What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-22 · 288 added, 198 removed, 274 unchanged (64% of the section changed)

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Net earnings per common share

Consolidated net sales for 2022 were $1,371.8 million, an increase of $73 million, or 5.6% compared to net sales of $1,298.8 million in 2021, and an increase of $170.2 million, or 15.1%, compared to net sales of $1,128.6 million in 2020.

Consolidated net sales increased in both our Engine Management and Temperature Control Segments.

The increase in net sales in 2022 reflects the favorable impact of multiple factors including:

the price increases in both our segments, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs,

incremental net sales in our Engine Management Segment from our soot sensor, Trombetta and Stabil acquisitions, and

continued strong customer demand in both our segments, and in particular in our Temperature Control Segment where the elevated customer demand we saw in 2021 held firm in 2022 fueled by record heat across the country and the

replenishment of customer inventory levels after very warm summer conditions in 2021.

Gross margins as a percentage of net sales in 2022 was 27.9% as compared to 29% in 2021 and 29.8% in 2020.

Although the gross margin percentage decreased in 2022, gross margin dollars increased in 2022 to $382.5 million compared to $376.9

million in 2021 and $336.7 in 2020.

The gross margin decrease as a percentage of sales in 2022 reflects the impact of lower fixed cost absorption due to lower and more normalized production, inflationary cost increases in raw materials, labor

and transportation, which were somewhat offset by increased pricing, the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower gross margins but comparable

operating margin, and higher freight and related expenses resulting from higher inventory levels.

While we anticipate continued margin pressure resulting from inflationary cost increases, we believe that our annual cost initiatives and our

ability to pass through higher prices to our customers, will help to mitigate the impact of the inflationary increases on our margins.

Operating margin as a percentage of net sales in 2022 was 7.6% as compared to 9.9% in 2021 and 9.6% in 2020.

Included in our operating margin were selling, general and administrative expenses (“SG&A”) of $276.6 million, or 20.2% of net

sales in 2022, $247.5 million, or 19.1% of net sales in 2021, and $224.7 million, or 19.9% of net sales in 2020.

The higher SG&A expenses in 2022 is principally due to the impact of (1) higher interest rate related costs of $20.6 million

incurred in our supply chain financing arrangements, (2) the impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from one of our customers that filed a petition for bankruptcy in January 2023 to

our estimated recovery amount, (3) incremental expenses of $7.2 million from our soot sensor, Trombetta and Stabil acquisitions, including amortization of intangible assets acquired, and (4) inflationary cost increases resulting in higher

distribution and freight costs.

SG&A expenses in 2022 were favorably impacted by the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower SG&A

expenses as a percentage of sales.

Overall, our core automotive aftermarket business demand remains strong, and we continue to make major strides into new complementary markets with upside potential.

New $500 Million Credit Facility

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

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 (the “revolving facility”).

Concurrently with our entry into the Credit Agreement, we 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 to manage exposure to interest rate changes.

The interest rate swap agreement matures in

Borrowings under the Credit Agreement were used to repay all outstanding borrowings under the existing 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.

Credit Agreement matures on June 1, 2027.

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

Consolidated net sales for 2023 were $1,358.3 million, a decrease of $13.5 million, or 1% compared to net sales of $1,371.8 million in 2022;

while consolidated net sales for 2022 increased $73 million, or 5.6%, compared to net sales of

$1,298.8 million in 2021.

Consolidated net sales decreased in our Vehicle Control and Temperature Control operating segments, while net sales in our Engineered Solutions operating segment increased when compared to the comparable period in the

Our net sales performance in 2023 reflects the impact of multiple factors including:

lower sales in our Vehicle Control operating segment reflecting the impact of lower sales to a customer that filed for bankruptcy in the first quarter, as well as the negative impact of lower customer pipeline orders and softer fourth

quarter sales,

lower sales in our Temperature Control operating segment reflecting the impact of a slow start to the season caused by a rainy spring and cool early summer temperatures across key markets.

Although customer demand and net sales

increased significantly in the third quarter of 2023 as summer temperatures increased, the strong third quarter 2023 net sales were not enough to offset the slow start to the season, and

strong demand and new business wins in our Engineered Solutions operating segment with continued optimism about the long-term growth potential of the complementary markets served in this newly created segment.

Gross margins as a percentage of net sales in 2023 was 28.6% as compared to 27.9% in 2022.

The gross margin percentages in 2023 increased year-over-year in each of our Vehicle Control, Temperature Control and Engineered Solutions operating

Overall, the gross margin increase as a percentage of sales in 2023 reflects the positive impact of increased pricing, improved operating performance, and the favorable customer sales mix in Engineered Solutions, which more than offset

ongoing inflationary increases in certain raw materials, labor and transportation costs, as well as the lower fixed cost absorption due to lower production levels than those achieved in 2022 as we worked down inventory levels, and the weakening

dollar on our international operations.

While we anticipate continued margin pressure resulting from inflationary headwinds, we believe that our annual cost savings initiatives coupled with our ability to pass through higher prices

to our customers should help to offset much of this impact to our gross margins.

Operating margin as a percentage of net sales in 2023 was 6.8% as compared to 7.6% in 2022.

Included in our operating margin were selling, general and administrative expenses (“SG&A”) of $293.6 million, or 21.6% of net sales in 2023,

$276.6 million, or 20.2% of net sales in 2022, and $247.5 million, or 19.1% of net sales in 2021.

The higher SG&A expenses in 2023 is principally due to the impact of (1) higher interest rate related costs of $14 million incurred in our

supply chain financing arrangements and (2) higher distribution costs, all of which more than offset the positive 2023 comparative impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from a

customer that filed for bankruptcy in the first quarter of 2023 to our estimated recoverable amount.

Excluding the impact of the incremental interest rate costs incurred in our supply chain financing arrangements, SG&A expenses in the year

ended December 31, 2023 were 20.6% of consolidated net sales, just slightly higher than the percentage in the comparable prior year period.

Overall, our core automotive aftermarket business remains strong, and we continue to be optimistic about the long-term growth potential of the complementary markets served in our Engineered Solutions operating segment.

New Distribution Facility in Shawnee, Kansas

In May 2023, we signed a lease for a new distribution facility in Shawnee, Kansas with a lease commencement date of July 1, 2023.

The new facility will expand our total distribution network square footage to meet our growing demands in the

automotive aftermarket industry.

The new 575,000 square foot facility will replace our current 363,000 square foot facility in Edwardsville, Kansas, 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 facility is located just five miles away from our Edwardsville facility, enabling us to retain our existing workforce avoiding the additional

costs of hiring and training.

The facility will have a phased opening beginning in 2024 and be fully operational in early 2025.

We will incur additional costs in 2023 and 2024 during the phase-in period while we operate the two facilities.

Impact of Russia’s Invasion of the Ukraine

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In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any

potential adverse impacts on our business, including implementing cost savings initiatives and the pass through of higher costs to our customers in the form of price increases, and increasing inventory levels to minimize the obvious disruptions

potential adverse impacts on our business, including implementing cost savings initiatives and the pass through of higher costs to our customers in the form of price increases, and maintaining inventory at levels to minimize potential disruptions

from out-of-stock raw materials and components to ensure higher fill rates with our customers.

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assurances that unforeseen future events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have an adverse effect on our business, financial condition and results of

Environmental, Social, & Governance (“ESG”)

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

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

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

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

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

our attention to diversity, equity and inclusion,

employee development, retention, and health and safety;

and our community engagement initiatives, to name a few.

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

generation of waste, increasing our recycling efforts and reducing our greenhouse gas emissions (“GHG”), with the ambition of achieving net-zero GHG emissions by 2050.

With each year, we intend to further our commitment to improving our

environmental stewardship and finding ways to give back to our communities.

Additional information on our ESG initiatives can be found under the heading, “Environmental, Social and Governance (ESG) and Human Capital,” in Part I, Item 1 of this

Report, and on our corporate website at ir.smpcorp.com under “Environmental & Social Responsibility” and at smpcares.smpcorp.com.

Information on our

corporate websites regarding our ESG initiatives are referenced for general information only and are not incorporated by reference in this Report.

Comparison of Results of Operations For Fiscal Years 2023 and 2022

Consolidated net sales for 2023 were $1,358.3 million, a decrease of $13.5 million, or 1%, compared to $1,371.8 million in the same

period of 2022, with the majority of our net sales to customers located in the United States.

Consolidated net sales decreased in our Vehicle Control and Temperature Control operating segments, while net sales in our Engineered Solutions

operating segment increased when compared to the comparable period in the prior year.

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

Year Ended December 31,

Vehicle Control

Engine Management (Ignition, Emissions and Fuel Delivery)

Electrical and Safety

Wire Sets and Other

Total Vehicle Control

Temperature Control

AC System Components

Other Thermal Components

Total Temperature Control

Engineered Solutions

Commercial Vehicle

Construction/Agriculture

Light Vehicle

Total Engineered Solutions

Vehicle Control’s net sales for the year ended December 31, 2023 decreased $12.7 million, or 1.7%, to $737.9 million compared to $750.6 million in the same period of 2022.

The decrease in net sales in our Vehicle Control operating segment

reflects the impact of lower sales to a customer that filed for bankruptcy in the first quarter of 2023, as well as the negative impact of lower customer pipeline orders in 2023 and softer fourth quarter sales.

Temperature Control’s net sales for the year ended December 31, 2023 decreased $13.4 million, or 3.8%, to $337.8 million compared to $351.2 million in the same period of 2022.

The lower year-over-year Temperature Control net sales reflects

the impact of a slow start to the season caused by a rainy spring and cool early summer temperatures across key markets which negatively impacted first and second quarter 2023 net sales.

After the slow start to the season, demand increased

significantly in the third quarter of 2023 as summer temperatures increased.

The result was strong third quarter 2023 net sales, which was not enough to offset the slow start to the season.

Demand for our Temperature Control products may vary

significantly with summer weather conditions and customer inventory levels.

Engineered Solutions’ net sales for the year ended December 31, 2023 increased $12.6 million, or 4.7%, to $282.6 million compared to $270 million in the same period of 2022.

Overall, net sales in our Engineered Solutions operating segment

showed year-over-year improvement driven by strong demand and new business wins, and we continue to be optimistic about the long-term growth potential of the complementary markets served in our newly created Engineered Solutions operating

Gross Margins.

Gross margins, as a percentage of consolidated net sales, increased to 28.6% for 2023, compared to 27.9% for 2022.

The following table summarizes gross margins by

segment for the years ended December 31, 2023 and 2022, respectively (in thousands):

Gross margins

Gross margin percentage

Gross margins

Gross margin percentage

Compared to 2022, gross margins at Vehicle Control increased 1.4 percentage points from 30.9% to 32.3%.

Gross margins at Temperature Control increased 0.2 percentage points from 28.2% to 28.4%, and gross margins at Engineered Solutions

increased 0.4 percentage points from 19% to 19.4%.

The gross margin percentage increase in our Vehicle Control operating segment reflects the positive impact of increased pricing and operating performance, which more than offset increases in material and labor costs, as well as the lower fixed

cost absorption due to lower production levels than those achieved in the same period in 2022.

The gross margin percentage increase in our Temperature Control operating segment reflects the impact increased pricing and operating performance;

while the gross margin percentage increase at our Engineered Solutions operating segment is driven primarily by favorable customer sales mix and increased pricing.

All of our operating segments were negatively impacted by the ongoing

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

While we anticipate continued margin pressure resulting from inflationary headwinds, we believe that our annual cost savings initiatives coupled with our

ability to pass through higher prices to our customers should help to offset much of this impact to our gross margins.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses (“SG&A”) increased to $293.6 million, or 21.6% of consolidated net sales in 2023, as

compared to $276.6 million, or 20.2% of consolidated net sales in 2022.

The $17 million increase in SG&A expenses as compared to 2022 is principally due to the impact of (1) higher interest related costs of $14 million incurred in our supply

chain financing arrangements and (2) higher distribution cost, all of which more than offset the positive 2023 comparative impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from one of our

customers that filed a petition for bankruptcy in January 2023 to our estimated recovery amount.

Excluding the impact of the incremental interest rate costs incurred in our supply chain financing arrangements, SG&A expenses in 2023 were

20.6% of consolidated net sales, slightly higher than the percentage in the comparable prior year period.

Restructuring and Integration Expenses.

Restructuring and integration expenses were $2.6 million in 2023 compared to restructuring and integration expenses of $1.9 million in 2022.

Restructuring and integration expenses in 2023 consists of (1) the $2.5 million of costs incurred in our 2022 cost reduction initiative, and (2) the $0.1 million increase in environmental cleanup costs for ongoing remediation in connection with

the prior closure of our manufacturing operations at our Long Island City, New York location;

while 2022 expenses consists of (1) costs of $1.5 million incurred in our 2022 cost reduction initiative, (2) relocation expenses of $0.2 million of

certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland, and (3) the $0.2 million increase in environmental cleanup costs for ongoing remediation in

connection with the prior closure of our manufacturing operations at our Long Island City, New York location.

During the fourth quarter of 2022, to further our ongoing efforts to improve operating efficiencies and reduce costs, we announced plans for a reduction in our sales force, and initiated plans to relocate certain product lines from our

Independence, Kansas manufacturing facility and from our St.

Thomas, Canada manufacturing facility to our manufacturing facilities in Reynosa, Mexico.

Total restructuring and integration expenses related to the initiative were $2.5 million and

$1.5 million 2023 and 2022, respectively.

Expenses related to the initiative for the year ended December 31, 2023 consist of (1) expenses of approximately $0.7 million related to a further sales force reduction, (2) expenses of $1.3 million of

employee severance and bonuses related to our product line relocations, and (3) expenses of $0.5 million related to the relocation of machinery and equipment to our manufacturing facilities in Reynosa, Mexico.

Expenses related to the initiative

for the year ended December 31, 2022 consist of (1) expenses of $0.9 million related to our sales force reduction, and (2) expenses of $0.6 million consisting of employee severance related to our product line relocations.

restructuring costs related to the initiative, and expected to be incurred, are approximately $0.5 million.

We anticipate that the Cost Reduction Initiative will be completed by the end of the second quarter of 2024.

Operating Income.

Operating income was $92.7 million, or 6.8%, of consolidated net sales in 2023, compared to $104.1 million, or 7.6%, of consolidated net sales in 2022.

year-over-year decrease in operating income of $11.4 million is the result of lower net sales, higher SG&A expenses, consisting primarily of higher interest rate related costs of $14 million incurred in our supply chain financing

arrangements, and higher restructuring and integration expenses offset, in part, by higher gross margins as a percentage of sales.

Other Non-Operating Income (Expense), Net.

Other non-operating income, net was $2.3 million in 2023, compared to $4.8 million in 2022.

The year-over-year decrease in other

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

The decline in equity income from our joint ventures is due,

in part, to lower production levels related to inventory reduction plans, and the impact of our acquisition of an additional 15% equity interest in Gwo Yng.

Commencing in July 2023, on the date of our 15% increase in equity interest, the

financial results of Gwo Yng were no longer accounted for under the equity method of accounting.

Instead, Gwo Yng’s financial results were reported on a consolidated basis, resulting in lower joint venture equity income.

Interest Expense.

Interest expense increased to $13.3 million in 2023, compared to $10.6 million in 2022.

The year-over-year increase in interest expense reflects the impact of

higher year-over-year average interest rates on our credit facilities when compared to 2022, which more than offset the impact of lower average outstanding balances.

Income Tax Provision .

The income tax provision for 2023 was $18.4 million at an effective tax rate of 22.5%, compared to $25.2 million at an

effective tax rate of 25.6% in 2022.

The lower effective tax rate in 2023 compared to 2022 reflects the impact of lower state and local income taxes due to changes in state laws, rates and filing methodologies, changes in foreign and domestic

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

Loss From Discontinued Operations.

Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2023 and

2022, as well as other information available and considered by us, and legal expenses and other costs associated with our asbestos-related liability.

During the years ended December 31, 2023 and 2022, we recorded a net loss of $29 million and

$17.7 million from discontinued operations, respectively.

The loss from discontinued operations for the year ended December 31, 2023 and 2022 includes (1) a $23.8 million and $18.5 million pre-tax provision, respectively, to increase our

indemnity liability in line with the 2023 and 2022 actuarial studies;

(2) legal and other miscellaneous expenses, before taxes, of $4.9 million and $5.4 million for 2023 and 2022, respectively, and (3) a $10.5 million pre-tax provision in 2023

related to a breach of contract legal proceeding.

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

relating to alleged exposure to asbestos containing products.

Net Earnings Attributable to Noncontrolling Interest.

Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in our 70% owned joint

venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”) and, in our 80% ownership in Gwo Yng, commencing in July 2023 upon the completion of our step acquisition.

Net earnings attributable to the noncontrolling

interest were $204,000 and $84,000 during the years ended December 31, 2023 and 2022, respectively.

For additional information on the Gwo Yng step acquisition, see Note 2, “Business Acquisitions and Investments,” in the notes to our consolidated

financial statements (unaudited).

Comparison of Results of Operations For Fiscal Years 2022 and 2021

Consolidated net sales for 2022 were $1,371.8 million, an increase of $73 million, or 5.6%, compared to $1,298.8 million in the same

period of 2022, with the majority of our net sales to customers located in the United States.

Consolidated net sales increased in both our Engine Management and Temperature Control Segments.

Consolidated net sales increased across all of our operating segments, when compared to the comparable period in the prior year.

The following table summarizes consolidated net sales by segment and by major product group within each segment for the years ended December 31, 2022 and 2021 (in thousands):

Year Ended December 31,

Engine Management:

Ignition, Emission Control, Fuel & Safety Related System Products

Wire and Cable

Total Engine Management

Vehicle Control

Engine Management (Ignition, Emissions and Fuel Delivery)

Electrical and Safety

Wire Sets and Other

Total Vehicle Control

Temperature Control

Other Climate Control Parts

AC System Components

Other Thermal Components

Total Temperature Control

Engine Management’s net sales increased $37.3 million, or 4%, to $975.2 million for the year ended December 31, 2022.

Net sales in ignition, emission control, fuel and safety related system products for the year ended December 31, 2022 were

$824.7 million, an increase of $38.2 million, or 4.9%, compared to $786.5 million in the same period of 2021.

Net sales in the wire and cable product group for the year ended December 31, 2022 were $150.6 million, an decrease of $0.8 million, or

0.5%, compared to $151.4 million in the same period of 2021.

Engine Management’s increase in net sales for the year ended December 31, 2022 compared to the same period in 2021, reflects the impact of the positive contribution of incremental

sales from our soot sensor, Trombetta and Stabil acquisitions, strong customer demand, and price increases implemented in 2022, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs.

Incremental net sales from our soot sensor, Trombetta and Stabil acquisitions of $44.6 million were included in the net sales of the ignition, emission control, fuel and safety related system product group for the year ended December 31,

Compared to the year ended December 31, 2021, excluding the incremental net sales from the acquisitions, net sales in the ignition, emission control, fuel and safety related product group decreased $6.4 million, or 0.8%, and Engine

Management net sales decreased $7.3 million, or 0.8%.

Temperature Control’s net sales increased $33.9 million, or 9.7%, to $382.3 million for the year ended December 31, 2022.

Net sales in the compressors product group for the year ended December 31, 2022 were $222.5 million, an increase of

$15.8 million, or 7.6%, compared to $206.7 million in the same period of 2021.

Net sales in the other climate control parts group for the year ended December 31, 2022 were $159.8 million, an increase of $18.1 million, or 12.7%, compared to

$141.7 million for the year ended December 31, 2021.

Temperature Control’s increase in net sales for the year ended December 31, 2022, when compared to the same period in 2021, reflects the impact of continued strong customer demand, with the

elevated demand we saw in 2021 holding firm, fueled by record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions in 2021, and the impact of price increases, which were implemented

to pass through inflationary increases in raw materials, distribution and labor costs.

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

Engineered Solutions

Commercial Vehicle

Construction/Agriculture

Light Vehicle

Total Engineered Solutions

Vehicle Control’s net sales for the year ended December 31, 2022 increased $13.2 million, or 1.8%, to $750.6 million compared to $737.4 million in the same period of 2021.

The increase in net sales in our Vehicle Control operating segment

reflects the impact of strong customer demand and price increases implemented in 2022, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs.

Temperature Control’s net sales for the year ended December 31, 2022 increased $27.1 million, or 8.4%, to $351.2 million compared to $324.1 million in the same period of 2021.

The increase in net sales in our Temperature Control segment

reflects the impact of continued strong customer demand, with the elevated demand we saw in 2021 holding firm, fueled by record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions

in 2021, and the impact of price increases, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs.

Demand for our Temperature Control products may vary significantly with summer weather

conditions and customer inventory levels.

Engineered Solutions’ net sales for the year ended December 31, 2022 increased $32.7 million, or 13.8%, to $270 million compared to $237.3 million in the same period of 2021.

The increase in net sales in our Engineered Solutions operating

segment reflects the impact of the positive contribution of incremental sales from our soot sensor, Trombetta and Stabil acquisitions of $44.6 million.

Compared to the year ended December 31, 2021, excluding the incremental net sales from the

acquisitions, Engineered Solutions net sales decreased $11.9 million, or 5%.

Gross Margins.

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segment for the years ended December 31, 2022 and 2021, respectively (in thousands):

Engine Management

Temperature Control

Net sales (a)

Gross margins

Gross margin percentage

Net sales (a)

Gross margins

Gross margin percentage

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

Compared to 2021, gross margins at Engine Management decreased 1.5 percentage points from 28.5% to 27%, while gross margins at Temperature Control decreased 0.5 percentage points from 27.3% to 26.8%.

The gross margin percentage decrease in

Engine Management compared to the prior year reflects the impact of lower fixed cost absorption due to lower and more normalized production, inflationary cost increases in raw materials, labor and transportation, which were somewhat offset by

increased pricing, the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower gross margins but comparable operating margin, and higher freight and related

expenses resulting from higher inventory levels.

The gross margin percentage decrease in Temperature Control compared to the prior year reflects the impact of inflationary cost increases in raw materials, labor and transportation, and higher freight and related expenses resulting from higher

inventory levels, which were somewhat offset by seasonal volume, customer mix and increased pricing.

While we anticipate continued margin pressures at both Engine Management and Temperature Control resulting from inflationary cost increases, we

believe that our annual cost initiatives, and our ability to pass through higher prices to our customers, will help to offset the impact of the inflationary increases on our margins.

Compared to 2021, gross margins at Vehicle Control decreased 1.5 percentage points from 32.4% to 30.9%, gross margins at Temperature Control decreased 0.1 percentage points from 28.3% to 28.2%, and gross margins at Engineered Solutions

decreased 1.6 percentage points from 19.6% to 19%.

The gross margin percentage decrease in Vehicle Control compared to the prior year reflects the impact of lower fixed cost absorption due to lower and more normalized production, inflationary cost increases in raw materials, labor and

transportation, which were somewhat offset by increased pricing, and higher freight and related expenses resulting from higher inventory levels.

The slight gross margin percentage decrease in Temperature Control compared to the prior year

reflects the impact of inflationary cost increases in raw materials, labor and transportation, and higher freight and related expenses resulting from higher inventory levels, which were offset by seasonal volume, customer mix and increased

The gross margin percentage decrease in Engineered Solutions compared to the prior year reflects the impact of inflationary cost increases in raw materials, labor and transportation.

While we anticipate continued margin pressures

across all of our segments resulting from inflationary cost increases, we believe that our annual cost initiatives, and our ability to pass through higher prices to our customers, will help to offset the impact of the inflationary increases on

Selling, General and Administrative Expenses.

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Restructuring and integration expenses were $1.9 million in 2022 compared to restructuring and integration expenses of $0.4 million in 2021.

Restructuring and integration expenses incurred in 2022 of $1.9 million related to (1) severance costs of approximately $0.9 million in connection with a reduction in our sales force, (2) expenses of approximately $0.6 million consisting of

employee severance costs related to our product line relocations 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, (3) relocation expenses of approximately $0.1 million in our Engine Management Segment of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities

in Independence, Kansas and Bialystok, Poland, and (4) the $0.2 million increase in environmental cleanup costs for ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long Island City,

New York location.

Restructuring and integration expenses incurred in 2021 of $0.4 million related to relocation in our Engine Management Segment of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in

Independence, Kansas and Bialystok, Poland.

The soot sensor product line relocation has been substantially completed.

Restructuring and integration expenses incurred in 2022 of $1.9 million related to (1) severance costs of $0.9 million in connection with a reduction in our sales force, (2) expenses of $0.6 million consisting of employee severance costs related

to our product line relocations from our Independence, Kansas manufacturing facility and from our St.

Thomas, Canada manufacturing facility to our manufacturing facilities in Reynosa, Mexico, (3) relocation expenses of $0.2 million of certain

inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland, and (4) the $0.2 million increase in environmental cleanup costs for ongoing monitoring and

remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York location.

Restructuring and integration expenses incurred in 2021 of $0.4 million related to the relocation of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and

Bialystok, Poland.

The soot sensor product line relocation has been completed.

Operating Income.

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represents 30% of the net earnings of Trombetta Asia, Ltd.

Comparison of Results of Operations For Fiscal Years 2021 and 2020

For a detailed discussion on the comparison of fiscal year 2021 to fiscal year 2020, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the

fiscal year ended December 31, 2021.

Restructuring and Integration Programs

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Liquidity and Capital Resources

Our primary cash requirements include working capital, capital expenditures, regular quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions.

The following table summarizes our primary sources

of funds including ongoing net cash flows from operating activities and availability under our Credit Agreement.

(In thousands)

Operating cash flows

Cash and cash equivalents

Remaining borrowing capacity

Total liquidity

Operating Activities.

During 2022, cash used in operating activities was $27.5 million compared to cash provided by operating activities of $85.6 million in 2021.

During 2023, cash provided by operating activities was $144.3 million compared to cash used in operating activities of $27.5 million in 2022.

The increase in

cash used in operating activities resulted primarily from the decrease in net earnings, the smaller year-over-year decrease in accounts receivable, the decrease in accounts payable compared to a year-over-year increase in accounts payable, the

larger year-over-year increase in prepaid expenses and other current assets, and the decrease in sundry payables and accrued expenses compared to a year-over-year increase in sundry payables and accrued expenses offset, in part, by the smaller

year-over-year increase in inventories.

cash provided by operating activities resulted primarily from the larger year-over-year decrease in accounts receivable, the decrease in inventories compared to an increase in inventories in the prior year, the increase in accounts payable

compared to a decrease in accounts payable in the prior year, no change in prepaid expenses and other current assets compared to an increase in prepaid expenses and other current assets in the prior year, and the smaller year-over-year decrease

in sundry payables and accrued expenses offset, in part, by the decrease in net earnings.

Net earnings during 2023 were $34.4 million compared to $55.4 million in 2022.

During 2023, (1) the decrease in accounts receivable was $8 million compared to the year-over-year decrease in accounts receivable of $6.9 million in 2022;

increase in inventories was $67.5 million compared to the year-over-year increase in inventories of $107.6 million in 2021;

(3) the decrease in accounts payable was $48.6 million compared to the year-over-year increase in accounts payable of $33

decrease in inventories was $29.5 million compared to the year-over-year increase in inventories of $67.5 million in 2022;

(3) the increase in accounts payable was $19.6 million compared to the year-over-year decrease in accounts payable of $48.6

million in 2022;

(4) the increase in prepaid expenses and other current assets was $5.5 million compared to the year-over-year increase in prepaid expenses and other current assets of $0.8 million in 2021;

and (5) the decrease in sundry payables

and accrued expenses was $29.1 million compared to the year-over-year increase in sundry payables and accrued expenses of $13.4 million in 2021.

The increase in inventories during 2022 and 2021 reflects actions taken beginning in the fourth

quarter of 2021 to meet ongoing customer demand, the impact of materials inflation, and higher safety stocks of raw materials given the volatility in the supply chain.

The decrease in accounts payable in 2022 reflects the timing of payments to

vendors for inventory purchases made in the fourth quarter of 2021, as well as the timing of inventory purchases made in 2022, including the impact of a reduction in inventory purchases in the second half of the year;

while the decrease in sundry

payments in 2022 reflects the impact of lower employee compensation accruals.

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

(4) there was no change in prepaid expenses and other current assets compared to the year-over-year increase in prepaid expenses and other current assets of $5.5 million in 2022;

and (5) the decrease in sundry payables and

accrued expenses was $4.3 million compared to the year-over-year decrease in sundry payables and accrued expenses of $29.1 million in 2022.

During 2023, we generated operating cash flow of $144.3 million by reducing our inventory to more

normalized levels while actively managing our accounts receivable and accounts payable.

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

Now that global supply chains have stabilized, allowing us to lower

working capital in 2023, we expect cash flows from operations will return to historical levels in 2024.

Investing Activities .

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Investing activities

during 2022 consisted of (1) the cash payment of $1.7 million for our acquisition of 100% of the capital stock of Kade Trading GmbH, a German company, (“Kade”) , net of $1 million of cash acquired and the $0.5 million earn-out;

(2) the payment of

$0.2 million for our 3.55% increase in equity ownership in Foshan Che Yijia New Energy Technology Co., Ltd., (“CYJ”), a China-based joint venture that manufactures automotive electric air conditioning compressors;

and (3) capital expenditures of

Investing activities in 2021 consisted of (1) the payment of $15.4 million, net of $0.9 million of cash acquired, for our acquisition of 100% of the capital stock of Stabil Operative Group GmbH, a German company, (“Stabil”);

(2) the payment of

$107.1 million, net of $4.6 million of cash acquired, for our acquisition of 100% of the capital stock of Trumpet Holdings, Inc., a Delaware corporation, (“Trombetta”);

(3) the payment of $2.9 million for our acquisition of certain assets of the

soot sensor product lines from Stoneridge, Inc.;

and (4) capital expenditures of $25.9 million.

during 2023 consisted of (1) the payment of $4 million for our acquisition of an additional 15% equity interest in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co., Ltd.

(“Gwo Yng”) and (2) capital expenditures of $28.6

million offset, in part, by cash acquired of $6.8 million in the Gwo Yng step acquisition.

Investing activities during 2022 consisted of (1) the cash payment of $1.7 million for our acquisition of 100% of the capital stock of Kade Trading GmbH, a German company, (“Kade”) , net of $1 million of cash acquired and the $0.5 million

(2) the payment of $0.2 million for our 3.55% increase in equity ownership in Foshan Che Yijia New Energy Technology Co., Ltd., (“CYJ”), a China-based joint venture that manufactures automotive electric air conditioning compressors;

(3) capital expenditures of $26 million.

Financing Activities .

Cash provided by financing activities was $55.5 million in 2022 compared to $69 million in 2021.

In June 2022, we

entered into a new credit agreement with JPMorgan Chase Bank, N.A., as agent.

The new credit agreement provides for a $500 million credit facility comprised of a $100 million term loan facility and a $400 million revolving credit facility.

Cash used in financing activities was $109.6 million in 2023 compared to cash provided by financing activities of $55.5

million in 2022.

During 2023, we (1) reduced our borrowings under our Credit Agreement by $83.5 million;

and (2) paid dividends of $25.2 million and $0.7 million to shareholders of our noncontrolling interests, respectively.

Cash provided by

our operating activities was used to reduce our borrowings under our Credit Agreement, fund our investing activities and pay dividends.

In June 2022, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as agent.

The new credit agreement provides for a $500 million credit facility comprised of a $100 million term loan facility and a $400 million revolving

credit facility.

Borrowings under the new credit facility were used to repay all outstanding borrowings under the then existing revolving credit facility, and certain fees and expenses incurred in connection with the refinancing.

During 2022, we (1) increased our borrowings under our revolving credit facilities by $114.2 million;

(2) reduced our borrowings under lease obligations and our Polish overdraft facility by $2.9 million;

(3) made cash payments of $2.1 million

for debt issuance costs in connection with our refinancing;

(4) made cash payments for the repurchase of shares of our common stock of $29.7 million;

and (5) paid dividends of $23.4 million.

Cash provided by borrowings under our credit

facilities were used to fund our operating activities, investing activities, reduce our borrowings under lease obligations and our Polish overdraft facility, pay debt issuance costs in connection with the refinancing, purchase shares of our

common stock and pay dividends.

Cash provided by financing activities was $55.5 million in 2022.

During 2021, we (1) increased our borrowings under our revolving credit facility by $115.3 million;

(2) increased our borrowings under lease obligations and our Polish overdraft

During 2022, we (1) increased our borrowings under our revolving credit facilities by $114.2 million;

(2) reduced our borrowings under lease obligations and our Polish overdraft

facility by $2.9 million;

(3) made cash payments of $2.1 million for debt issuance costs in connection with our refinancing;

(4) made cash payments for the repurchase of shares of our common stock of $29.7 million;

and (4) paid dividends of $22.2 million.

Cash provided by operating activities, along with borrowings under our revolving credit

agreement, lease obligations and Polish overdraft facility were used to fund our investing activities, purchase shares of our common stock and pay dividends.

and (5) paid dividends of $23.4

Cash provided by borrowings under our credit facilities were used to fund our operating activities, investing activities, reduce our borrowings under lease obligations and our Polish overdraft facility, pay debt issuance costs in

connection with the refinancing, purchase shares of our common stock and pay dividends.

Dividends of $25.2 million and $23.4 million were paid in 2023 and 2022, respectively.

Quarterly dividends were paid at a rate of $0.29 in 2023 and $0.27 in 2022.

In February 2023, our Board of Directors voted to increase our quarterly

dividend from $0.27 per share in 2022 to $0.29 per share in 2023.

Comparison of Liquidity and Capital Resources For Fiscal Years 2022 and 2021

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Report on Form 10-K for the fiscal year ended December 31, 2022.

Our primary cash requirements include working capital, capital expenditures, regular quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions.

Our primary sources of funds are ongoing net cash

flows from operating activities and availability under our Credit Agreement (as detailed below).

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

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

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Outstanding borrowings at December 31, 2023 under the Credit Agreement were $156 million, consisting of current borrowings of $5 million and long-term debt of $151 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.

while outstanding borrowings at December 31, 2022 were $239.5 million,

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

Letters of credit outstanding under the Credit Agreement were $2.3 million and $2.4 million at December 31, 2023 and 2022, respectively.

At December 31, 2023, the weighted average interest rate under our Credit Agreement was 5%, which consisted of $156 million in borrowings at 5% 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.

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%.

During the year ended December 31, 2023, our average daily alternative base rate loan balance was $0.1 million, compared to a balance of $5.6 million for the

year ended December 31, 2022.

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

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The Credit Agreement also contains customary events of default.

In 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.

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 million).

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

In November 2023, our Polish subsidiary, SMP Poland sp.

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

The overdraft facility, as amended, provides for borrowings under the

facility in Euros and U.S.

Under the amended terms, the overdraft facility provides for borrowings of up to Zloty 30 million (approximately $7.6 million) if borrowings are solely in Zloty, or up to 85% of the Zloty 30 million limit

(approximately $6.5 million) if borrowings are in Euros and/or U.S.

The overdraft facility has a maturity date in March 2024, with automatic three-month renewals until June 2027, subject to cancellation by either party, at its sole

discretion, at least 30 days prior to the commencement of the three-month renewal period.

Borrowings under the amended overdraft facility will bear interest at a rate equal to (1) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.0% for

borrowings in Polish Zloty, (2) the one month Euro Interbank Offered Rate (“EURIBOR”) + 1.0% for borrowings in Euros, and (3) the Mid-Point of the Fed Target Range + 1.25% for borrowings in U.S Dollars.

Borrowings under the overdraft facility

are guaranteed by Standard Motor Products, Inc., the ultimate parent company.

There were no borrowings outstanding under the overdraft facility at both December 31, 2023 and December 31, 2022.

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

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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.

$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.

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

The bankruptcy court proceedings have continued into 2023.

Although the courts have named us a “critical

supplier,” the funds allocated to us have not yet been determined and, as such, we have not recorded an adjustment to the $7 million pre-tax charge previously recorded.

In March 2020, our Board of Directors authorized the purchase of up to $20 million of our common stock under a stock repurchase program.

Stock repurchases under this program, during the years ended December 31, 2021 and 2020, were 150,273 and

323,867 shares of our common stock, respectively, at a total cost of $6.5 million and $13.5 million, respectively, thereby completing the 2020 Board of Directors authorization.

Stock repurchases under this program during the year ended December 31, 2021 were 150,273 shares of our

common stock at a total cost of $6.5 million thereby completing the 2020 Board of Directors authorization.

In February 2021, our Board of Directors authorized the purchase of up to an additional $20 million of our common stock under a stock repurchase program.

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.

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

Stock repurchases under this program, during the year ended December 31, 2022 and 2021 were 692,067 and

7,000 shares of our common stock, respectively, at a total cost of $29.7 million and $0.3 million, respectively, thereby completing the October 2021 Board of Directors authorization.

464,992 shares of our common stock at a total cost of $20 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 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.

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.

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Material Cash Commitments

Material cash commitments as of December 31, 2022 consist of required cash payments to service our outstanding borrowings of $239.5 million under our Credit Agreement with JPMorgan Chase Bank, N.A., as agent, the future minimum cash

requirements of $60.2 million through 2033 under operating leases, and future cash payments relating to our restructuring and integration activities of $4.9 million.

Material cash commitments as of December 31, 2023 consist of required cash payments to service our outstanding borrowings of $156 million under our Credit Agreement with JPMorgan Chase Bank, N.A., as agent and the future minimum cash

requirements of $131.7 million through 2034 under operating leases.

All of our other cash commitments as of December 31, 2023 are not material.

For additional information related to our material cash commitments, see Note 3, “Restructuring and Integration Expenses”, Note 7, “Leases,” and Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in

Item 8 of this Report.

For additional information related to our material cash commitments, see Note 7, “Leases,” and Note

11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

We anticipate that our cash flow from operations, available cash, and available borrowings under our Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months.

Significant assumptions underlie

this belief, including, among other things, that we will be able to mitigate the future impact, 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

and other governments, future increases in interest rates, and significant inflationary cost increases in raw materials, labor and transportation that we are unable to pass through our customers, macroeconomic uncertainty, and that there

will be no material adverse developments in our business, liquidity or capital requirements.

If material adverse developments were to occur in any of these areas, there can be no assurance that our business will generate sufficient cash flow

from operations, or that future borrowings will be available to us under our Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.

In addition, if we

default on any of our indebtedness, or breach any financial covenant in our Credit Agreement, our business could be adversely affected.

this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in the supply chain caused by geo-political risks, future increases in interest rates, and significant inflationary cost

increases in raw materials, labor and transportation that we are unable to pass through our customers, macroeconomic uncertainty, and that there will be no material adverse developments in our business, liquidity or capital requirements.

material adverse developments were to occur in any of these areas, there can be no assurance that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our Credit Agreement in

amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.

In addition, if we default on any of our indebtedness, or breach any financial covenant in our Credit Agreement, our

business could be adversely affected.

For further information regarding the risks in our business, refer to Item 1A, “Risk Factors,” of this Report.

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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 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.

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

business, financial condition and results of operations.

Valuation of Long‑Lived and Intangible Assets and Goodwill

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

What changed 10-K

Item 7. Management’s Discussion and Analysis