What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-22 · 630 added, 614 removed, 1151 unchanged (52% of the section changed)

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Management’s Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm—Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm—Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021

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and Subsidiaries:

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act).

Our internal control system was designed to provide reasonable

assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) of the

Exchange Act).

Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations.

Because of these inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement

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

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

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

Because of these inherent limitations, internal control over financial reporting

can provide only reasonable assurance with respect to financial statement preparation and presentation, and may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.

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

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

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

reporting is effective.

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

reporting as of December 31, 2022.

In making this assessment, we used the criteria set

forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control - Integrated Framework.

assessment using those criteria, we concluded that, as of December 31, 2023, our internal control over financial reporting is effective.

Our independent registered public accounting firm, KPMG LLP, has audited our consolidated financial statements as of and for the year ended December 31, 2023 and has

also audited the effectiveness of our internal control over financial reporting as of December 31, 2023.

KPMG’s report appears on the following pages of this “Item 8.

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Stockholders and Board of Directors

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Opinion on Internal Control Over Financial Reporting

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

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

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

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

Treadway Commission.

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

statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement Schedule II, Valuation and

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

We have audited Standard Motor Products, Inc and Subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria

established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission .

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on

criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of

the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and

the related notes and financial statement Schedule II, Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 22, 2024 expres sed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s

Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are

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

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

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal

control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

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

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

in all material respects.

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

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

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

We believe that our audit provides a reasonable

basis for our opinion.

Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial

reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we

considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with

generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,

and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

New York, New York

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED FINANCIAL STATEMENTS

To the Stockholders and Board of Directors

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We have audited the accompanying consolidated balance sheets of Standard Motor Products, Inc.

and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes

in stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2022, and the related notes and financial statement Schedule II Valuation and Qualifying Accounts (collectively, the “consolidated

financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows

for each of the years in the three‑year period ended December 31, 2022, in conformity with U.S.

and Subsidiaries’ (the “Company”) as of December 31, 2023 and 2022,

the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2023, and the related notes and financial statement

Schedule II Valuation and Qualifying Accounts (collectively, the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of

December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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

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

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over

financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of

Sponsoring Organizations of the Treadway Commission, and our report da ted February 22, 2024 e xpressed an

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

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

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

We are a public accounting firm

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

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

Our responsibility is to express an opinion on these consolidated

financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

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

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material

misstatement, whether due to error or fraud.

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

to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial

statements, whether due to error or fraud, and performing procedures that respond to those risks.

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

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Critical Audit Matter

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

(1) relates to

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

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

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

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or

required to be communicated to the audit committee and that:

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

communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the

critical audit matter or on the accounts or disclosures to which it relates.

Asbestos liability and litigation

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

As of December 31, 2022, the accrued asbestos

liability was $68 million.

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

potential recovery from insurance carriers.

As discussed i n Notes 1 and

23 to t he consolidated financial statements, the Company is involved in asbestos litigation and has a potential asbestos liability.

As of December 31, 2023, the accrued asbestos liability was $82 million.

The Company’s

asbestos liability represents the low end of the actuarially determined range of the undiscounted liability for settlement payments and awards of asbestos related damages, excluding legal costs and any potential recovery from insurance

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

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

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

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

The key assumptions included future claim

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

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

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

This required subjective auditor judgment, due to the

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

Specialized skills were needed to evaluate the

Company’s key assumptions.

The key assumptions included future claim filings, closed with pay ratios, closed with pay lag patterns, settlement values, and large claims.

Minor changes to these key assumptions could have had a significant

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

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the asbestos

liability estimation process.

This included controls related to the key assumptions and the claims data utilized in the process, and the potential need for an updated actuarial valuation.

We evaluated the asbestos related legal cases settled

during the year and the number of open cases as of year-end by reading letters received directly from the Company’s external and internal legal counsel.

We tested a selection of claims data used in the actuarial model by comparing the selection

items to underlying claims documentation.

We involved an actuarial professional with specialized skills and knowledge, who assisted in evaluating (1) the future claim filings assumption by developing an independent expectation and comparing it

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

We evaluated the design and tested the operating

effectiveness of certain internal controls related to the asbestos liability estimation process.

This included controls related to the key assumptions and the claims data utilized in the process, and the potential need for an updated

actuarial valuation.

We evaluated the asbestos related legal cases settled during the year and the number of open cases as of year-end by reading letters received directly from the Company’s external and internal legal counsel.

selection of claims data used in the actuarial model by comparing the selection items to underlying claims documentation.

We involved an actuarial professional with specialized skills and knowledge, who assisted in evaluating (1) the future

claim filings assumption by developing an independent expectation and comparing it against the Company’s future claim filing assumption, and (2) the closed with pay ratios, closed with pay lag patterns, settlement values, and large claims by

comparing them to the Company’s historical experience.

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

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

STATEMENTS OF

Year Ended December 31,

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Selling, general and administrative expenses

Intangible asset impairment

Restructuring and integration expenses

Other income (expense), net

Other income, net

Operating income

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Customer bankruptcy charge

Intangible asset impairment

Equity income from joint ventures

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Change in assets and liabilities:

(Increase) decrease in accounts receivable

Decrease in accounts receivable

(Increase) decrease in inventories

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Acquisitions of and investments in businesses

Cash acquired in step acquisition

Capital expenditures

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Net borrowings (repayments) under revolving credit facilities

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

Net borrowings (repayments) of other debt and lease obligations

Purchase of treasury stock

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BALANCE AT DECEMBER 31, 2020

Other comprehensive income, net of tax

Noncontrolling interest in business acquired

Other comprehensive loss, net of tax

Cash dividends paid ($ 1.00

Purchase of treasury stock

Dividends paid to noncontrolling interest

Stock-based compensation

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BALANCE AT DECEMBER 31, 2021

Noncontrolling interest in business acquired

Other comprehensive loss, net of tax

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Purchase of treasury stock

Dividends paid to noncontrolling interest

Stock-based compensation

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BALANCE AT DECEMBER 31, 2022

Noncontrolling interest in step acquisition

Other comprehensive loss, net of tax

Cash dividends paid ($ 1.16

Purchase of treasury stock

Dividends paid to noncontrolling interest

Stock-based compensation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

Summary of Significant Accounting

Principles of Consolidation

Standard Motor Products, Inc.

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

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

industries around the world.

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

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

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

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

All significant inter-company items have been

Stan dard Motor Products, Inc.

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

premium replacement parts in the automotive aftermarket, and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets.

Our automotive aftermarket 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 American countries .

In instances where

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

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

Investments in

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

All significant inter-company items have been eliminated .

Use of Estimates

The preparation of consolidated financial

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

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

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

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

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

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

and other governments, future

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

results of operations.

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

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

T he preparation of consolidated

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

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

We have made a number of estimates and assumptions in the preparation of these

consolidated financial statements.

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

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

or in the assumptions that we use in calculating the estimates, the uncertain future effects, if any, of disruptions in the supply chain caused by 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.

Some of the more significant estimates include

allowances for expected credit losses, cash discounts, valuation of inventory, valuation of long-lived assets, goodwill and other intangible assets, depreciation and amortization of long-lived assets, product liability exposures, asbestos,

environmental and litigation matters, valuation of deferred tax assets, share based compensation and sales returns and other allowances.

Reclassification

Certain prior period amounts in the accompanying consolidated financial statements and related notes have been reclassified to conform to the 2023 presentation.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reportable Segments

Beginning on January 1, 2023, we reorganized our business into three operating segments – Vehicle Control, Temperature Control and Engineered Solutions.

The new 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.

Prior period segment results have been reclassified to conform to our operating segment reorganization.

For additional information related to our segment reorganization, see Note 8, “Goodwill and Acquired Intangible

Assets,” Note 21, “Industry Segment and Geographic Data” and Note 22, “Net Sales.”

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Allowance for Expected Credit Losses and Cash Discounts

We do not generally

require collateral for our trade accounts receivable.

We do not generally require collateral for our trade accounts

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

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

supportable forecasts, aging analysis, and specific account evaluations.

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

specific account evaluations.

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

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

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

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

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

We will continue to monitor the circumstances

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

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

Cash discounts are provided based on an overall average experience rate applied to qualifying

accounts receivable balances.

Inventories are valued at the lower of cost and net realizable value.

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programs, at the time of sale of air conditioning compressors, diesel injectors, and diesel pumps, we estimate the core expected to be returned from the customer and record the estimated return as unreturned customer inventory.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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study trends of such claims.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, Plant and Equipment

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

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

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

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

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

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

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

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

Operating lease expense is recognized on a straight-line basis

over the lease term.

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

the lease term.

Valuation of Long-Lived and Intangible Assets and Goodwill

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

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

Valuing intangible assets requires the use of

significant estimates and assumptions.

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

At acquisition, we estimate and record

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

Intangible assets acquired through

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

Valuing intangible assets requires the use of significant estimates and assumptions.

As related to

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

(1) forecasted revenues attributable to existing customers;

(2) forecasted earnings

before interest and taxes (“EBIT”) margins;

(2) forecasted earnings before interest and taxes (“EBIT”) margins;

customer attrition rates;

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

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

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

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

Goodwill and certain other intangible assets having indefinite

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

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

We believe that the fair value of acquired

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

STANDARD MOTOR PRODUCTS, INC.

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Revenue Recognition

We derive our revenue primarily from sales of replacement parts for motor vehicles from both our Engine Management and Temperature Control Segments.

We recognize revenues

when our performance obligation has been satisfied and the control of products has been transferred to a customer which typically occurs upon shipment.

Revenue is measured as the amount of consideration we expect to receive in exchange for the

transfer of goods or providing services.

The amount of consideration we receive and revenue we recognize depends on the marketing incentives, product warranty and overstock returns we offer to our customers.

For certain of our sales of

remanufactured products, we also charge our customers a deposit for the return of a used core component which we can use in our future remanufacturing activities.

Such deposit is not recognized as revenue at the time of the sale but rather carried

as a core liability.

At the same time, we estimate the core expected to be returned from the customer and record the estimated return as unreturned customer inventory.

The liability is extinguished when a core is actually returned to us, or at

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

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

upon our prior experience and current trends.

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

We derive our revenue primarily from

vehicle aftermarket sales in our Vehicle Control and Temperature Control Segments, and non-aftermarket sales in our Engineered Solutions Segment.

We recognize revenues when our performance obligation has been satisfied and the control of products

has been transferred to a customer which typically occurs upon shipment.

Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of goods or providing services.

The amount of consideration we receive and revenue we recognize depends on the marketing incentives,

product warranty and overstock returns we offer to our customers.

For certain of our sales of remanufactured products, we also charge our customers a deposit for the return of a used core component which we can use in our future remanufacturing

Such deposit is not recognized as revenue at the time of the sale but rather carried as a core liability.

At the same time, we estimate the core expected to be returned from the customer and record the estimated return as unreturned

customer inventory.

The liability is extinguished when a core is actually returned to us, or at period end when we estimate and recognize revenue for the core deposits not expected to be returned.

We estimate and record provisions for cash

discounts, quantity rebates, sales returns and warranties in the period the sale is recorded, based upon our prior experience and current trends.

Significant management judgments and estimates must be made and used in estimating sales returns

and allowances relating to revenue recognized in any accounting period.

Product Warranty and Overstock Returns

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

Deferred financing costs related to our revolving credit facility

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

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

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

Deferred financing costs related to our term loan and revolving

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

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

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

Accounting for Income Taxes

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

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

foreign tax credit carryovers and foreign net operating loss carryovers.

Based on these considerations, we believe it is more likely than not that we will realize the benefit of the net deferred tax asset of $ 33.7 million as of December 31, 2022 , which is net of the remaining valuation allowance.

The valuation allowance of $ 3.8 million as of December 31, 2023 is intended to provide for the uncertainty regarding the ultimate realization

foreign tax credit carryovers.

Based on these considerations, we believe it is more likely than not that we will realize the benefit of the net deferred tax asset of $ 40.5 million as of December 31, 2023 , which

is net of the remaining valuation allowance.

Tax benefits are recognized for an uncertain tax position when, in management’s judgment, it is more likely

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

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

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

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

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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.

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

We will continue to monitor the circumstances surrounding

the bankruptcy in determining whether additional provisions may be necessary.

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

The bankruptcy court proceedings have continued into

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.

For further information on net sales to

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Recently Issued Accounting Pronouncements

Standards that were adopted

Date of adoption / Effective date

Effects on the financial statements or other significant matters

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

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

reference rate reform on financial reporting.

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

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

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

In connection with these new agreements, the adoption of the

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

Standards that are not yet adopted as of December 31, 2023

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

could have a material impact on our financial statements.

Effective date

Effects on the financial statements or other significant matters

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

ASU 2023-07 will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an

interim and annual basis.

ASU 2023-07 expands segment disclosures by requiring disclosure of (1) significant segment expenses that are regularly provided to the chief operating

decision maker (“CODM”) and included within each reported measure of segment profit or loss;

(2) the amount and description of the composition of other segment items to reconcile to segment profit and loss;

and (3) the CODM’s title and

position and how the CODM uses the reported segment measures to allocate resources.

Additionally, ASU 2023-07 requires interim disclosures of all reportable segment profit or loss and assets previously required annually by Topic 280.

The ASU is effective

for the fiscal years beginning after December 15, 2023, which for us is December 31, 2024, and all subsequent interim periods, with full retrospective application required to all prior periods presented.

Early adoption is permitted.

The new standard will

require expanding our segment disclosure to include additional segment level information.

We are currently evaluating the full impact of adopting ASU 2023-07 on our consolidated financial statements, disclosures, processes and

On an ongoing basis, we will continue to assess the impact of the new standard through our planned date of adoption of December 31, 2024.

Income Taxes (Topic 270):

Improvements to Income Tax Disclosures

ASU 2023-09 will improve transparency and decision making usefulness of income tax disclosures.

ASU 2023-09 will expand the annual required income effective tax rate reconciliation disclosures to include disclosure of (1) eight specific

categories of rate reconciling items;

(2) additional information for reconciling items that meet or exceed a quantitative threshold;

and (3) expand the required disclosures to include reconciling percentages as well as reported

Additionally, the ASU 2023-09 will expand required interim and annual disclosures of income taxes paid to include the disaggregation by federal, state and foreign jurisdictions, with expanded disclosures required annually.

The ASU is effective for annual reporting periods beginning after December 15, 2024, which for us is January 1, 2025, with full retrospective

application required to all prior periods presented.

Early adoption is permitted.

The new standard will require expanding our interim and annual income tax disclosures in our financial statements.

We are currently evaluating the full

impact of adopting ASU 2023-09 on our consolidated financial statements, disclosures, processes and controls.

On an ongoing basis, we will continue to assess the impact of the new standard through our planned date of adoption of March 31,

We have reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a

material impact on the Company’s consolidated financial statements.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Business Acquisitions and Investments

2023 Increase in Equity Investment

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

In April 2014, we

formed Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co.

(“Gwo Yng”), a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd., a China-based manufacturer of air conditioner accumulators, filter driers, hose assemblies

and switches.

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

In March 2018, we acquired an additional 15 %

equity interest in the joint venture for RMB 26,475,583 (approximately $ 4.2 million), thereby increasing our equity interest in the joint venture to 65 %.

While we increased our equity interest in the joint venture to 65 %, the minority shareholder maintained substantive participating

rights that allowed it to participate in certain significant financial and operating decisions that occur in the ordinary course of business.

As a result, we continued to account for our investment in the joint venture under the equity method

of accounting.

In July 2023, we

acquired an additional 15 % equity interest in the joint venture for RMB 27,378,290 (approximately $ 4 million), thereby increasing our equity

interest in Gwo Yng to 80 %.

In connection with the transaction, we amended and restated the charter documents of Gwo Yng to remove

all minority shareholder substantive participating rights, giving SMP control of Gwo Yng.

As a result, as of the closing date of the transaction, Gwo Yng was accounted for as a business combination achieved in stages (“a step acquisition”).

Accordingly, commencing on the closing of the transaction, we reported the results of Gwo Yng on a consolidated basis with the minority ownership interest reported as a noncontrolling interest.

The following table summarizes the allocation of the

total step acquisition purchase consideration to the identifiable assets acquired and liabilities assumed based on their fair values (in thousands):

Total purchase consideration (1)

Assets acquired and liabilities assumed:

Cash and cash equivalents

Other current assets

Property, plant and equipment, net

Operating lease right-of-use assets

Intangible assets (2)

Long term investments and other assets

Current liabilities

Noncurrent operating lease liabilities

Fair value of acquired noncontrolling interest

Total purchase consideration allocated to net assets acquired

Total purchase

consideration is the sum of the fair value of the previously held equity investment interest in Gwo Yng of $ 17.7 million

and the cash paid of $ 4 million for the acquisition of the additional 15 % equity ownership interest.

Intangible assets

consists of customer relationships of $ 0.4 million and capitalized software of $ 0.1 million.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible assets of $ 0.4 million consisting of customer relationships will be amortized on a straight-line basis over the estimated useful life of 10 years.

Goodwill of $ 2.2 million

was allocated to the Temperature Control and Engineered Solutions segments in the amounts of $ 1.2 million and $ 1 million, respectively.

The goodwill reflects relationships, business specific knowledge and the replacement cost of an assembled workforce

associated with personal reputations.

Revenues from Gwo Yng

included in our consolidated statement of operations from the closing date of our 15 % equity increase in July 2023 through December

31, 2023 were not material.

2022 Increase in Equity Investment

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

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

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2022 Business Acquisitions

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

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

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

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

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

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

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

Purchase price

Assets acquired and liabilities assumed:

Other current assets (1)

Property, plant and equipment, net

Operating lease right-of-use assets

Intangible assets

Current liabilities

Noncurrent operating lease liabilities

Deferred income taxes

Net assets acquired

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

Intangible assets

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

life of 15 years .

Incremental revenues

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

2021 Business Acquisitions

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

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

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

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

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

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

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

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

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

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Purchase price

Assets acquired and liabilities assumed:

Other current assets (1)

Property, plant and equipment, net

Operating lease right-of-use assets

Intangible assets

Current liabilities

Noncurrent operating lease liabilities

Deferred income taxes

Net assets acquired

The other current assets balance includes $ 0.9 million of cash acquired.

Intangible assets acquired of $ 5.5 million consist of

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

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

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

of an assembled workforce associated with personal reputations.

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

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

Acquisition of Capital Stock of Trumpet Holdings, Inc.

(“Trombetta”)

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

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

Trombetta is a leading provider

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

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

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

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

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

million) plus a Euros 0.5 million (approximately $ 0.5 million) earn-out based upon Kade’s performance in 2024 and 2025.

Kade is a supplier across Europe of mobile temperature control components to commercial vehicle, passenger car and specialty equipment

markets and has been a distributor of products from our joint ventures including electric compressors, hose assemblies and receiver dryers, with annual sales of approximately $ 6 million.

The acquired Kade business, reported as part of our Engineered Solutions segment, was paid for with cash.

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

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Deferred income taxes

Fair value of acquired noncontrolling interest

Net assets acquired

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

The other current

assets balance includes $ 1 million of cash acquired.

STANDARD MOTOR PRODUCTS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible assets acquired of $ 54.7 million consist of

customer relationships of $ 39.4 million that will be amortized on a straight-line basis over the estimated useful life of 20 years ;

developed technology of $ 13.4

million that will be amortized on a straight-line basis over the estimated useful life of 15 years ;

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

Goodwill of $ 49.3 million was allocated to the Engine

Management Segment.

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

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

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

Acquisition of Particulate Matter Sensor Business of Stoneridge, Inc.

(“Soot Sensor”)

In March 2021 and

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

The acquired product

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

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

The product lines

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

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

We did not acquire these

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

Bialystok, Poland, respectively.

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

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

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

Purchase Price

Assets acquired and liabilities assumed:

Machinery and equipment, net

Intangible assets

Net assets acquired

Intangible assets acquired of approximately $ 0.8 million

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

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

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restructuring and Integration Expense

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

life of 15 years .

Incremental revenues

from the acquired Kade business included in our consolidated statement of operations for the year ended December 31, 2023 were $ 5

Restructuring and Integration Expenses

The aggregated liabilities included in “sundry payables and

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Cash payments

Reclassification of environmental and other liabilities

Exit activity

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Cash payments

Reclassification of environmental and other liabilities

Reclassification of environmental liability

Foreign currency exchange rate changes

Exit activity

liability at December 31 , 2023

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

at our Long Island City, New York location.

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

Included in restructuring and integration costs in 2023 and 2022 is a $ 0.1 million and $ 0.2 million increase, respectively, in

environmental cleanup costs related to ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York location.

The environmental liability has been reclassed to

accrued liabilities as of December 31, 2023 and 2022, respectively.

Restructuring and integration expenses incurred during the year

ended December 31, 2023 consist of $ 1.3 million in our Vehicle Control segment, $ 1.1 million in our Temperature Control segment and $ 0.2

million in our Engineered Solutions segment.

Restructuring Costs

Cost Reduction Initiative

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

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

Thomas, Canada manufacturing facility in our Temperature Control

segment to our manufacturing facilities in Reynosa, Mexico.

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

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

to our product line relocations.

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

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

Plant Rationalization Programs

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

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

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

with these programs.

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

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 expenses related to the initiative of approximately $ 2.5 million

and $ 1.5 million were incurred during the years ended December 31, 2023 and 2022, respectively.

Expenses 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

approximately $ 1.3 million of employee severance and bonuses related to our product line relocations, and (3) expenses of

approximately $ 0.5 million related to the relocation of machinery and equipment to our manufacturing facilities in Reynosa,

Expenses for the year ended December 31, 2022 consist of (1) expenses of approximately $ 0.9 million related to our sales

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

Cash payments made under the initiative were $ 2.4 million during the year ended December 31, 2023.

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 .

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Plant Rationalization Programs

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

included the shutdown of our Orlando, Florida facility, have been completed.

Cash payments made of $ 16 ,000 during the year ended

December 31, 2022 consist of severance payments to former employees terminated in connection with these programs.

remaining aggregate liability related to these programs as of December 31, 2022.

Integration Costs

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

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

respectively, related to these relocation activities in our Engine

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

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

Integration expenses recognized and cash payments made of $ 144 ,000 during the year ended December 31, 2022 related to these relocation activities.The soot sensor product line relocation has been completed and there is no remaining aggregate liability related to the soot sensor product line relocation as of December 31, 2022.

Sale of Receivables

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results of operations and cash flows.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

4 unchanged sentences

Total inventories

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, Plant and Equipment

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Operating leases (b)

Excludes expenses of approximately $ 2.7 million and $ 2 million for the years ended December

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

Includes $ 21.6 million

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

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

Excludes expenses of approximately $ 3.3

million, $ 2.7 million and $ 2

million for the years ended December 31, 2023, 2022, and 2021, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less,

which is not material.

During the year ended December 31, 2023 includes $ 27.8 million of right-of-use

assets related to the lease modification and extension for our distribution center and office in Lewisville, Texas;

million of right-of-use assets related to the new distribution center in Shawnee, Kansas;

$ 4.4 million of right-of-use

assets obtained in Gwo Yng step-acquisition;

and $ 3.7 million of right-of-use assets related to our Reynosa, Mexico lease

Minimum Lease Payments

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Present value of lease liabilities

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Other Intangible Assets

3 unchanged sentences

fair value of a reporting unit is below its carrying amount.

We completed our annual impairment test of goodwill as of December 31, 2022.

When performing our evaluation of goodwill for impairment, if we conclude qualitatively that it is not more likely than not that the fair value of the reporting unit is

less than its carrying amount, then a quantitative impairment test would not be required.

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

In performing the quantitative test, the fair

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

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

reporting unit.

When performing our evaluation of goodwill

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

If we are unable to reach this

conclusion, then we would perform a goodwill quantitative impairment test.

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

A charge for impairment is recognized by the amount by which

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

In connection with our operating segment

reorganization, we reassessed our reporting units and reallocated goodwill from the reporting units that existed prior to the change to the new reporting units, using a relative fair value approach similar to that used when a portion of a

reporting unit is to be disposed of.

We performed goodwill impairment tests as of January 1, 2023 on both the reporting units in place prior to the change and the new reporting units, and concluded that the estimated fair values of each of the

reporting units exceeded their respective carrying amounts and, therefore, no impairment charge was necessary.

completed our annual impairment test of goodwill as of December 31, 2023.

As of December 31, 2023, we performed a qualitative assessment of the likelihood of a goodwill impairment for the Vehicle Control, Temperature Control and Engineered

Solutions reporting units.

Based upon our qualitative assessment, we determined that it was not more likely than not that the fair value of the each of the Vehicle Control, Temperature Control and Engineered Solutions reporting units was less

than their respective carrying amounts.

As such, we concluded that the quantitative impairment test would not be required, and that there would be no required goodwill impairment charge as of December 31, 2023 at each of the reporting units.

While we concluded that we did no t have a goodwill impairment charge as of December 31, 2023, and we do not believe that future

impairments are probable, we will need to maintain the current ongoing performance levels at each of the Vehicle Control, Temperature Control and Engineered Solutions reporting units in future periods to sustain their goodwill carrying values.

STANDARD MOTOR PRODUCTS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

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

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

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

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

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

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

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

Changes in the carrying values of goodwill by operating segment during the years ended December 31, 2023 and 2022 are as follows (in thousands):

2 unchanged sentences

Activity in 2022

Acquisition of Trombetta

Acquisition of Stabil

Acquisition of Kade

Foreign currency exchange rate change

2 unchanged sentences

Activity in 2023

Acquisition of Kade

Step acquisition of Gwo Yng

Foreign currency exchange rate change

1 unchanged sentence

Accumulated impairment losses

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Acquired Intangible Assets

19 unchanged sentences

For information related to identified

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

intangible assets acquired in the Kade acquisition and Gwo Yng step acquisition, see Note 2, “Business Acquisitions and Investments,” of the notes to our consolidated financial statements.

Other Intangible Assets

7 unchanged sentences

2023, 2022 and 2021, respectively.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments in Unconsolidated Affiliates

(In thousands)

Foshan GWOYNG SMP Vehicle Climate Control & Cooling Products Co.

Foshan FGD SMP Automotive Compressor Co.

1 unchanged sentence

Orange Electronic Co.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co.

Investment in Foshan FGD SMP Automotive Compressor Co.

In November 2017, we formed Foshan FGD SMP Automotive Compressor Co., Ltd., a 50/50 joint venture with Foshan Guangdong Automotive Air Conditioning Co., Ltd.

China-based manufacturer of automotive belt driven air conditioning compressors.

We acquired our 50 % interest in the joint venture for

approximately $ 12.5 million.

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

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

During the years ended December 31, 2023 and 2022, we made purchases from the joint venture of

approximately $ 44.1 million and $ 43.5 million, respectively.

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

7 unchanged sentences

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

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

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

subject to extension by SMP HK at its sole discretion.

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

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

as lender, up to an aggregate principal amount of $ 4 million, with interest calculated on the basis of simple interest of five

percent ( 5 %) per annum and a maturity date of November 30, 2023 , subject to extension by SMP HK at its sole discretion.

In September 2023, the loan agreement was extended through November 30, 2025.

Outstanding borrowings under the

loan agreement at December 31, 2023 were $ 4 million.

In October 2022, we

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

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

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

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

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

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

were not material.

Investment in Foshan FGD SMP Automotive Compressor Co.

In November 2017, we formed Foshan FGD SMP Automotive Compressor Co., Ltd., a 50/50 joint venture with Foshan Guangdong Automotive Air Conditioning Co., Ltd.

China-based manufacturer of automotive belt driven air conditioning compressors.

We acquired our 50 % interest in the joint venture for

approximately $ 12.5 million.

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

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

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

approximately $ 53.3 million and $ 32.2 million, respectively.

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

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

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

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

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

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

of accounting.

In March 2018, we acquired an additional 15 % equity

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

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

ordinary course of business.

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

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

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the years ended December 31, 2023 and 2022, purchases we

made from CYJ were not material.

Investment in Orange Electronic Co.

3 unchanged sentences

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

During the years ended December

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

During the years ended

December 31, 2023 and 2022, we made purchases from Orange of approximately $ 3.2 million and $ 4.5 million, respectively.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

In April 2014, we formed Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co.

(“Gwo Yng”), a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd., a China-based manufacturer of air conditioner accumulators,

filter driers, hose assemblies and switches.

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

In March 2018, we acquired an additional 15 % equity interest in the joint venture for RMB 26,475,583

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

While we increased our equity interest in the joint venture to 65 %, the minority shareholder maintained substantive participating rights that allowed it to participate in certain significant financial and operating decisions that occur in the

ordinary course of business.

As a result, we continued to account for our investment in the joint venture under the equity method of accounting.

July 2023, we acquired an additional 15 % equity interest in the joint venture for RMB 27,378,290 (approximately $ 4 million), thereby increasing our

equity interest in Gwo Yng to 80 %.

In connection with the transaction, we amended and restated the charter documents of Gwo Yng to

remove all minority shareholder substantive participating rights, giving SMP control of Gwo Yng.

As a result, as of the closing date of the transaction, Gwo Yng will be accounted for as a business combination achieved in stages (“a step

acquisition”).

Accordingly, commencing on the closing of the transaction, we will report the results of Gwo Yng on a consolidated basis with the minority ownership interest reported as a noncontrolling interest.

the year ended December 31, 2023 and through the date of our step acquisition in July 2023, we made purchases from the joint venture of approximately $ 10.3

Purchases made from the joint venture approximated $ 16.2 million during the year ended December 13, 2022.

For additional information related to Gwo

Yng, see Note 2, “Business Acquisitions and Investments,” of the notes to our consolidated financial statements.

(In thousands)

Deferred compensation

Long-term investments

Noncurrent portion of interest rate swap fair value

Long term receivables

Deferred financing costs, net

Total other assets, net

Deferred compensation consists of assets held in a nonqualified defined contribution pension plan as of December 31, 2022 and 2021, respectively.

Def erred compensation consists of assets held in a nonqualified defined contribution pension plan as of December 31, 2023 and 2022, respectively.

Long term investments as of

December 31, 2023 consist of certificates of deposit with original maturities in excess of twelve months .

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Credit Facilities and Long-Term Debt

3 unchanged sentences

Credit facility – revolver due 2027

Senior secured facility – revolver due 2023

Current maturities of debt

Long-term debt

Other includes borrowings under our Polish

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

There were no borrowings under

the Polish overdraft facility at December 31, 2022.

Term Loan and Revolving Credit Facilities

In March 2022, the

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

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

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

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

LIBOR with Term SOFR as the reference rate.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Term Loan and

Revolving Credit Facilities

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

5 unchanged sentences

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

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

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

million sub-limit for the borrowing of swingline loans.

The term loan amortizes in quarterly installments of 1.25 % in each of the first four years, and quarterly

installments of 2.5 % in the fifth year of the Credit Agreement.

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

The maturity date is June 1, 2027 .

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

maturity date.

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

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

Company may request up to two one-year

extensions of the maturity date.

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

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

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

4 unchanged sentences

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

Term loan borrowings are being made at one-month

Term loan borrowings were made at one-month

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

1 unchanged sentence

The Company may select

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

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

Interest is payable at the end of the selected interest

8 unchanged sentences

The interest rate swap agreement matures in May 2029.

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

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

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

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

Agreement at December 31, 2021.

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

STANDARD MOTOR PRODUCTS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

million at 8 %.

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

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

During the year ended December 31, 2022, our average

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

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, 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

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,

2 unchanged sentences

Polish Overdraft Facility

I n October 2022, our Polish subsidiary, SMP Poland sp.

z.o.o., amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce to provide for borrowings under the facility in Euros and U.S.

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

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

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

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

commencement of the three-month renewal period.

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

for borrowings in U.S Dollars.

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

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

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

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

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

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Maturities of Debt

As of December 31, 2022, maturities of debt

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

As of December 31, 2023, maturities of

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

Revolving Credit Facility

3 unchanged sentences

Long-term debt

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred Financing Costs

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

We have deferred financing costs of approximately $ 1.6 million and $ 2.1 million as of December 31, 2023 and 2022, resp ectively.

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

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

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

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

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

Deferred financing costs as of December

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

(In thousands)

Total amortization

Deferred financing costs as of December 31, 2023, assuming no prepayments, are being amortized in the amounts of $ 0.5 million in 2024, $ 0.5 million

in 2025, $ 0.5 million in 2026 and $ 0.1

million in 2 027.

Accumulated Other Comprehensive Income

11 unchanged sentences

Balance at December 31, 2023 attributable to SMP

Consists of the unrecognized

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

December 31, 2022.

Consists of the unrecognized loss relating to the change in fair value of the cash flow

interest rate hedge of $ 1.2 million ($ 0.9 million, net of tax) plus cash settlement receipts of $ 2.4 million ($ 1.7 million, net of tax) in the year ended December 31, 2023;

and the unrecognized gain relating to the change in fair value of the cash

flow interest rate hedge of $ 5.2 million ($ 3.8 million, net of tax) minus cash settlement payments of $ 42 ,000 ($ 31 ,000, net of tax) in the year December 31, 2022.

STANDARD MOTOR PRODUCTS, INC.

11 unchanged sentences

Total reclassifications attributable to SMP

Unrecognized accumulated other

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

borrowings are recognized.

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

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

Unrecognized accumulated other comprehensive income (loss) related to the cash flow interest rate hedge

is reclassified to earnings and reported as part of interest expense in our consolidated statements of operations when the interest payments on the underlying borrowings are recognized.

Unrecognized accumulated other comprehensive income (loss) related to our post retirement plans is

reclassified to earnings and included in the computation of net periodic postretirement benefit costs, which are included in other non-operating income (expense), net in our consolidated statements of operations (see Note 15,

“Employee Benefits,” for additional information).

Stockholders’ Equity

11 unchanged sentences

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.

5 unchanged sentences

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.

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

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

To date, there have been no repurchases of our common

stock under the program.

STANDARD MOTOR PRODUCTS, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

Stock will be purchased under the program from time

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

To date, there have been no repurchases

of our common stock under the program.

Stock-Based Compensation Plans

36 unchanged sentences

upon our evaluation of historical and expected future turnover.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

3 unchanged sentences

All shares and rights are subject to forfeiture if certain employment conditions are not met.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Under the amended and restated 2016 Omnibus Incentive Plan, 2,050,000

21 unchanged sentences

Balance at December 31 , 2021

Performance Shares Target Adjustment

Balance at December 31 , 2022

14 unchanged sentences

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

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

respectively.

In March 2023 and 2022, contributions of $ 0.8 million were made related to calendar years 2022 and 2021, respectively.

As of December 31, 2023, we have recorded an obligation of $ 0.6 million for 2023.

47 unchanged sentences

The fair value of the

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

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

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

interest expense in the consolidated statements of operations.

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

interest rate swap agreement as of December 31, 2023 and December 31, 2022 was an asset of $ 3.9 million and $ 5.2 million, respectively, which has been deferred and recorded in accumulated other comprehensive income, net of income taxes, in our consolidated

balance sheet.

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

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

Fair Value Measurements

15 unchanged sentences

December 31, 2022

Cash and cash equivalents

Cash and cash equivalents (a)

Deferred compensation

2 unchanged sentences

Cash flow interest rate swap

The carrying value of cash and cash

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

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

registered investment companies.

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

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

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

Long-term investments

As of December 31, 2023 cash and cash equivalents consist

of cash of $ 29.5 million and cash equivalents of $ 3 million, which are classified as Level 1 and Level 2, respectively, under the fair value hierarchy.

Cash and cash equivalents at December 31, 2022 consists solely of cash of $ 21.2 million, which is classified as Level 1 under the fair value hierarchy.

Cash equivalents consist of

certificates of deposit with original maturities of 3 months, or less.

These securities are accounted for as held-to-maturity and recorded at amortized cost, which approximates their fair values at December 31, 2023.

The fair value of the

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

The carrying value of our variable rate short-term borrowings and long-term

debt under our credit facilities approximates fair value as the variable interest rates in the facilities reflect current market rates.

The fair value of our cash flow interest rate swap agreement is obtained from an independent third party, is

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

Long-term investments consist of certificates of deposit with original

maturities in excess of twelve months.

These securities are accounted for as held-to-maturity and recorded at amortized cost, which approximates their fair values at December 31, 2023.

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

3 unchanged sentences

Total income tax provision

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reconciliations between taxes at the U.S.

5 unchanged sentences

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

Change in valuation allowance

Income tax (benefit) attributable to foreign income

Other non-deductible items, net

Change in valuation allowance

Provision for income taxes

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

1 unchanged sentence

Allowance for customer returns

Postretirement benefits

Allowance for expected credit losses

Accrued asbestos liabilities

Accrued salaries and benefits

Tax credit and NOL carryforwards

Accrued asbestos liabilities

Allowance for expected credit losses

Valuation allowance

15 unchanged sentences

2023 is intended to provide for uncertainty regarding the ultimate realization of our U.S.

foreign tax credit carryovers and foreign net operating loss carryovers.

Based on these considerations, we believe it is more likely than not that we would

realize the benefit of the net deferred tax asset of $ 33.7 million as of December 31, 2022, which is net of the remaining valuation

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

foreign tax credit carryovers.

Based on these considerations, we believe it is more likely than not that we would realize the benefit of the net deferred tax

asset of $ 40.5 million as of December 31, 2023, which is net of the remaining valuation allowance.

At December 31, 2023, we have foreign

tax credit carryforwards of approximately $ 3.8 million that will expire in varying amounts by 2032 .

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

3 unchanged sentences

such amounts.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2 unchanged sentences

During the years ended December 31, 2023, 2022 and 2021, we did no t establish a liability for uncertain tax positions.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We are subject to taxation in the U.S.

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Poland ( 2018 onward), Hungary ( 2018

onward) and Germany ( 2019 onward).

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

decrease over the next 12 months;

onward), U.K.

( 2017 onward) and Germany ( 2019

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

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

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Industry Segment and Geographic Data

We have two major reportable operating segments, each of

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

Our Engine Management Segment manufactures and

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

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

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

Beginning on January 1, 2023, we reorganized our business into three operating segments

– Vehicle Control, Temperature Control and Engineered Solutions .

The new 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.

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

It includes our core automotive aftermarket business after carving out all

non-aftermarket business to our Engineered Solutions operating segment.

The Vehicle Control operating segment includes sales from ignition, emissions and fuel delivery, electrical and safety, and wire sets and other product categories.

Temperature Control is our ongoing automotive aftermarket operating segment, after the carve out of all non-aftermarket business to our Engineered Solutions

operating segment.

Temperature Control derives its sales from air conditioning system components and other thermal product categories.

Our Temperature Control operating 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 powertrain.

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

operating segments.

Our Engineered Solutions segment supplies custom-engineered solutions to vehicle and equipment manufacturers in highly diversified global end-markets such as commercial and light vehicles, construction, agriculture, power

sports and marine.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The following tables contain

financial information for each reportable segment (in thousands):

The following tables contain financial information for each reportable operating segment (in thousands):

Year Ended December 31,

Net sales (a):

Engine Management

Vehicle Control

Temperature Control

Engineered Solutions

Total net sales

Intersegment sales (a) :

Engine Management

Temperature Control

Total intersegment sales

Depreciation and Amortization:

Engine Management

Vehicle Control

Temperature Control

Engineered Solutions

Total depreciation and amortization

Operating income (loss) :

Engine Management

Vehicle Control

Temperature Control

Engineered Solutions

Total operating income

Investment in unconsolidated affiliates:

Engine Management

Vehicle Control

Temperature Control

Engineered Solutions

Total investment in unconsolidated affiliates

Capital expenditures :

Engine Management

Vehicle Control

Temperature Control

Engineered Solutions

Total capital expenditures

Total assets :

Engine Management

Vehicle Control

Temperature Control

Segment net sales include

intersegment sales in our Engine Management and Temperature Control segments.

Engineered Solutions

There are no intersegment sales

among our Vehicle Control, Temperature Control and Engineered Solutions operating segments.

Other consists of financial information related to the activities of our corporate headquarters function.

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

Reconciliation of segment operating income to net earnings:

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approximately 59 % of our consolidated net sales in 2023.

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

Net sales from each of the customers were

reported in both our Engine Management and Temperature Control Segments.

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

financial condition and results of operations.

2023, O’Reilly Auto Parts, AutoZone and NAPA accounted for 29 %, 16 % and 14 % of our consolidated net sales, respectively.

Net sales from each

of the customers were reported in our Vehicle Control and Temperature Control Segments.

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

our business, financial condition and results of operations.

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

For the disaggregation of our net sales from customers by major product group and geographic area within each of our operating segments, see Note 22, “Net Sales.”

Disaggregation of Net Sales

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

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

Major Product Group

The Vehicle Control operating segment generates its revenues from core aftermarket sales of ignition, emissions, and fuel delivery, electrical and safety, and wire sets

and other product categories.

The Temperature Control operating segment generates its revenue from aftermarket sales of air conditioning system components and other thermal products.

Engineered Solutions operating segment generates revenues from custom-engineered products to vehicle and equipment manufacturers in highly diversified global end-markets such as commercial and light vehicles, construction, agriculture, power

sports and marine.

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

This change in operating segments will better align our operating segments with our strategic focus on diversification, and provide

greater transparency into how we are positioned to capture growth opportunities of the future.

The change will also better reflect the impact of our recent acquisitions.

Disaggregation of Net Sales

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

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

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

Year Ended December 31, 2022 (a)

The following table summarizes consolidated net sales by major product group within each operating segment for the years ended December 31, 2023, 2022 and 2021 (in

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

Geographic Area

We sell our line of products primarily in the United States, with additional sales in Canada, Mexico, Europe, Asia and Latin America.

Sales are attributed to countries

based upon the location of the customer.

Our sales are substantially denominated in U.S.

The following tables provide disaggregation of net sales information by geographic area within each operating segment for the years ended December 31, 2023, 2022 and

2021 (in thousands):

Year Ended December 31, 2023

Geographic Area:

United States

Other foreign

Major Product Group:

Ignition, emission control, fuel and safety related system products

Wire and cable

Other climate control parts

Major Sales Channel:

STANDARD MOTOR PRODUCTS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended December 31, 2021 (a)

Year Ended December 31, 2022

Geographic Area:

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Other foreign

Major Product Group:

Ignition, emission control, fuel and safety related system products

Wire and cable

Other climate control parts

Major Sales Channel:

Year Ended December 31, 2020 (a)

Year Ended December 31, 2021

Geographic Area:

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Other foreign

Major Product Group:

Ignition, emission control, fuel and safety related system products

Wire and cable

Other climate control parts

Major Sales Channel:

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

Other consists of the elimination of intersegment sales from our Engine

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

Intersegment wire and cable sales for the years ended December 31, 2022 and

2021 exceeded third party sales from our Canadian business unit.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Geographic Area

We sell our line of products primarily in the United States, with additional sales in Canada, Mexico, Europe, Asia and Latin America.

Sales are attributed to countries

based upon the location of the customer.

Our sales are substantially denominated in U.S.

Major Product Group

The Engine Management segment of the Company principally generates revenue from the sale of automotive engine parts in the automotive aftermarket including ignition,

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

The Temperature Control segment of the Company principally generates revenue from the sale of automotive temperature control systems parts in the automotive

aftermarket including air conditioning compressors and other climate control parts.

Major Sales Channel

In the 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 the Specialized Original Equipment (“OE”) and Original Equipment Service (“OES”) channel, we sell our products to original

equipment manufacturers who redistribute our products within their distribution network, independent dealerships and service dealer technicians.

Lastly, in the Export channel, our domestic entities sell to customers outside the United States.

Commitments and Contingencies

Total rent expense for the three years ended December 31, 2023 was as follows (in thousands):

In cludes expenses of approximately $ 2.7 million and $ 2

million for the years ended December 31, 2022 and 2021, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less, which

is no t material.

expenses of approximately $ 3.3 million , $ 2.7 million, and $ 2

million for the years ended December 31, 2023, 2022 and 2021, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less,

which is no t material.

For our operating lease minimal rental payments that we are obligated to make, see Note 7, “Leases.”

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Warranty expense for each of the years 2023, 2022, and 2021 were $ 120 million, $ 112.5 million and $ 91.9 million, respectively.

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table provides the changes in our product warranties:

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Balance, end of period

STANDARD MOTOR PRODUCTS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Letters of Credit

At December 31, 2022, we had outstanding letters of credit with certain vendors aggregating approximately $ 2.4 million.

These letters of credit are being maintained as security for reimbursements to insurance companies and as security to the landlord of our administrative offices

in Long Island City, New York.

The contract amount of the letters of credit is a reasonable estimate of their value as the value for each is fixed over the life of the commitment.

As of December 31, 2023 and 2022, we had outstanding letters of credit with certain vendors aggregating approximately $ 2.3 million and $ 2.4 million, respectively.

These letters of

credit are being maintained as security for reimbursements to insurance companies and as security to the landlord of our administrative offices in Long Island City, New York.

The contract amount of the letters of credit is a reasonable estimate

of their value as the value for each is fixed over the life of the commitment.

Change of Control Arrangements

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At December 31, 2023, approximately 1,390 cases were outstanding for which we may be responsible for any related liabilities.

Since inception in

September 2001 through December 31, 2022, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $ 64.6 million.

Since inception in September 2001

through December 31, 2023, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $ 74.6

We do not have insurance coverage for the indemnity and defense costs associated with the claims we face.

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(1) historical data available from publicly available studies;

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

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

(3) an analysis of our currently pending claims;

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2023 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs, ranging from $ 84 million to $ 135.3 million for the period through 2065 .

The change from the prior year study, which was as of August 31, 2021, was a $ 7.9 million increase for the low end of the range

and a $ 11.4 million increase for the high end of the range.

The increase in the estimated undiscounted liability from the prior year

study at both the low end and high end of the range reflects our actual experience, our historical data and certain assumptions with respect to events that may occur in the future.

change from the prior year study, which was as of August 31, 2022, was a $ 15.2 million increase for the low end of the range and a $ 23.7 million increase for the high end of the range.

The increase in the estimated undiscounted liability from the prior year study at both the low

end and high end of the range reflects our actual experience, our historical data and certain assumptions with respect to events that may occur in the future.

Based upon the results of the August 31, 2023 actuarial study, in September 2023 we increased our asbestos liability to $ 84 million , the low end of the range, and recorded an incremental pre-tax provision of $ 23.8 million in earnings (loss) from discontinued operations in the accompanying

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range from $ 53.1 million to $ 105.2 million for the period through 2065 .

Total operating cash outflows related to discontinued operations, which include settlements, awards of asbestos-related damages and legal costs, net of taxes, were $ 12 million , $ 8.8 million and $ 16.4 million for the years ended December 31, 2022, 2021 and 2020 , respectively.

Total operating cash outflows related to discontinued operations, which include settlements, awards of asbestos-related damages and legal costs, net of taxes, were $ 11 million , $ 12 million and $ 8.8

million for the years ended December 31, 2023, 2022 and 2021 , respectively.

We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future and whenever events or changes in circumstances

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Other Litigation

In connection with the aforementioned former brake business, we were subject to a legal

proceeding alleging a breach of contract claim of the related purchase agreement.

In May 2023, we were found liable for approximately $ 11

million and, as such, in the second quarter of 2023 we recorded a pre-tax provision of such amount in earnings (loss) from discontinued operations in the accompanying statement of operations.

However, in August 2023, we reached a final

settlement of the legal proceeding, in which we reduced our liability to $ 10.5 million.

In connection therewith, we reduced the

pre-tax provision to $ 10.5 million and recorded a $ 0.5 million credit in earnings (loss) from discontinued operations in the accompanying statement of operations.

Payment of such claim was made in early October 2023.

We are currently involved in various other legal claims and legal proceedings (some of which may involve substantial amounts), including claims related to commercial

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As additional information becomes available, we reassess our potential liability related to these matters.

Such revisions of

the potential liabilities could have a material adverse effect on our business, financial condition or results of operations.

Such revisions of the

potential liabilities could have a material adverse effect on our business, financial condition or results of operations.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data