales in 2020.

As the use and complexity of vehicle systems continue to develop and proliferate, we expect to identify and benefit from new sales opportunities.

All new vehicles are factory‑equipped with numerous electronic control modules designed to

monitor and control the internal combustion process and the emissions, transmission, safety and comfort systems of the vehicle.

Newer automotive systems include Advanced Driver Assistance Systems and Collision Avoidance Systems to alert the

driver to potential problems, or to avoid collisions by implementing safeguards.

Many of these systems use on-board computers to monitor inputs from sensing devices located throughout the vehicle.

Our sales of sensors, switches, actuators,

valves, solenoids and related parts have increased as automobile manufacturers continue to equip their cars with these more complex engine management systems.

New sales opportunities have also arisen in the United States as a result of government regulations regarding safety and emissions.

Legally, automobiles must now comply with emissions standards from the time they were manufactured and, in

most states, until the last day they are in use.

Emissions laws and fuel economy regulations have had a positive impact on sales of our ignition, emissions control and fuel delivery parts since vehicles failing these laws may require repairs

utilizing parts sold by us.

Similarly, as government-mandated safety devices, such as anti-lock braking systems and air bags mature, requiring servicing and repair, we anticipate increased sales opportunities for many of our products such as ABS

sensors, TPMS sensors and traction control products.

Wire & Cable Products.

Wire and cable parts accounted for $150.6 million, or 11%, of our consolidated net sales in 2022, $151.4 million, or 12%, of our consolidated net sales in 2021, and $144

million, or 13%, of our consolidated net sales in 2020.

These products include spark plug wire sets, battery cables, pigtails, sockets and a wide range of electrical wire, terminals, connectors and tools for servicing an automobile’s electrical

Temperature Control Segment

Our Temperature Control Segment manufactures and distributes a full line of critical components for the temperature control (air conditioning and heating) systems, engine cooling systems, power window accessories and windshield washer systems

of motor vehicles.

Key product categories within our temperature control portfolio include:

air conditioning compressors (new and remanufactured), air conditioning repair kits, clutch assemblies, blower and radiator fan motors (brushless and

brushed), filter dryers, evaporators, accumulators, actuators, hose assemblies, thermal expansion devices, heater valves, heater cores, A/C service tools and chemicals, fan assemblies, fan clutches, oil coolers, window lift motors, window

regulators and assemblies, and windshield washer pumps.

We continuously look to improve our cost position through strategic transactions with manufacturers in low cost regions.

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

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

hose assemblies, and switches.

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

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

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

The joint ventures also provide complementary

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

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

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

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

Compressors .

Compressors accounted for $222.5 million, or 16%, of our consolidated net sales in 2022, $206.7 million, or 16%, of our consolidated net sales in 2021, and $163.1 million, or 14%, of our

consolidated net sales in 2020.

Included in consolidated net sales for the compressor product line is the revenue generated from the sale of kits.

Other Climate Control Parts .

Other climate control parts accounted for $159.8 million, or 12%, of our consolidated net sales in 2022, $141.7 million, or 11%, of our consolidated net sales in 2021, and

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

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

We market and distribute our products under

our own brands, such as:

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

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

We believe that this alignment makes

us an invaluable business partner to our customers.

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

Our Engineered Solutions Value Proposition

We seek to leverage our extensive portfolio of adaptable products and strategically positioned global network of resources to deliver custom-engineered solutions for vehicle

control and thermal management categories to the diversified end markets we supply.

Our Engineered Solutions products are sold primarily to original equipment manufacturers and their tier suppliers, system integrators, and original equipment service part operations.

Our customers use

our products in serial production and as service and replacement parts.

We believe our global network of resources, including our engineering capabilities, advanced quality systems, manufacturing, distribution and technical sales expertise, combined with our customizable solutions for vehicle control and thermal

management categories, is a key competitive advantage.

Our focus on vehicle control and thermal management categories leverages the legacy and leadership position of our automotive aftermarket business to provide a platform for future growth in

diverse non-aftermarket end markets.

We drive growth in this segment by developing new customer relationships, cross-selling to existing customers, introducing new products to new and existing customers, and increasing content per unit.

growth strategy is long-term, and we do not expect growth to be linear given the lengthy nature of design engineering and validation and the period of time between the awarding of new business and the start of production, often which occurs 1-2

years after business is awarded.

We believe our automotive aftermarket business benefits from our Engineered Solutions business through accelerated future product development;

systems, processes and quality enhancements;

the technical

insights of its original equipment customers;

its global footprint;

and synergistic mergers and acquisitions.

We distribute our Engineered Solutions products under the following trade names:

Strategic Acquisitions

We selectively pursue strategic acquisitions that strengthen our position in the markets we supply or that diversify our business in target markets or geographies.

Among other considerations, we seek acquisitions that align with our core

competencies;

enhance our existing design, engineering and manufacturing capabilities;

and vertically integrate key technologies, products and processes.

For information on recent acquisitions and investments, see Note 2 “Business Acquisitions and Investments” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

Industry Trends

The automotive aftermarket is a mature industry that tends to be influenced by trends such as the number of vehicles on the road, the average age of vehicles on the road, and the total number of miles driven per year.

Weather extremes like

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

In the diverse non-aftermarket end markets we supply, such as commercial and light vehicles, construction, agriculture, power sports and others, other economic factors such as the level of new vehicle sales and production rates, which more

recently have been impacted by disruptions in the global supply chain and labor, tend to have a more direct impact.

Our Customers

We sell our products primarily to:

Automotive aftermarket retailers , such as O’Reilly Automotive, Inc.

(“O’Reilly”), AutoZone, Inc.

(“AutoZone”), and Canadian Tire Corporation, Limited.

Automotive aftermarket distributors, including warehouse distributors and program distribution groups , such as Genuine Parts Co.

and National Automotive Parts Association (“NAPA”), Auto Value

and All Pro/Bumper to Bumper (Aftermarket Auto Parts Alliance, Inc.), Automotive Distribution Network LLC, The National Pronto Association (“Pronto”), Federated Auto Parts Distributors, Inc.

(“Federated”), Pronto and Federated’s

affiliate, the Automotive Parts Services Group or The Group, and Icahn Automotive Group LLC (doing business as Pep Boys, Auto Plus, AAMCO and Precision Tune Auto Care).

Original equipment manufacturers and original equipment service part operations , such as General Motors Co., Ford Motor Co., Woodward, Inc., Deere & Company, Caterpillar Inc., Daimler Truck

AG, Case/New Holland, Eberspacher, Mobile Climate Control, Volvo/Mack Truck, and Harley.

In the automotive aftermarket, our customers are many of the largest national and regional retailers and distributors, such as:

Advance Auto Parts;

Auto Value and Bumper to Bumper (Aftermarket Auto Parts Alliance);

Automotive Distribution

Canadian Tire;

Federated Auto Parts;

Genuine Parts Company and National Automotive Parts Association;

O’Reilly Auto Parts;

The Automotive Parts Services Group or The Group;

The National Pronto Association;

and Uni-Select.

Engineered Solutions customers are many of the largest original equipment manufacturers and their tier suppliers, system integrators, and original equipment service part operations, such as:

Daimler Truck;

General Motors;

Harley-Davidson;

Mobile Climate Control;

Volvo/Mack Truck;

and Woodward.

Our three largest individual customers accounted for approximately 59% of our consolidated net sales in 2023.

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

Net sales from

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

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

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

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

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

domestic and import vehicles on the road today.

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

We believe we differentiate ourselves from our

competitors primarily through:

a value‑added, knowledgeable sales force;

continuous product development, engineering & technical advancement;

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

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

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

sophisticated parts cataloging systems, including catalogs available online through our website and our mobile application;

inventory levels and responsive logistical systems sufficient to meet the critical delivery requirements of customers;

breadth of manufacturing capabilities;

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

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

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

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

These discounts, allowances and incentives are a common practice

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

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

In the Engine Management Segment, we compete with:

ACDelco, Aptiv Plc, Denso Corporation, Continental AG, Hitachi, Ltd., Motorcraft, Robert Bosch GmbH, Visteon Corporation, NGK Spark Plug Co., Ltd., Dorman Products, Inc.

and several privately-owned companies primarily importing products from

In the Temperature Control Segment, we compete with:

ACDelco, MAHLE GmbH, Denso Corporation, Motorcraft, Sanden International (U.S.A.), Inc., Continental AG, Dorman Products, Inc., and several privately-owned companies.

Our business operates in highly competitive markets, and we face substantial competition in all markets that we serve.

In addition, in the aftermarket, we face competition from automobile manufacturers who supply many of the replacement parts

sold by us, although these manufacturers generally supply parts only for cars they sell through OE dealerships.

Sales and Distribution

In the traditional aftermarket channel, we sell our products to warehouse distributors and retailers.

Our customers buy directly from us and sell directly to jobber stores, professional technicians and to “do-it-yourselfers” who perform

automotive repairs on their personal vehicles.

In recent years, warehouse distributors have consolidated with other distributors, and an increasing number of distributors own their jobber stores or sell down channel to professional technicians.

Retailers are also consolidating with other retailers and have begun to increase their efforts to sell to professional technicians adding additional competition in the “do-it-for-me,” or the professional technician segment of our industry.

automotive parts and systems become more complex, “do-it-yourselfers” are less likely to service their own vehicles and may become more reliant on professional technicians.

In the heavy duty aftermarket, we sell our products to recognized distributors who buy directly from us and sell directly to fleet operators and repair facilities for use in the repair and maintenance of medium to heavy duty vehicles.

sell our products to the service parts divisions of heavy duty OEMs for distribution into the independent heavy duty aftermarket.

In the original equipment market we sell our products to manufacturers of automotive, heavy duty truck, construction, agriculture, alternative energy, lawn/garden and powersports/marine vehicles and equipment, as well as their tier suppliers

and system integrators.

We also sell and support the service part divisions of each of our customers.

We sell our products primarily in the United States, with additional sales in Canada, Europe, Asia, Mexico and other Latin American countries.

Our sales are substantially denominated in U.S.

For information on revenues and long-lived assets by geographic area, see Note 21 “Industry Segment and Geographic Data” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

Our customers have come to depend on our sales personnel as a reliable source for technical information and to assist with sales to their customers ( e.g.

, jobber stores and professional technicians).

In this manner, we direct a significant portion of our sales efforts to our customers’ customers to generate demand for our products, and we believe that the structure of our sales force facilitates these efforts by enabling us to implement our

sales and marketing programs uniformly throughout the distribution channel.

Another way we generate demand for our products is through our training program, which offers training seminars to professional automotive technicians.

Our training program is accredited by the National Institute for Automotive Service

Excellence (ASE) Training Managers Council.

Our seminars are taught by ASE certified instructors in real time either in-person or by webinars online and feature more than 30 different topics.

We also offer on-demand training webinars online on

What changed 10-K

Item 1. Business