SMP 10-K & 10-Q changes, risk factors and insider trading

OurIn 2025, three largestcustomers individual customerseach accounted for approximatelymore 60.7%than 10% of our consolidated net sales inat 2024.25.2%, During 2024, O’Reilly Auto Parts, AutoZone18.6% and NAPA accounted for 28.4%, 18.8% and 13.5% of our consolidated net sales,10.5%, respectively. Net sales from each of the customers were reported in our Vehicle Control and Temperature Control operating segments. The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of themthem, could have a materialmaterially 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.

•respond more quickly than we can to new or emerging technologiestechnologies, such as the identification of potential uses and successful adoption of artificial intelligence ("AI") technologies, and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive products and services;

We cannot assure you that our competitors will not develop products or services that are equal or superior to our products or that achieve greater market acceptance than our products or that in the future other companies involved in the automotive industry will not expand their operations into product lines produced and sold by us. We also cannot assure you that additional entrants will not enter the automotive industry or that companies in the industry will not consolidate. Furthermore, if we do not invest in or effectively use AI capabilities, or if competitors leverage these technologies more successfully, our competitive position could suffer. Any such competitive pressures could cause us to lose market share or could result in significant price decreases and could have a material adverse effect upon our business, financial condition and results of operations.

We may incur material losses and significant costs as a result of warranty-related returns by our customers in excess of anticipated amounts.amounts or product recalls.

Our products are required to meet rigorous standards imposed by our customers and our industry. Many of our products carry a warranty ranging from a 90-day limited warranty to a limited lifetime warranty, which generally cover defects in materials orand workmanship, and conformance to agreed upon specifications. If our products fail to conform to these warranties, the affected products may be subject to warranty returns and/or product recalls. Furthermore, non-conformities that affect motor vehicle safety or compliance with applicable motor vehicle safety standards or guidelines, or non-conformities in products sold to original equipment manufacturers or their tier suppliers or system integrators could result in significant costs and lost sales, investigations and/or enforcement actions by state and federal governments, as well as negative publicity and damage to our reputation that could reduce future demand for our products. We cannot give any assurance that our products will not suffer from defects or other deficiencies or that we will not experience material warranty returns or product recalls in the future.

In our automotive aftermarket business, we permit overstock returns of inventory that may be either new or non-defective or non-obsolete but that we believe we can re-sell. Customers are generally limited to returning overstocked inventory according to a specified percentage of their annual purchases from us. In addition, a customer’s annual allowance cannot be carried forward to the upcoming year. We accrue for overstock returns as a percentage of sales, after giving consideration to recent historical returns. While we believe that we make reasonable estimates for overstock returns in accordance with our revenue recognition policies, actual returns may differ from our estimates. To the extent that overstocked returns are materially in excess of our projections, our business, financial condition and results of operations may be materially adversely affected.

At December 31, 2024,2025, 1,287approximately 945 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2024,2025, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $91.4$105.2 million. A substantial increase in the number of new claims, or increased settlement payments, or awards of asbestos-related damages, could have a material adverse effect on our business, financial condition and results of operations.

In accordance with our policy to perform an annual actuarial evaluation in the third quarter of each year, an actuarial study was performed as of August 31, 2024.2025. The results of the August 31, 20242025 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs, ranging from $99.6$127.5 million to $210.8$275.9 million for the period through 2065. Based upon the results of the August 31, 20242025 actuarial study, andin allSeptember other available information to us,2025 we increased our asbestos liability to $99.6$127.5 million, the low end of the range, and recorded an incremental pre-tax provision of $29.3$44.4 million in loss from discontinued operations in the accompanying consolidated statement of operations. Future legal costs, which are expensed as incurred and reported in loss from discontinued operations in the accompanying statementconsolidated statements of operations, are estimated, according to the August 31, 20242025 study, to range from $49.8$48.5 million to $115.9$115.3 million for the period through 2065.

Despite security measures designed to preventprevent, detect and mitigate the risk of cybersecurity incidents, our information systems, and the systems of our customers, suppliers and business partners, mayhave bebeen subject to and remain vulnerable to harm from such incidents, including interruptions, outages, data breaches, phishing attacks, ransomware attacks, unauthorized access, attempts to hack into our network, and computer viruses. Moreover, the technologies and techniques used to carry out cyber-attacks are continuously evolving, making it difficult to detect these changes or implement adequate measures in time to preventprevent, detect or mitigate the impact of an attack. We have not experienced a material cybersecurity incident in 2024, but we cannot guarantee that there will be no future cybersecurity incident that causes a material adverse effect on our information systems, or that of our customers, suppliers and other business partners.

In the event that our information systems, or the systems of our customers, suppliers or business partners, are subject to such incidents, we could experience errors, interruptions, delays, and/or the cessation of services in key portions of our information systems.systems, Ifadversely critical information systems fail or otherwise become unavailable,affecting our ability to process orders, maintain proper inventory levels, collect accounts receivable andreceivable, disburse funds couldand beperform adverselykey affected.business Theoperations. foregoingSuch mattersincidents could also causeresult significantin the theft of our intellectual property and proprietary business information, unauthorized access to personnel information, damage to our business reputation,reputation affectand our relationships with our business partners, and lead to claims against us,us and/or subject us to fines or other penalties assessed by governmental authorities. Additionally, we may be required to incur substantial costs to remediate the damage caused by these disruptions or to protect us against future cybersecurity incidents. Depending on the nature and magnitude of these events, they could have a material and adverse effect on our business, financial condition or results of operations.

Our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors. In our automotive aftermarket business, we believe that our success depends, in part, on maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our aftermarket customers through the support of their marketing initiatives. A decline in the reputation of our brands as a result of events, such as the proliferation of private labels by certain retail customers, deficiencies or defects in the design or manufacture of our products, or from legal proceedings, product recalls or warranty claims resulting from such deficiencies or defects, may harm our reputation as a manufacturer and distributor of premium automotive parts, reduce demand for our products and adversely affect our business.

Most of our customers buy products from us on credit. We extend credit to customers and offer extended payment terms based upon competitive conditions in the marketplace and our assessment and analysis of creditworthiness. General economic conditions, competition and other factors may adversely affect the solvency or creditworthiness of our customers. Higher interest rates, inflationary cost increases in raw materials, labor and transportationtransportation, the availability of supplier finance programs to purchase goods and services and the terms of such programs, and a general worsening of economic conditions have put financial pressure on many of our customers and may threaten certain customers’ ability to maintain liquidity sufficient to repay their obligations to us as they become due. The bankruptcy, insolvency or other credit failure of any customer that has a substantial amount owed to us could have a material adverse effect on our operating revenue and results of operations. We recorded a $7 million pre-tax charge in 2022 to reduce our outstanding accounts receivable balance from a customer that filed for bankruptcy in the first quarter of 2023 to our estimated recovery amount.

Our success is dependent upon our ability to attract, retain and motivate certain key employees, including our management and our skilled workforce of engineers, technically-trained salesforcesales force employees and other qualified personnel. Many of our key employees have many years of experience with our Company and would be difficult to replace without allotment of a significant amount of time for knowledge transfer. Furthermore, we compete with other businesses to fill many of our hourly positions in certain distribution facilities, which historically have had high turnover rates, and has led to increased training and retention costs, particularly in a competitive and shrinking labor market. We cannot be certain that we will be able to continue to attract or retain our key employees or other labor needs, which could cause us to fail to execute our value proposition, fail to achieve operational efficiencies, and incur increased labor costs, which could have an adverse effect our business, financial condition and results of operations.

The utility of the supply chain financing arrangements also depends upon a benchmark reference rate for the purpose of determining the discount rate on the sale of the underlying trade accounts receivable. If the benchmark reference rate increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows. Depending upon the level of sales of receivables pursuant these agreements, the effect of a hypothetical, instantaneous and unfavorable change of 100 basis points in the referencemargin rate may have an approximate $8.8$9.8 million negative impact on our earnings or cash flows.

In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). The 2024 Credit Agreement matures on September 16, 2029 and provides for senior secured borrowings of up toan approximately $750 million,million consistingcredit facility, comprised of (i) a $430 million multi-currency revolving credit facility ("global tranche"),; (ii) a $10 million multi-currency revolving credit facilityfacility, available to one or more wholly-owned Danish subsidiaries of the Company ("Danish tranche"),; (iii) a $200 million delayed draw term loan facility,facility in U.S. dollars; and (iv) a 100 million euros delayed draw term loan facility. The revolving credit facility has a $25 million sublimit for the issuance of letters of credit, and a $30 million sublimit for the borrowing of swingline loans. As of December 31, 2024,2025, our total outstanding indebtedness was $562.3$618.7 million, including outstanding borrowings under the 2024 Credit Agreement of $545.4$598.1 million, net of deferred financing costs, consisting of current borrowings of $25.2$45.3 million and long-term debt of $520.1$552.8 million.

In addition, the Company’s obligations under the 2024 Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions. The collateral security described above also secures certain banking services obligations and interest rate swaps and currency or other hedging obligations of the Company owing to any of the then existing lenders or any affiliates thereof. In 2022 and 2024, we entered into interest rate swap agreements with a total notional amountsamount of $100 million and $103.9 million or €100$213.0 million that mature in May 2029 and March 2030, respectively. The interest rate swap agreements are designated as a cash flow hedges of interest payments on borrowings in U.S. dollars and euros under our 2024 Credit Agreement.

We have manufacturing and distribution facilities in many countries, including Mexico, Canada, Denmark, France, Germany, Hungary, Italy, Netherlands, Poland, Slovakia, Spain and the United Kingdom, as well as joint-ventures in China. Our global operations subject us to a variety of political, economic and regulatory risks that are associated with doing business internationally, including: (a) changes in economic conditions in the countries in which we operate; (b) political uncertainty, instability, civil unrest and the risks of terrorism or other hostilities; (c) foreign currency exchange rate fluctuations and currency controls; (d) changes in U.S. trade policy and international trade agreements, resulting in political tension and trade disputes between the U.S. and foreign governments, and new or higher tariffs or changes to customs requirements or procedures; and (e) the potential for shortages of trained labor.

Changes in U.S. trade policy, particularly as it relates to Mexico, Canada and China, have caused significant uncertainty in our business, and could have a substantial adverse effect on our business, financial condition and results of operations. We believe that new or higher tariffs on imports to the United States from countries in which we source raw materials, component parts and finished goods, such as the tariffs on imports from Mexico, Canada and China announced on February 1, 2025, should they be implemented and sustained for an extended period of time,goods could have a substantial adverse effect on the automotive industry and our business. Further, any retaliatory tariffs imposed by foreign governments would exacerbate the impact.

Our operations and properties are subject to a wide variety of increasingly complex and stringent federal, state, local and international laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of materials, substances and wastes, the remediation of contaminated soil and groundwater and the health and safety of employees. Such environmental laws, including but not limited to those under the Comprehensive Environmental Response Compensation & Liability Act, may impose joint and several liability and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located.

The nature of our operations exposes us to the risk of claims with respect to such matters, and we can give no assurance that violations of such laws have not occurred or will not occur or that material costs or liabilities will not be incurred in connection with such claims. We are currently monitoring our environmental remediation efforts at one of our facilities and our reserve balance related to the environmental clean-up at this facility is $1.7 million at December 31, 2024. The environmental testing and any remediation costs at such facility may be covered by several insurance policies, although we can give no assurance that our insurance will cover any environmental remediation claims. We can give no assurance that the future cost of compliance with existing environmental laws and the liability for known environmental claims pursuant to such environmental laws will not give rise to additional significant expenditures or liabilities that would be material to us. In addition, future events, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement policies of federal, state or local regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations.

If we do not respond appropriately to changesChanges in automotive technologies,technologies can impact our business, such as the adoption of new technologies and systems to make traditional, internal-combustion-engine vehicles more efficient, or the adoption of electric or hybrid electric vehicle architectures, weor changes in access to vehicle-generated data needed to service and repair vehicles. These factors could experienceresult in less demand for our products thereby causing a decline in our results of operations or deterioration in our business and financial condition, and we may have a material adverse effect on our long-term performance.

Consolidated net sales for 20242025 were $1,463.8$1,791.2 million, aan increase of $105.6$327.3 million, or 7.8%22.4% compared to net sales of $1,358.3$1,463.8 million in 2023.2024. The increase in net sales in 20242025 reflects the impact of multiple factors including:

•strong demand in our Temperature Control operating segment primarily reflecting the impact of warmergrowth year-over-yearin seasonalcertain weatherproduct conditions,categories and gains in market share,

•stable demand in our Vehicle Control aftermarket segmentsegment, acrossoffset our major product groups, andby

•a slight increase inlower net sales in our Engineered Solutions operating segment withas growth from business wins and successful cross-selling efforts offset bylower slowingdemand customerdue productionto incyclical thesoftness fourthacross quarter.global end markets.

Gross margin as a percentage of net sales in 20242025 was 28.9%31.2% as compared to 28.6%28.9% in 2023.2024. Overall, the increase in gross margin increase as a percentage of sales in 20242025 primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar. In addition, we experienced the positive impact of higher sales volumes leadingin our legacy segments lead to higher fixed manufacturing cost absorption, improved operating performance including the impact of cost control measures, and increased pricing,pricing primarily to incorporate higher tariffs on imports into the United States, which more than offset lingering inflationary increases in certain materials and labor costs.costs and a lag in the timing of updating pricing for the impact of higher tariffs. We anticipate that the ongoing benefits from our cost-savings initiatives and strongsynergies gross margins inwith our newly acquired operating segment, Nissens Automotive, will mitigate continued pressure on margins resulting from inflationary headwinds.margins. While our business in U.S. markets could be impacted by additional tariffs, we expect to mitigate the impact with a combination of price increases and cost reduction efforts.

Operating margin as a percentage of net sales in 20242025 was 5.5%7.6% as compared to 6.8%5.5% in 2023.2024. Overall the increase in operating margin as a percentage of sales primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which resulted in improved gross margin, as well as lower acquisition related costs and restructuring expenses. Included in our operating margin were selling, general and administrative expenses of $420.7 million, or 23.5% of net sales in 2025 compared to $335.1 million, or 22.9% of net sales in 2024 compared to $293.6 million, or 21.6% of net sales in 2023.2024. The $41.5$85.6 million increase in selling, general and administrative expenses in 20242025 is principally due to (i) $14.3$79.3 million ofin selling, general and administrative expenses for Nissens Automotive as the results reflect a full year of ouractivity newcompared operating segment are consolidated into our financial statements for theto two months from the close of the acquisition,acquisition in 2024, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales,sales (iii)and costs associated with our acquisition of Nissens Automotive, and (iv) increased rent and incremental expenses as wethe transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas.Kansas, Theand new(iii) largerincreased distributiongeneral centerand willadministrative integratecosts new distribution technologies including a mechanized material handling system designedrelated to delivercompany-wide improvedstrategic logisticsinitiatives, capabilities,offset operationalby efficiencies,(iv) as well as enhanced employee, customer and supplier experiences and is expect to be fully operational later in 2025. We will incur additionallower costs inassociated 2025with duringour theacquisition phase-inof periodNissens while we operate the two facilities.Automotive.

Sales. Consolidated net sales for 20242025 were $1,463.8$1,791.2 million, an increase of $105.6$327.3 million, or 7.8%,22.4%, compared to $1,358.3$1,463.8 million in 2023,2024, with the majority of our net sales to customers located in the United States. Consolidated net sales increased in all of our automotive aftermarket operating segments when compared to the prior fiscal year.

The following table summarizes consolidated net sales by segment and by major product group within each segment for the years ended December 31, 2024 and 2023 (in thousands):

Vehicle Control’s net sales for 20242025 increased $24.6$22.8 million, or 3.3%,3%, to $785.4 million compared to $762.6 million comparedin to2024. $737.9 millionIncreases in 2023.net Demandsales within engine management and electrical safety product groups reflected strong demand from customers, and was tempered by the continued secular decline in thesales Vehicleof Controlwire segment remained relatively stable across our major product groups.sets.

Temperature Control’s net sales for 20242025 increased $42.3$46.3 million, or 12.5%,12%, to $426.4 million compared to $380.1 million compared to $337.8 million in 2023.2024. The higher year-over-year Temperature Control net sales reflects highercontinued very strong customer demand duecompared to the impactsame of warmer seasonal weather conditionsperiod in the2024 U.S.benefiting comparedfrom a longer peak season, growth in certain product categories and gains in market share as our existing customers continued to 2023.grow. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.

NetNissens Automotive's net sales offor 2025 increased by $269.6 million from $35.7 million,million orin 2.4%2024 to $305.4 million in 2025 due to a full year of totalsales SMP'sactivity netas sales,compared for our newly acquired operating segment, Nissens Automotive, are included in our consolidated results for theto two months from the closingacquisition date ofin the acquisition. We expect2024. Nissens Automotive's net sales toexceeded our expectations in 2025 reflecting gains in market share. Demand for Nissens Automotive products follow a similar annual seasonal pattern as the Temperature Control segment, as demand for many of Nissens Automotive's products increasegenerally increases with warmer weather. We also expect to benefit from revenue synergies resulting from the acquisition starting in 2026 and beyond.

Gross Margins. Gross margins, as a percentage of consolidated net sales, increased to 28.9%31.2% for 2024,2025, compared to 28.6%28.9% for 2023.2024. The following table summarizes gross margins by segment for the years ended December 31, 2024 and 2023, respectively (in thousands):

The gross margin percentage in our Vehicle Control operating segment remaineddecreased relativelyslightly flat reflectingas higher sales volume and higher fixed cost absorption due to higher production levels than those achieved in 2023,2024, partiallywas more than offset by inflationarythe costimpact increases.of passing higher tariffs on imports into the United States through to customers at cost.

The gross margin percentage increase in our Temperature Control operating segment reflected higher sales volume, somehigher increasedcustomer pricing, improved operating performance from cost savings initiatives, lower seasonal returns and favorable fixed cost absorption due to higher production levels than those achieved in 2023.2024.

The gross margin percentage at our Nissens Automotive operating segment wasreflects negativelythe impacted by $3.1 millioninclusion of amortizationNissens Automotive segment results for inventorya full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar. Inventory fair value adjustments in 2025 of $4.6 million related to the application of accounting for business combinations.combinations Amortizationwere fully amortized by the end of the remainingsecond inventoryquarter fair value adjustment will continue through Q2of 2025.

While we anticipate continued margin pressure resulting from inflationary headwinds and a competitive market environment, we believe that our cost savings and product rationalization initiatives should mitigate much of this impact to our gross margins as well as, revenue and cost synergies related to the continued integration of our acquisitionnew ofsegment, Nissens Automotive. While our business in U.S. markets could be impacted by additional tariffs, we expect to mitigate the impact with a combination of price increases and cost reduction efforts.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $41.5$85.6 million to $420.7 million, or 23.5% of consolidated net sales in 2025, as compared to $335.1 million, or 22.9% of consolidated net sales in 2024,2024. asThe compared to $293.6 million, or 21.6% of consolidated net sales in 2023. Excluding the $14.3$85.6 million impact of including Nissens Automotive into our financial statements for the two months from the acquisition date, the increase in selling, general and administrative expenses in 2025 is principally due to the impact of (i) $10.5$79.3 million in selling, general and administrative expenses for Nissens Automotive as the results reflect a full year of activity compared to two months from the close of the acquisition in 2024, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales,sales (ii) $10.3 million ofand costs associated with our acquisition of Nissens Automotive, including $2.3 million of derivative losses on forward foreign exchange contract used to economically hedge the purchase price, and (iii) $4.6 million of increased rent and incremental expenses as we transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas.Kansas, and (iii) increased general and administrative costs related to company-wide strategic initiatives, offset by (iv) lower costs associated with our acquisition of Nissens Automotive.

Interest Expense. Interest expense increased to $31.3 million in 2025, compared to $13.5 million in 2024, compared to $13.3 million in 2023.2024. The year-over-year increase in interest expense reflects the impact of higher average outstanding balances due to borrowings under our 2024 Credit Agreement to fund our acquisition of Nissens Automotive,Automotive in 2024, partly offset by slightly lower year-over-year average interest rates on our credit facilities, including the impact of our interest rate swap agreements. We expect interest expense to increase in 2025 due to higher overall outstanding balances under our 2024 Credit Agreement connected to our acquisition of Nissens Automotive.

Income Tax Provision. The income tax provision for 20242025 was $30.6 million at an effective tax rate of 27.7%, compared to $19.4 million at an effective tax rate of 26.2%, compared to $18.4 million at an effective tax rate of 22.5%26.2% in 2023.2024. The higher effective tax rate in 20242025 compared to 20232024 reflects the impact of non-deductible transaction costs associated with our acquisition of Nissens Automotive, an increase in earnings from international as compared to U.S. operations, and thean effectiveincrease in future tax rateliabilities impactassociated ofwith lowerunrepatriated year-over-yearearnings pre-taxfrom income.international operations.

Loss From Discontinued Operations. Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 20242025 and 2023,2024, as well as other available information, and legal expenses and other costs associated with our asbestos-related liability. During the years ended December 31, 20242025 and 2023,2024, we recorded a net loss of $26.1$37.7 million and $29$26.1 million from discontinued operations, respectively. The loss from discontinued operations for the yearyears ended December 31, 20242025 and 20232024 includes (i) a $29.3$44.4 million and $23.8$29.3 million pre-tax provision, respectively, to increase our indemnity liability in line with the 20242025 and 20232024 actuarial studies;studies, (ii)and legal and other miscellaneous expenses, before taxes, of $4.8$5.2 million and $4.9$4.8 million for 20242025 and 2023,2024, respectively, and (iii) a $10.5 million pre-tax provision in 2023 related to a breach of contract legal proceeding.respectively. As discussed more fully in Note 23 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.

Net Earnings Attributable to Noncontrolling Interest. Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in Trombetta Asia, Ltd., our 70% owned joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”) and, in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co. Ltd., our 80% ownershipowned joint venture in Gwo Yng, commencing in July 2023 upon the completion of our step acquisition.China. Net earnings attributable to the noncontrolling interest were $1.0$0.9 million and $0.2$1.0 million during the years ended December 31, 20242025 and 2023,2024, respectively. For additional information on the Gwo Yng step acquisition, see Note 2, “Business Combinations,” in the Notes to Consolidated Financial Statements in Item 8 of this Report.

Restructuring and Integration Programs

For a detailed discussion on the restructuring and integration costs, see Note 3, “Restructuring and Integration Expenses,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

Net earnings during 20242025 were $28.5$42.2 million compared to $34.4$28.5 million in 2023.2024. The decrease in cash provided by operating activities resulted primarily from an increase in inventories of $36.9$81.6 million compared to a decreaseincrease of $29.5$36.9 million in the prior year, as well as increases in other working capital accounts primarily due to higher net salessales, andadditional tariff costs capitalized into inventory, preparation for pre-seasonand delivery timing of expected orders in early 2026. We continue to actively manage our Temperatureworking Controlcapital segment,to andmaximize lowerour netoperating earnings.cash flow.

Investing Activities. Cash used in investing activities was $418.7$35.7 million in 20242025 as compared to $25.7$418.7 million in 2023.2024. Investing activities during 20242025 primarily consisted of (i)capital expenditures of $38.7 million as compared to 2024 which primarily consisted of $372.5 million of cash paid for the acquisition of 100% of the shares of Nissens Automotive, net of cash acquired of $24.6 million, and (ii) capital expenditures of $44$44.0 million. The year-over-year increasedecrease in capital expenditures primarily relates to thelower implementation of upgraded automation equipment, racking and other equipment,spending as we invest in the start-up of our new distribution facility in Shawnee, Kansas.Kansas reaches completion.

Financing Activities. Cash used in financing activities was $0.3 million in 2025 as compared to cash provided by financing activities wasof $349.5 million in 2024 as compared to cash used in financing activities of $109.6 million in 2023.2024. In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). Borrowings under the 2024 Credit Agreement were used to repay all outstanding borrowings under the 2022 Credit Agreement and to finance the Company's acquisition of Nissens Automotive and related transaction costs, and will be used for general corporate purposes of the Company and its subsidiaries.

During 2023,2024, we (i) reducedincreased our borrowings by $392.0 million under our 20222024 Credit Agreement by $83.5 million; and (ii) paid dividends of $25.2$25.3 million and $0.7$2.3 million to SMP shareholders and shareholders of our noncontrolling interests, respectively. Cash provided by our operating activities in 2024 was used to reduce our borrowings under our 2022 Credit Agreement, fund our investing activities and pay dividends.

Quarterly dividends were paid at a rate of $0.31 in 2025 and $0.29 in 2024 and 2023.2024.

In May 2024 and July 2024, the Company amended it's then-existing Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders ("2022 Credit Agreement"), to transition from the Canadian Dollar Offered Rate (“CDOR”) to the Canadian Overnight Repo Rate Average (“CORRA”) for benchmark borrowings denominated in Canadian dollars and to provide for a new $125 million term loan and the use of funds available under the revolving credit facility to finance the acquisition of Nissens Automotive and related transaction costs. For additional information on our agreement to acquire Nissens Automotive see Note 2, “Business Combinations,” in the Notes to Consolidated Financial Statements in Item 8 of this Report.

In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). The 2024 Credit Agreement matures on September 16, 2029 and provides for an approximately $750 million credit facility, comprised of (i) a $430 million multi-currency revolving credit facility ("global tranche"); (ii) a $10 million multi-currency revolving credit facility, available to one or more wholly-owned Danish subsidiaries of the Company ("Danish tranche"); (iii) a $200 million delayed draw term loan facility in U.S. dollars; and (iv) a 100 million euros delayed draw term loan facility. The revolving credit facility has a $25 million sublimit for the issuance of letters of credit, and a $30 million sublimit for the borrowing of swingline loans.

In November 2023, our Polish subsidiary, SMP Poland sp. z.o.o., further amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce.Polsce Theto overdraft facility, as amended, provides for borrowings under the facility in euros and U.S. dollars. Under the amended terms, the overdraft facility providesprovide for borrowings of up to Polish zloty 30 million (approximately $7.3$8.3 million) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $6.2$7.1 million) if borrowings are in euros and/or U.S. dollars. The overdraft facility hadautomatically anrenews originalevery maturitythree date in March 2024, with automatic three-month renewalsmonths 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. The facility automatically renewed in December 2024 to a March 2025 maturity date. Borrowings under the amended overdraft facility will bear interest at a rate equal to (i) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.0% for borrowings in Polish zloty, (ii) the one month Euro Interbank Offered Rate (“EURIBOR”) + 1.0% for borrowings in Euros, and (iii) the Mid-Point of the Fed Target Range + 1.25% for borrowings in U.S dollars. Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company. There were no$3.6 million borrowings outstanding under the overdraft facility at bothDecember 31, 2025 and none at December 31, 2024 and December 31, 2023.2024.

Our Vehicle Control operating segment services our core automotive aftermarket customers, deriving its sales from three major product groups: (1) Ignition, Emissions & Fuel Delivery, which includes the traditional internal combustion engine (ICE) dependent categories; (2) Electrical & Safety, which includes powertrain neutral vehicle technologies such as electrical switches/relays, safety related products such as anti-lock brake and vehicle speed sensors, tire pressure monitoring, park assist sensors, and advanced driver assistance components; and (3) Wire Sets & Other, which includes spark plug wire sets and other related products, and are product categories we have noted to be in secular decline based upon product life cycle.

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto. This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during the three months ended MarchJune 31,30, 2026 and 2025.

Consolidated net sales for the three months ended MarchJune 31,30, 2026 were $451.2$501.6 million, an increase of $37.8$7.7 million, or 9.1%,1.6%, compared to net sales of $413.4$493.9 million in the same period in 2025.

The increase in net sales in the three months ended MarchJune 31,30, 2026 when compared to the same period in the prior year2025 reflects the impact of multiple factors including:

•higher net sales in our VehicleTemperature Control operating segment as certain customers expanded their range of products and the benefits of strong growth in 2025 continuing into 2026, partly offset by the recognition of an obligation for our products,estimate asof wellIEEPA astariff somerefunds benefitreceived from higher prices following the passUnited throughStates Treasury in 2026 that may be passed back to customers of tariffs implemented later in 2025,future periods,

•improved net sales in our Engineered Solutions operating segment as growthdemand beginsfrom toexisting recovercustomers recovers from the general softness in end markets experienced in 2025,

•Overall, full year results at our Temperature Control and Nissens Automotive operating segments will be dependent upon summer weather conditions and customer inventory levels.

Gross margins, as a percentage of net sales, increased to 30.8%32.8% in the firstsecond quarter of 2026 compared to 30.2%30.6% in the firstsecond quarter of 2025. Overall, the gross margin increase as a percentage of sales in the firstsecond quarter of 2026 primarily reflects the positive impact of higher sales volumes including the impact of cost control measuresvolumes, and $4.6a milliontemporary ofmargin amortizationimprovement for inventory fair value adjustments relateddue to the applicationoffsetting reduction in net sales and cost of accountingsales for businessIEEPA combinationstariff inrefunds thereceived first quarter of 2025 that did not recur, which more than offset the impact of higher tariffs on imports intofrom the United States.States Treasury and the recording of an obligation for our estimate of tariff refunds that may be passed back to customers, respectively.

Operating margin as a percentage of net sales for the three months ended MarchJune 31,30, 2026 increased to 7.6%10.1% as compared to 5.9%8.7% for the same period in 2025. Included in our operating margin were selling, general and administrative expenses of $104.8$113.5 million, or 23.2%22.6% of net sales for the three months ended MarchJune 31,30, 2026 compared to $99.8$107.5 million, or 24.2%21.8% of net sales, for the same period in 2025. The $5.0$6.0 million increase in selling, general and administrative expenses in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025 is principally due to higher distributionemployee-related expensescosts, drivenincluding bythe impact of the change in timing of our annual stock-based compensation grants and higher sales.distribution However, selling, general and administrative expenses as a percentage of net sales improvedcosts due to higher salessales, volumein relativeaddition to fixedhigher costdepreciation components.expense primarily due to our recent investment in the Shawnee, Kansas distribution facility.

Since February 2025, the United States government imposed new tariffs on imports to the United States from certain countries and regions, including Canada, Mexico, China, the European Union and many other countries. Certain foreign governments have implemented retaliatory actions in response to the change in United States trade policy. We operate manufacturing plants in, and rely on imports primarily from Canada, Mexico, China and the European Union to serve our customers in the United States, and therefore, we are exposed to the adverse impacts of higher tariffs on imported raw materials, components and finished goods. In response, we have taken, and will continue to take actions to optimize our operations to minimize the impact of such tariffs and maintain our profitability through cost and pricing measures. We believe our diverse global footprint provides a competitive advantage and resiliency within our supply chain. More than one-half of our sales in the United States are from products manufactured in North America, which are currently mostly exempt from tariffs under the United States-Mexico-Canada Agreement. Products sourced from China represent approximately one-quarter of our sales in the United States, with the remainder of our sales in the United States from products sourced from other regions of the world which are currently subject to lower tariffs. Furthermore, our recent acquisition of Nissens Automotive provides sales diversification outside of the United States. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the United States and affected countries, retaliation imposed by other countries, tariff exemptions, and decisions to pause, reimpose or increase tariffs. We will continue to actively monitor international trade developments and evaluate the potential impact on our results of operations and financial condition, including the potential refund of tariffs that had been imposed under the International Emergency Economic Powers Act following the United States Supreme Court decision to invalidate such tariffs.

Comparison of the Three Months Ended MarchJune 31,30, 2026 to the Three Months Ended MarchJune 31,30, 2025

Sales. Consolidated net sales for the three months ended MarchJune 31,30, 2026 were $451.2$501.6 million, an increase of $37.8$7.7 million, or 9.1%,1.6%, compared to $413.4$493.9 million in the same period of 2025, with the majority of our net sales to customers located in the United States.

Vehicle Control’s net sales for the three months ended MarchJune 31,30, 2026 increaseddecreased $21.5$18.8 million, or 11.2%,9.3%, to $213.8$182.9 million compared to $192.3$201.7 million in the same period of 2025. The increasedecrease in Vehicle Control’s net sales was primarily driven by higherthe demandcontinued decline in sales of the wire sets products category and by the recording of an obligation for our estimate of IEEPA tariff refunds received from certain customers expanding their range of our products, as well as some benefit from higher prices following the passUnited throughStates Treasury in 2026 that may be passed back to customers of tariffs implemented later in 2025.future periods.

Temperature Control’s net sales for the three months ended MarchJune 31,30, 2026 increased $0.6$13.4 million, or 0.7%,10.2%, to $89.5$144.7 million compared to $88.9$131.4 million in the same period of 2025. Temperature Control’s net sales for the firstsecond quarter of 2026 reflect continuedcertain customers expanding their range of products and the benefits of strong customer demand experiencedgrowth in 2025 continuing into 2026, partly offset by the samerecognition periodof an obligation for our estimate of IEEPA tariff refunds received from the United States Treasury in 2025.2026 that may be passed back to customers in future periods. Overall full year results will be dependent upon summer weather conditions and customer inventory levels.

Nissens Automotive's net sales for the three months ended MarchJune 31,30, 2026 increased $8.2$4.1 million, or 12.4%,4.6%, to $74.4$94.7 million compared to $66.2$90.5 million in the same period of 2025. The increase in Nissens Automotive’s net sales primarily resulted from the benefit of foreign exchange conversion and higher demand from existing customers. Overall full year results will be dependent upon summer weather conditions and customer inventory levels.

Engineered Solutions’ net sales for the three months ended MarchJune 31,30, 2026 increased $8.3$9.8 million, or 12.6%,13.9%, to $74.3$80.0 million compared to $66.0$70.3 million in the same period of 2025. The increase in Engineered Solutions’ net sales reflects the continuing recovery from the general softness in end markets experienced in 2025.

Gross Margins. Gross margins, as a percentage of consolidated net sales, increased to 30.8%32.8% in the firstsecond quarter of 2026, compared to 30.2%30.6% in the firstsecond quarter of 2025. The following table summarizes gross margins by segment (in thousands):

Compared to the firstsecond quarter of 2025, gross margin percentage increased across our aftermarket operating segments by 3.6 percentage points from 38.9% to 42.5% at our Temperature Control and Nissens Automotive operating segmentssegment, increased by 0.92.9 percentage points from 31.1%30.1% to 32.0% and 8.0 percentage points from 35.1% to 43.1%, respectively, and decreased33.0% at our Vehicle Control operating segment and 2.4 percentage points from 32.2% to 34.6% at our Temperature Control operating segment. Gross margin percentage decreased at our Engineered Solutions operating segmentssegment by 0.40.7 percentage points from 32.3%18.1% to 31.9%17.4% and 3.9 percentage points from 17.7%compared to 13.8%,the respectively.second quarter of 2025.

TheIn addition to the benefit from IEEPA tariff refunds, the gross margin percentage at our Temperature Control operating segment continued to benefit from higher sales volume as customers prepare for the warmer weather season leading to favorable manufacturing cost absorption due to higher production levels, as well as the impact of cost saving measures.

The gross margin percentage benefit from IEEPA tariff refunds at our Engineered Solutions operating segment decreasedwas inmore thethan firstoffset quarter of 2026 when compared to the same period in 2025 despite higher sales due toby unfavorable capitalization of costs in prior periods that carried over into 2026, as well as inflationary pressures.pressures in the second quarter of 2026 when compared to the same period in 2025 despite higher sales.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $104.8$113.5 million, or 23.2%22.6% of consolidated net sales, in the firstsecond quarter of 2026, as compared to $99.8$107.5 million, or 24.2%21.8% of consolidated net sales, in the firstsecond quarter of 2025. The $5.0$6.0 million increase in selling, general and administrative expenses in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025 is principally due to higher distributionemployee-related expensescosts, drivenincluding bythe impact of the change in timing of our annual stock-based compensation grants and higher sales.distribution costs due to higher sales, in addition to higher depreciation expense primarily due to our recent investment in the Shawnee, Kansas distribution facility.

Operating Income. Operating income was $34.1$50.8 million, or 7.6%10.1% of consolidated net sales, in the firstsecond quarter of 2026, compared to $24.5$42.8 million, or 5.9%8.7% of consolidated net sales, in the firstsecond quarter of 2025. The year-over-year increase in operating income of $9.6$8.0 million iswas primarily driven by an increase of $5.3 million at our Nissens Automotive segment principally due to $4.6 million of amortization for inventory fair value adjustments related to the application of accounting for business combinationsincreases in theoperating first quarter of 2025 that did not recur, and a $2.9 million increaseincome at our Temperature Control and Nissens Automotive operating segmentsegments driven by higher gross marginsmargins, andoffset costpartly savingby measures, as well as controlledhigher selling, general and administrative expenses.

Other Non-Operating Income, Net. Other non-operating income, net was a loss of $1.3$0.8 million in the firstsecond quarter of 2026, compareddecreased in comparison to a gain of $2.2$1.9 million in the firstsecond quarter of 2025 primarily due to the impact of unfavorable foreign currency exchange rates on transactions.

Interest Expense. Interest expense was $7.5$7.6 million in the firstsecond quarter of 2026, compared to $7.8$8.3 million in the firstsecond quarter of 2025. The year-over-year decrease in interest expense primarily reflects the impact of lower average interest rates, partlyas offsetwell byas higherlower average outstanding borrowings in the firstsecond quarter of 2026 when compared to the firstsecond quarter of 2025 .2025.

Income Tax Provision. The income tax provision in the firstsecond quarter of 2026 was $6.8$12.0 million at an effective tax rate of 27.3% compared to $9.8 million at an effective tax rate of 27.0% compared to $5.1 million at an effective tax rate of 26.8% for the same period in 2025 primarily reflecting higherchanges earnings.in the mix of earnings in different tax jurisdictions.

Loss from Discontinued Operations. Loss from discontinued operations, net of income taxes, during the firstsecond quarter of 2026 and 2025 of $1.2$1.4 million and $1.1 million, respectively, reflects legal and other administrative expenses associated with our asbestos-related liability. As discussed more fully in Note 18, “Commitments and Contingencies” in the notes to our consolidated financial statements (unaudited), we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.

Operating Activities. During the first threesix months of 2026, cash provided by operating activities was $58.3 million compared to $5.9 million used in operating activities was $41.9 million compared to $60.2 million in the same period of 2025.

Net earnings during the first threesix months of 2026 were $17.3$47.9 million compared to $12.7$38.3 million in the same period of 2025. The $18.3$64.2 million decreaseincrease in cash usedprovided inby operating activities resulted primarily from higher net earnings, and lower net cash outflows from changes in working capital. Lower net cash outflows from changes in working capital are primarily due to a lowerhigher increase in sundry payables and accrued expenses due to the receipt of IEEPA tariff refunds from the United States Treasury at the end of the second quarter of 2026 and a decrease in the inventory balance due to the timing of shipmentsimprovements in earlyinventory 2026 and improved accounts payable terms,management, partly offset by a growing accounts receivable balance due to higher net sales in the first threesix months of 2026, as compared to the same period of 2025.

Investing Activities. Cash used in investing activities was $6.7$14.5 million during the first threesix months of 2026, as compared to $6.2$16.3 million in the same period of 2025. Investing activities during the threesix months ended MarchJune 31,30, 2026 and 2025 primarily consisted of capital expenditures of $6.7$14.9 million and $9.1$19.3 million, respectively. Capital expenditures have returned to normal levels following a period of elevated spending due to the investment in our new distribution facility in Shawnee, Kansas.

Financing Activities. Cash used in financing activities was $39.5 million during the first six months of 2026, as compared to $32.6 million provided by financing activities was $35.8 million and $72.5 million duringin the firstsame three monthsperiod of 2026 and 2025, respectively.2025. During the first threesix months of 2026, we increasedused cash generated from our operating activities to decrease our borrowings under our 2024 Credit Agreement by $47.5$19.4 million, and paid dividends to SMP shareholders of $7.3$14.7 million. Cash provided by borrowings under our 2024 Credit Agreement in the threesix months ended MarchJune 31,30, 2026 was primarily used to fund our operating activities, including tariff costs, capital expenditures, and pay dividends.

During the first threesix months of 2025, we increased our borrowings by $79.1$45.9 million and paid dividends to SMP shareholders of $6.8$13.6 million. Cash provided by borrowings in the threesix months ended MarchJune 31,30, 2025 was primarily used to fund our operating activities, capital expenditures and pay dividends.

The weighted average interest rate under the 2024 Credit Agreement, adjusted for the impact of interest rate swap agreements, is 4.9% and 4.8% at Marchboth 31,June 30, 2026 and December 31, 2025, respectively.2025. Interest rates primarily consist of Term SOFR for borrowings in U.S. dollars and EURIBOR for borrowings in euros.

The Company has an overdraft facility that provides for borrowings of up to Polish zloty 30 million (approximately $8.0 million) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $6.8 million) if borrowings are in euros and/or U.S. dollars. The overdraft facility automatically renews every three months 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. There were $2.2$0.9 million of borrowings outstanding under the overdraft facility at MarchJune 31,30, 2026.

In order to reduce our accounts receivable balances and improve our cash flow, we are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions. We sell our undivided interests in certain of these receivables at our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables, and do not service the receivables after the sale. As such, these transactions are accounted for as a sale. Pursuant to these agreements, we sold $299.9 million and $514.8 million of receivables during the three and six months ended 2026, respectively and $257.6 million and $442.1 million for the comparable periods in 2025. Receivables presented at financial institutions and not yet collected as of June 30, 2026 were approximately $14.7 million and remained in our accounts receivable balance as of that date. All receivables sold were reflected as a reduction of accounts receivable on the consolidated balance sheet at the time of sale. We recorded expense of $13.7 million and $23.0 million related to the sale of receivables which was included in selling, general and administrative expenses in our consolidated statements of operations for the three and six months ended June 30, 2026, respectively, and $12.3 million and $21.6 million for the comparable periods in 2025.

In 2022, our Board of Directors authorized the purchase of up to $30 million of our common stock under a stock repurchase program. Stock will be purchased from time to time in the open market, or through private transactions, as market conditions warrant. Under this program, there were no repurchases of common stock during the threesix months ended MarchJune 31,30, 2026 and 2025. As of MarchJune 31,30, 2026, there was approximately $19.6 million available for future stock purchases under the program.