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What changed in STANDARD MOTOR PRODUCTS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of STANDARD MOTOR PRODUCTS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+294 added−321 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-22)

Top changes in STANDARD MOTOR PRODUCTS, INC.'s 2024 10-K

294 paragraphs added · 321 removed · 222 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

51 edited+14 added−9 removed48 unchanged
Biggest changeThis 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. 3 Index Our Vehicle Control Segment services our core automotive aftermarket customers through its offering of premium replacement parts within the following major product groups: (1) Engine Management , which includes components for the ignition, emissions and fuel delivery systems of vehicles utilizing an internal combustion engine.
Biggest changeOur operating segment structure provides clarity to the unique dynamics and margin profiles of the markets we serve, and it is designed to align our operations with our strategic focus on diversifying our business and capturing opportunities for future growth. 3 Index Our Vehicle Control Segment services our core automotive aftermarket customers through its offering of premium replacement parts within the following major product groups.
(3) Wire Sets & Other , which includes spark plug wire sets, coil on plug boots and accessories servicing vehicle’s ignition system. Certain product categories within this group are in secular decline based upon product life cycle. Many Vehicle Control systems use on-board computers to monitor inputs from sensing devices located throughout the vehicle.
(3) Wire Sets & Other , which includes spark plug wire sets, coil on plug boots and accessories servicing the vehicle’s ignition system. Certain product categories within this group are in secular decline based upon product life cycle. Many Vehicle Control systems use on-board computers to monitor inputs from sensing devices located throughout the vehicle.
Our growth strategy is long-term, and we do not expect growth to be linear given the lengthy nature of design engineering and validation and the period of time between the awarding of new business and the start of production, often which occurs 1-2 years after business is awarded.
Our growth strategy is long-term, and we do not expect growth to be linear given the lengthy nature of design engineering and validation, and the period of time between the awarding of new business and the start of production, which often occurs 1-2 years after business is awarded.
The new Shawnee, Kansas distribution facility will also bring our Vehicle Control products geographically closer to our Midwest and West Coast customers, reducing transportation lead-time, and will ultimately provide disaster recovery capabilities for automotive aftermarket products across our divisions. Field Sales Support . We believe our technically-trained salesforce is a key competitive advantage.
The new Shawnee, Kansas distribution facility will also bring our Vehicle Control and Temperature Control products geographically closer to our Midwest and West Coast customers, reducing transportation lead-time, and will ultimately provide disaster recovery capabilities for automotive aftermarket products across our divisions. Field Sales Support . We believe our technically-trained salesforce is a key competitive advantage.
Through our training program, we typically teach approximately 60,000 technicians annually how to diagnose and repair vehicles equipped with complex systems related to our products, and we have approximately 16,000 technicians and 7,000 of our customers’ store employees and sales team members who are registered to participate in such sessions through our online platform. 7 Index Basic Manufacturing .
Through our training program, we typically teach approximately 60,000 technicians annually how to diagnose and repair vehicles equipped with complex systems related to our products, and we have approximately 16,000 technicians and 7,000 of our customers’ store employees and sales team members who are registered to participate in such sessions through our online platform. 8 Index Basic Manufacturing .
We operate primarily in non‑union facilities and have binding labor agreements with employees at other unionized facilities. We have approximately 75 production employees in Edwardsville, Kansas, who will eventually migrate to our new Shawnee, KS facility, who are covered by a contract with The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America that expires in August 2026.
We operate primarily in non‑union facilities and have binding labor agreements with employees at other unionized facilities. We have approximately 94 production employees in Edwardsville, Kansas, who will eventually migrate to our new Shawnee, KS facility, who are covered by a contract with The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America that expires in August 2026.
Our focus on vehicle control and thermal management categories leverages the legacy and leadership position of our automotive aftermarket business to provide a platform for future growth in diverse non-aftermarket end markets. We drive growth in this segment by developing new customer relationships, cross-selling to existing customers, introducing new products to new and existing customers, and increasing content per unit.
Our focus on vehicle control and thermal management categories leverages the legacy and leadership position of our automotive aftermarket business to provide a platform for future growth in diverse non-aftermarket end markets. We drive growth in this segment by developing new customer relationships, cross-selling to existing customers, introducing new products to new and existing customers, and increasing platform content.
We market and distribute our products under our own brands, such as: Vehicle Control Temperature Control We also distribute our products to customers for resale under private labels and the following co-labels: Vehicle Control In some cases, we have developed our product offering and brand strategies to support our customers’ initiatives to market a tiered product assortment designed to satisfy end-user preferences for quality and value.
We market and distribute our products under our own brands, such as: Vehicle Control Temperature Control Nissens Automotive We also distribute our products to customers for resale under private labels and the following co-labels: Vehicle Control In some cases, we have developed our product offering and brand strategies to support our customers’ initiatives to market a tiered product assortment designed to satisfy end-user preferences for quality and value.
Among other considerations, we seek acquisitions that align with our core competencies; enhance our existing design, engineering and manufacturing capabilities; and vertically integrate key technologies, products and processes. For information on recent acquisitions and investments, see Note 2 “Business Acquisitions and Investments” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
Among other considerations, we seek acquisitions that align with our core competencies; enhance our existing design, engineering and manufacturing capabilities; and vertically integrate key technologies, products and processes. For information on recent acquisitions and investments, see Note 2 “Business Combinations” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
We permit our automotive A ftermarket customers to return new, undamaged products within customer-specific limits (which are generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories. We accrue for overstock returns as a percentage of sales after giving consideration to recent returns history.
We permit our automotive aftermarket customers to return new, undamaged products within customer-specific limits (which are generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories. We accrue for overstock returns as a percentage of sales after giving consideration to recent returns history.
The principal raw materials purchased by us consist of brass, electronic components, fabricated copper (primarily in the form of magnet and insulated cable), steel magnets, laminations, tubes and shafts, stamped steel parts, stainless steel coils and rods, aluminum coils, fittings, rods, cast aluminum parts, lead, steel roller bearings, rubber molding compound, thermo‑set and thermo plastic molding powders, and chemicals.
The principal raw materials purchased by us consist of brass, electronic components, fabricated copper (primarily in the form of magnet and insulated wire), steel magnets, laminations, tubes and shafts, stamped steel parts, stainless steel coils and rods, aluminum coils, fittings, rods, cast aluminum parts, lead, steel roller bearings, rubber molding compound, thermo‑set and thermo plastic molding powders, and chemicals.
We sell our products in the automotive aftermarket primarily to retailers and warehouse distributors, who buy directly from us and sell directly to jobber stores, professional technicians and to individual consumers who perform “do-it-yourself” repairs on their personal vehicles.
We sell our products in the automotive aftermarket in North America primarily to retailers and warehouse distributors, who buy directly from us and sell directly to jobber stores, professional technicians and to individual consumers who perform “do-it-yourself” repairs on their personal vehicles.
We focus on expanding our product coverage in advanced powertrain technologies, including start and stop technology, cylinder deactivation, variable valve timing, turbochargers, electronic throttle bodies, diesel exhaust emissions control, gasoline direct injection, active grill shutters; electrification, such as battery cooling fans, drive battery charging cables and adapters, and electric coolant pumps; and safety related categories, such as anti-lock brake, vehicle speed sensors, tire pressure monitoring, park assist sensors and advanced driver assistance components, including blind spot detection sensors, cruise control distance sensors, lane departure sensor cameras and park assist backup cameras.
We focus on expanding our product coverage in advanced powertrain technologies, including start and stop technology, cylinder deactivation, variable valve timing, turbochargers, electronic throttle bodies, diesel exhaust emissions control, gasoline direct injection, active grill shutters; electrification, such as battery cooling fans, drive battery charging cables and adapters, and electric coolant pumps; and safety related categories, such as anti-lock brake, vehicle speed sensors, tire pressure monitoring, park assist sensors and advanced driver assistance components, including blind spot detection sensors, cruise control distance sensors, lane departure sensor cameras and park assist backup cameras. 7 Index Supply Chain Excellence .
Engineered Solutions customers are many of the largest original equipment manufacturers and their tier suppliers, system integrators, and original equipment service part operations, such as: Bombardier; Carquest: Caterpillar; CNH; Daimler Truck; Eberspacher; Ford; General Motors; Harley-Davidson; IVECO; John Deere; Mobile Climate Control; Polaris; Scania; Volvo/Mack Truck; and Woodward.
Engineered Solutions customers are many of the largest original equipment manufacturers and their tier suppliers, system integrators, and original equipment service part operations, such as: BRP; Caterpillar; CNH; Daimler Truck; Eberspacher; Ford; General Motors; Harley-Davidson; IVECO; John Deere; Mobile Climate Control; Polaris; Scania; Volvo/Mack Truck; and Woodward.
This sustainability steering committee is tasked with developing specific strategies to ensure that our company-wide operations adhere to our corporate governance values and advance our sustainability objectives globally.
The sustainability steering committee is tasked with developing specific strategies to ensure that our company-wide operations adhere to our corporate governance values and advance our sustainability objectives globally.
This system reduces the volume of a given part in inventory. We face inventory management issues in our automotive A ftermarket business as a result of overstock returns.
This system reduces the volume of a given part in inventory. We face inventory management issues in our automotive aftermarket business as a result of overstock returns.
Our Customers In the automotive aftermarket, our customers are many of the largest national and regional retailers and distributors, such as: Advance Auto Parts; Auto Value and Bumper to Bumper (Aftermarket Auto Parts Alliance); Automotive Distribution Network; AutoZone; Canadian Tire; Federated Auto Parts; Genuine Parts Company and National Automotive Parts Association; O’Reilly Auto Parts; The Automotive Parts Services Group or The Group; The National Pronto Association; and Uni-Select.
Our Customers In the automotive aftermarket in North America, our customers are many of the largest national and regional retailers and distributors, such as: Auto Value and Bumper to Bumper (Aftermarket Auto Parts Alliance); Automotive Distribution Network; AutoZone; Canadian Tire; Federated Auto Parts; Genuine Parts Company and NAPA (National Automotive Parts Association); O’Reilly Auto Parts; The Automotive Parts Services Group or The Group; The National Pronto Association; and Uni-Select.
Examples of vertically integrated processes: ➢ plastic molding operations ➢ automated electronics assembly ➢ stamping and machining operations ➢ design and fabrication of processing and test equipment ➢ wire extrusion ➢ teardown, diagnostics and rebuilding of remanufactured air conditioning compressors, diesel injectors and diesel pumps As of December 31, 2023, all of our principal manufacturing facilities maintained quality management systems that were ISO 9001 and/or TS 16949 certified, and ten of our principal manufacturing and distribution facilities maintained environmental management systems that were ISO 14001 certified.
Examples of vertically integrated processes: ➢ plastic molding operations ➢ automated electronics assembly ➢ stamping and machining operations ➢ design and fabrication of automated processing and test equipment ➢ wire extrusion ➢ teardown, diagnostics and rebuilding of remanufactured air conditioning compressors, diesel injectors and diesel pumps As of December 31, 2024, seventeen of our principal manufacturing facilities maintained quality management systems that were ISO 9001 and/or TS 16949 certified, and thirteen of our principal manufacturing and distribution facilities maintained environmental management systems that were ISO 14001 certified.
We strive to eliminate workplace incidents, risks and hazards. Our health and wellness programs support our employees’ physical and mental health by providing tools and resources to encourage healthy behaviors and provide peace of mind in circumstances that may require time away from work. Compensation and Benefits.
We are committed to the health, safety and wellness of our employees. We strive to eliminate workplace incidents, risks and hazards. Our health and wellness programs support our employees’ physical and mental health by providing tools and resources to encourage healthy behaviors and provide peace of mind in circumstances that may require time away from work. Compensation and Benefits.
These reports and other information are also available, free of charge, at www.sec.gov .
These reports and other information are also available, free of charge, at www.sec.gov . 13 Index
In the diverse non-aftermarket end markets we supply, such as commercial and light vehicles, construction, agriculture, power sports and others, other economic factors such as the level of new vehicle sales and production rates, which more recently have been impacted by disruptions in the global supply chain and labor, tend to have a more direct impact.
In the diverse non-aftermarket end markets we supply, such as commercial and light vehicles, construction, agriculture, power sports and others, other economic factors such as the level of new vehicle sales and production rates tend to have a more direct impact.
Our working capital requirements typically peak near the end of the second quarter, as the inventory build‑up of air conditioning products is converted to sales, and payments on the receivables associated with such sales have yet to be received.
Our working capital requirements typically peak near the end of the second quarter, as the inventory build‑up of air conditioning products is converted to sales, and payments on the receivables associated with such sales have yet to be received. These increased working capital requirements are funded by borrowings from our revolving credit facility.
The new facility, which is expected to have a phased opening beginning in 2024 and be fully operational in early 2025, will expand our total distribution network square footage to meet our growing demands in the automotive aftermarket, and integrate state-of-the-art technologies to deliver improved logistics capabilities, operational efficiencies, as well as enhanced employee, customer and supplier experiences.
The new facility, which began a phased opening in 2024 and is expected to be fully operational in 2025, will expand our total distribution network square footage to meet our growing demands in the automotive aftermarket, and integrate new distribution technologies including a mechanized material handling system designed to deliver improved logistics capabilities, operational efficiencies, as well as enhanced employee, customer and supplier experiences.
ITEM 1. BUSINESS Overview We are a leading manufacturer and distributor of premium replacement parts in the automotive aftermarket and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets.
ITEM 1. BUSINESS Overview We are a leading manufacturer and distributor of premium replacement parts in the automotive aftermarket and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets. Our business is organized into four operating segments: Vehicle Control , Temperature Control , Nissens Automotive and Engineered Solutions .
We believe that this alignment makes us an invaluable business partner to our customers. Full-Line Coverage . Our product offering is designed to ensure our automotive aftermarket customers have the parts they need to maintain, service and repair the wide range of vehicles in operation.
We believe that this alignment makes us an invaluable business partner to our customers. Full-Line Coverage . Our product offering is designed to ensure our automotive aftermarket customers have the parts needed to maintain, service and repair the wide range of vehicles in operation. We offer a full line of critical components for most years, makes, models and engine sizes.
Our Business Strategy Our Corporate Mission is to be a leading global supplier of parts and services to diverse end markets for the vehicles of yesterday, today and tomorrow, while leveraging our heritage of integrity and respect for all of our stakeholders.
(8) Clamping Devices , covering commercial and light vehicle automotive applications, and industrial applications. 5 Index Our Business Strategy Our Corporate Mission is to be a leading global supplier of parts and services to diverse end markets for the vehicles of yesterday, today and tomorrow, while leveraging our heritage of integrity and respect for all of our stakeholders.
We also have approximately 1,200 employees in Mexico who are covered under union agreements negotiated at various intervals. For clarification, the employee numbers described above exclude the employees of our joint venture operations.
We also have approximately 1,200 employees in Mexico who are represented by works council, trade unions or other employee representative bodies under agreements negotiated at various intervals. For clarification, the employee numbers described above exclude the employees of our joint venture operations.
We deliver employee workshops and mentoring programs, numerous training opportunities, provide rotational assignment opportunities, offer continuous learning and development, and implement methodologies to manage performance, provide feedback and develop talent opportunities, all designed to provide employees with the resources they need to help achieve their career goals and build management skills.
Talent Development. We invest significant resources to develop the talent of our high potential employees. We deliver employee workshops and mentoring programs, training opportunities, rotational assignments, continuous learning and development, and implement processes to manage performance, provide feedback and develop talent, all designed to provide employees with the resources they need to achieve their career goals and build skills.
Our automotive aftermarket business is comprised of two segments, Vehicle Control and Temperature Control , while our Engineered Solutions Segment offers a broad array of conventional and future-oriented technologies in markets for commercial and light vehicles, construction, agriculture, power sports, marine, hydraulics and lawn and garden.
Our Engineered Solutions operating 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.
In addition to wages and salaries, these programs include annual cash bonuses, stock awards, a 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, fertility benefits, family care resources, tuition reimbursement, LGBTQ+ inclusive benefits, mental health resources and employee assistance programs. Talent Development.
In addition to wages and salaries, these programs include annual incentive based compensation, a 401(k) Plan, employee stock ownership plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, fertility benefits, family care resources, tuition reimbursement, inclusive benefits, medicare and retirement planning, perimenopause and menopause support, mental health resources and employee assistance programs.
The demand for our Temperature Control products during the second and third quarters of the year may vary significantly with the summer weather and customer inventories.
It is in these quarters that demand for our products is typically the highest, specifically in the Temperature Control Segment of our business. The demand for our Temperature Control products during the second and third quarters of the year may vary significantly with the summer weather and customer inventories.
We offer a full line of critical components for most years, makes, models and engine sizes. Our product offering is a reflection of the vehicles in operation, the adoption rates of new vehicle technologies by original equipment manufacturers, the number of miles driven, and the failure rates of parts in service.
Our product offering is a reflection of the vehicles in operation, the adoption rates of new vehicle technologies by original equipment manufacturers, the number of miles driven, and the failure rates of parts in service.
Human Capital As of December 31, 2023, we employed approximately 5,200 people, with 2,100 people in the United States and 3,100 people in Mexico, Canada, Poland, the U.K., Germany, Hungary, China and Hong Kong. Of the 5,200 people employed, approximately 2,600 people are production employees.
Human Capital As of December 31, 2024, we employed approximately 5,600 people, with 2,000 people in the United States and 3,600 people in Mexico, Canada, Denmark, France, Germany, Hungary, Italy, Netherlands, Poland, Slovakia, Spain, the United Kingdom, China and Hong Kong. Of the 5,600 people employed, approximately 2,800 people are production employees.
For example, in addition to cabin comfort, powertrains such as electric vehicles will require cooling systems for the batteries, electronics, motors and other applications. 4 Index The Engineered Solutions Segment services our vehicle and equipment manufacturing customers across diverse global end markets, including on-highway and off-highway applications such as commercial and light vehicles, construction, agriculture, power sports, marine, hydraulics and lawn and garden, through an offering of custom-engineered solutions within the following product categories: (1) Thermal Management Products , which are designed to control the operating temperature of HVAC, battery and heat exchange systems, such as electrical compressors, fans, motors and pumps.
(3) Engine Efficiency , which includes turbochargers and intercoolers, electronics, such as exhaust gas recirculation (EGR) valves and modules, and related components, such as EGR coolers and oil feed pipes. 4 Index Our Engineered Solutions Segment services our vehicle and equipment manufacturing customers across diverse global end markets, including commercial and light vehicles, construction, agriculture, power sports, marine, hydraulics and lawn and garden, through an offering of custom-engineered solutions within the following product categories: (1) Thermal Management Products , which are designed to control the operating temperature of HVAC, battery and heat exchange systems, such as electrical compressors, fans, motors and pumps.
(7) Ignition & Emissions , which includes wire, ignition coils and positive crankcase ventilation valves. (8) Clamping Devices , covering automotive and industrial applications.
(7) Ignition & Emissions , which includes wire, ignition coils and positive crankcase ventilation valves.
We expect to have an adequate supply of primary raw materials and cores necessary to meet our needs; however, there always are risks and uncertainties with respect to the supply of raw materials and components that could impact their availability in sufficient quantities and at cost effective prices to meet our needs.
We expect to have an adequate supply of primary raw materials and cores necessary to meet our needs; however, there are always risks and uncertainties with respect to the supply of raw materials and components that could impact their availability in sufficient quantities and at cost effective prices to meet our needs. 11 Index Sustainability We support and seek continuous improvement in the pursuit of environmental, social and corporate governance practices that embody our culture and what we believe it means to be a good corporate citizen.
We believe our automotive aftermarket business benefits from our Engineered Solutions business through accelerated future product development; systems, processes and quality enhancements; the technical insights of its original equipment customers; its global footprint; and synergistic mergers and acquisitions. 8 Index We distribute our Engineered Solutions products under the following trade names: Engineered Solutions Strategic Acquisitions We selectively pursue strategic acquisitions that strengthen our position in the markets we supply or that diversify our business in target markets or geographies.
We believe our automotive aftermarket business benefits from our Engineered Solutions business through accelerated future product development; systems, processes and quality enhancements; the technical insights of its original equipment customers; its global footprint; and synergistic mergers and acquisitions.
We believe our facilities are in labor markets with ready access to adequate numbers of skilled and unskilled workers, and our relations with our union and non‑union employees are good. 11 Index Diversity, Equity, Inclusion, and Belonging. We strive to hire, retain and advance a diverse workforce that reflects the communities that we serve.
We believe our facilities are in labor markets with ready access to adequate numbers of skilled and unskilled workers, and our relations with our union and non‑union employees are good. Talent Acquisition and Retention. We strive to hire, retain and advance a workforce whose diverse experiences and backgrounds enhance our collaborative and inclusive environment.
Our annual review process encourages manager and employee conversations throughout the year to enhance growth and development. Employee satisfaction and engagement are important elements in our talent retention strategy. From time to time, we conduct employee engagement surveys to identify areas where we can enhance our talent retention strategy and employee satisfaction, including fostering a more inclusive and equitable environment.
Our annual review process encourages manager and employee conversations throughout the year to enhance growth and development. 12 Index Employee satisfaction and engagement are important elements in our talent retention strategy.
We sell our products primarily to retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin America countries. Beginning in the first quarter of 2023, we reorganized our business into three operating segments – Vehicle Control, Temperature Control and Engineered Solutions .
We sell our products primarily to retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Europe, Canada, Mexico, Asia and other foreign countries.
Our primary competitors are full-line suppliers, short- or value-line suppliers, tier suppliers and service part operations of original equipment manufacturers, including car dealerships, and the direct import programs of certain retailers.
In the automotive aftermarket, we compete primarily on the basis of product quality, availability (including order turn-around time and fill rate), coverage and price, and value-added services. Our primary competitors are full-line suppliers, short- or value-line suppliers, tier suppliers and service part operations of original equipment manufacturers, including car dealerships, and the direct import programs of certain retailers.
These discounts, allowances and incentives are a common practice in the automotive aftermarket, and we intend to continue offering them in response to competitive pressures and to strategically support growth in sales of our products.
These discounts, allowances and incentives are a common practice in the automotive aftermarket, and we intend to continue offering them in response to competitive pressures and to strategically support growth in sales of our products. 10 Index Seasonality Historically, our operating results have fluctuated by quarter, with the greatest sales occurring in the second and third quarters of the year and revenues generally being recognized at the time of shipment.
The multidisciplinary approach of our steering committee allows it to leverage our expertise in operations, engineering, supply chain, human capital management, finance, legal and other fields to push our sustainability initiatives ahead from all angles. 12 Index Continued Commitment With each year, we intend to further our commitment to sustainability initiatives, improving our environmental stewardship, finding ways to give back to our communities, and enhancing the diversity and inclusion of our workforce while offering opportunities for development.
The multidisciplinary approach of our steering committee allows it to leverage our expertise in operations, engineering, supply chain, human capital management, finance, legal and other fields to push our sustainability initiatives ahead from all angles.
We believe that our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors.
In some cases, we have successfully identified and implemented improvements in the durability of our products through the evaluation and analysis of OE product failures in the field. 6 Index Premium Brands . We believe that our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors.
Our recent efforts have been focused in three areas: inspiring innovation through an inclusive and diverse culture; expanding our efforts to recruit and hire world-class diverse talent; and identifying strategic partners to accelerate our inclusion and diversity programs. Health, Safety and Wellness . We are committed to the health, safety and wellness of our employees.
Our recent efforts have been focused in three areas: expanding our efforts to recruit and hire world-class diverse talent; inspiring innovation through collaboration and diversity of ideas; and offering opportunities for our employees to engage in meaningful projects, both at work and in our communities. Health, Safety and Wellness .
We believe that our value proposition is a key competitive advantage in maintaining our position as a strategic partner to our customers and a leader in the automotive aftermarket. In the automotive aftermarket, our mission is to be the best full-line, full-service supplier of premium Vehicle Control and Temperature Control products.
In the automotive aftermarket in Europe, we sell primarily to wholesalers and distributors, who may be members of international trading groups, in addition to retailers and repair shops. We believe that our value proposition is a key competitive advantage in maintaining our position as a strategic partner to our customers and a leader in the automotive aftermarket.
As a result of the breadth of our product offering, we are not dependent on any single raw material.
Suppliers We source materials through a global network of suppliers to ensure a consistent, high quality and low cost supply of materials and key components for our product lines. As a result of the breadth of our product offering, we are not dependent on any single raw material.
Our Aftermarket Value Proposition ■ Premium Quality Products ■ Premium Brands ■ Full-Line Coverage ■ Supply Chain Excellence ■ Field Sales Support ■ Marketing Support ■ World-Class Training ■ Basic Manufacturing Premium Quality Products . We offer professional grade products intended to fit, form and function to standards that meet or exceed the original equipment (“OE”) product it replaces.
In the automotive aftermarket, our mission is to be the best full-line, full-service supplier of premium Vehicle Control and Temperature Control products. Our Aftermarket Value Proposition ■ Premium Quality Products ■ Premium Brands ■ Full-Line Coverage ■ Supply Chain Excellence ■ Field Sales Support ■ Marketing Support ■ World-Class Training ■ Basic Manufacturing Premium Quality Products .
Sustainability We support and seek continuous improvement in the pursuit of environmental, social and corporate governance practices that embody our culture and what we believe it means to be a good corporate citizen. Our Culture Our Company was founded in 1919 on the values of integrity, common decency and respect for others.
Our Culture Our Company was founded in 1919 on the values of integrity, common decency and respect for others.
Our three largest individual customers accounted for approximately 59% of our consolidated net sales in 2023. During 2023, O’Reilly Auto Parts, AutoZone and NAPA accounted for 29%, 16%, and 14% of our consolidated net sales, respectively.
Our three largest individual customers accounted for approximately 60.7% of our consolidated net sales in 2024 . During 2024 , O’Reilly Auto Parts, AutoZone and NAPA accounted for 28.4% , 18.8% and 13.5% of our consolidated net sales, respectively. Competition Our business operates in highly competitive markets, and we face substantial competition in all of the markets that we supply.
In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including implementing cost savings initiatives and the pass through of higher costs to our customers in the form of price increases.
We continue to work closely with our suppliers and customers to implement actions designed to mitigate the impact of these events on our business, including cost savings initiatives, the vertical integration of production processes and price negotiations.
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Our products undergo rigorous product qualification, testing our products against exacting specifications and performance criteria. In some cases, we have successfully identified and implemented improvements in the durability of our products through the evaluation and analysis of OE product failures in the field. 5 Index Premium Brands .
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Nissens Automotive is a new operating segment created in the fourth quarter of 2024 following the completion of our previously-disclosed acquisition of AX V Nissens III ApS (now known as SMP Nissens III ApS) and its direct and indirect subsidiaries (“Nissens Automotive”) in November 2024.
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In December 2023, we offered over 79,000 total stock keeping units (SKUs) to the automotive aftermarket.
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Our Vehicle Control , Temperature Control and Nissens Automotive operating segments supply the automotive aftermarket with premium replacement parts in largely non-discretionary categories. Our products are primarily used to perform non-discretionary repairs that extend the service life of vehicles by replacing critical components that have failed over time and that are necessary for vehicles to operate as designed.
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Approximately 2,600 of these SKUs were newly introduced in 2023, of which more than half were powertrain neutral vehicle technologies, such as cruise control distance sensors, park assist cameras and electronic parking brake actuators. 6 Index Our Vehicle Control offering includes more than seventy product categories for hybrid electric vehicles.
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(1) Engine Management , which includes components for the ignition, emissions and fuel delivery systems of vehicles utilizing an internal combustion engine.
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We are committed to strategically expanding our product offerings for electric and hybrid vehicles to service this important segment. Supply Chain Excellence .
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For example, in addition to cabin comfort, powertrains such as electric vehicles will require cooling systems for the batteries, electronics, motors and other applications.
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Competition Our business operates in highly competitive markets, and we face substantial competition in all of the markets that we supply. 9 Index In the automotive aftermarket, we compete primarily on the basis of product quality, availability (including order turn-around time and fill rate), coverage and price, and value-added services.
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Our Nissens Automotive Segment was created in the fourth quarter of 2024 following the completion of our previously-disclosed acquisition of Nissens Automotive, a leading European supplier of thermal management and engine efficiency products for the automotive aftermarket.
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Seasonality Historically, our operating results have fluctuated by quarter, with the greatest sales occurring in the second and third quarters of the year and revenues generally being recognized at the time of shipment. It is in these quarters that demand for our products is typically the highest, specifically in the Temperature Control Segment of our business.
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Our Nissens Automotive Segment offers premium replacement parts within the following major product groups: (1) Engine Cooling , which includes radiators and oil coolers, electronics, such as electric water pumps and temperature sensors, and related components, such as expansion tanks and fan clutches.
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These increased working capital requirements are funded by borrowings from our revolving credit facility in our Credit Agreement. 10 Index Suppliers We source materials through a global network of suppliers to ensure a consistent, high quality and low cost supply of materials and key components for our product lines.
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(2) Air Conditioning , which includes compressors and condensers, electronics, such as blowers, fans and pressure sensors, and related components, such as evaporators, expansion valves and heaters.
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Irrespective, disruptions in the global economy have impeded global supply chains, resulting in inflationary cost increases in certain raw materials, labor and transportation, in longer lead times, delays in procuring component parts and raw materials, and in prior year inventory increases, which are subsequently being worked down.
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We offer professional grade products intended to fit, form and function to standards that meet or exceed the original equipment (“OE”) product it replaces. Our products undergo rigorous product qualification, testing our products against exacting specifications and performance criteria.
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We invest significant resources to develop the talent of our high potential employees.
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We distribute our Engineered Solutions products under the following trade names: Engineered Solutions 9 Index Strategic Acquisitions We selectively pursue strategic acquisitions that strengthen our position in the markets we supply or that diversify our business in target markets or geographies.
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In Europe, Nissens Automotive customers are comprised of many of the largest wholesalers and distributors, which may be members of international trading groups, such as: AD International, ATR International, GROUPAUTO International, Global One Automotive, Nexus Automotive International and TEMOT International Autoparts.
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In 2024, we experienced a gradual improvement in our global supply chains, with fewer delays in procuring component parts and raw materials, and moderation in the volatility of input costs generally following a period of significant volatility.
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However, we were adversely impacted by regional events, such as the Suez Canal and Panama Canal disruptions, and the lingering effects of inflationary cost increases.
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From time to time, we conduct employee engagement surveys to identify areas where we can enhance our talent retention strategy and employee satisfaction, including fostering a sense of belonging throughout our organization.
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Continued Commitment With each year, we intend to further our commitment to sustainability initiatives, improving our environmental stewardship, finding ways to give back to our communities, and enhancing the diversity and inclusion of our workforce while offering opportunities for development.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to fund our operations through earnings or external financing, we will be forced to adopt an alternative strategy that may include actions such as: • deferring, reducing or eliminating future cash dividends; • reducing or delaying capital expenditures or restructuring activities; • reducing or delaying research and development efforts; • selling assets; • deferring or refraining from pursuing certain strategic initiatives and acquisitions; • refinancing our indebtedness; and • seeking additional funding. 21 Index We cannot assure you that, if material adverse developments in our business, liquidity or capital requirements should occur, our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.
Biggest changeIf we are unable to fund our operations through earnings or external financing, we will be forced to adopt an alternative strategy that may include actions such as: • deferring, reducing or eliminating future cash dividends; • reducing or delaying capital expenditures or restructuring activities; • reducing or delaying research and development efforts; • selling assets; • deferring or refraining from pursuing certain strategic initiatives and acquisitions; • refinancing our indebtedness; and • seeking additional funding.
We have in the past reduced prices to remain competitive and may have to do so again in the future. Price reductions have impacted our sales and profit margins and may do so in the future.
We have in the past reduced prices to remain competitive and may do so again in the future. Price reductions have impacted our sales and profit margins and may do so again in the future.
These regulations, as well as shifts in consumer demand due to public awareness and concern of climate change, could affect the timing and scope of their proliferation and may also adversely impact our sales of products designed for the internal combustion engines.
These regulations, as well as shifts in consumer demand due to public awareness and concern of climate change, could affect the timing and scope of their proliferation and may also adversely impact our sales of products designed for internal combustion engines.
Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in global supply chains, which have resulted in longer lead times and delays in procuring component parts and raw materials, and significant inflationary cost increases in certain raw materials, labor and transportation, and that there will be no material adverse developments in our business, liquidity or capital requirements.
Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in global supply chains, which have resulted in longer lead times and delays in procuring component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation, and that there will be no material adverse developments in our business, liquidity or capital requirements.
In particular, historically there has been social unrest in Hong Kong and Mexico and any recurrence, or increased violence in or around our facilities in such countries could be disruptive to our business operations at such facilities, or present risks to our employees who may be directly affected by the violence and may result in a decision by them to relocate from the area, or make it difficult for us to recruit or retain talented employees at such facilities.
Historically, there has been social unrest in Hong Kong and Mexico and any recurrence, or increased violence in or around our facilities in such countries could be disruptive to our business operations at such facilities, or present risks to our employees who may be directly affected by the violence and may result in a decision by them to relocate from the area, or make it difficult for us to recruit or retain talented employees at such facilities.
A significant downgrade in the company’s credit ratings could increase its borrowing costs and limit access to capital. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months.
A significant downgrade in the company’s credit ratings could increase its borrowing costs and limit access to capital. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our 2024 Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months.
In addition, the Company’s obligations under the Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions.
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.
In addition, if we default on any of our indebtedness, or breach any financial covenant in our Credit Agreement, our business could be adversely affected. We have significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on our financial condition and results of operations.
In addition, if we default on any of our indebtedness, or breach any financial covenant in our 2024 Credit Agreement, our business could be adversely affected. We have significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on our financial condition and results of operations.
These factors may allow our competitors to: • respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive products and services; • engage in more extensive research and development; • sell products at a lower price than we do; • undertake more extensive marketing campaigns; and • make more attractive offers to existing and potential customers and strategic partners.
These factors may allow our competitors to: • respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive products and services; • engage in more extensive research and development; • sell products at a lower price than us; • undertake more extensive marketing campaigns; and • make more attractive offers to existing and potential customers and strategic partners.
Our access to funding sources in amounts adequate to finance our activities on terms that are beneficial to us could be impaired by factors that affect us specifically or the economy generally. During periods of disruptions in the credit and capital markets, potential sources of external financing could be reduced, and borrowing costs could increase.
Our 20 Index access to funding sources in amounts adequate to finance our activities on terms that are beneficial to us could be impaired by factors that affect us specifically or the economy generally. During periods of disruptions in the credit and capital markets, potential sources of external financing could be reduced, and borrowing costs could increase.
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 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 14 Index automotive industry will not expand their operations into product lines produced and sold by us.
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.
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. 15 Index We accrue for overstock returns as a percentage of sales, after giving consideration to recent historical returns.
The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them could have a materially adverse impact on our business, financial condition and results of operations. In addition, any consolidation among our key customers may further increase our customer concentration risk.
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.
In addition to asbestos-related claims, our product sales entail the risk of involvement in other product liability actions. We maintain product liability insurance coverage, but we cannot give any assurance that current or future policy limits will be sufficient to cover all possible liabilities.
In addition to asbestos-related claims, our product sales entail the risk of involvement in other product liability actions. We cannot give any assurance that current or future policy limits of our product liability insurance coverage will be sufficient to cover all possible liabilities.
Our inability to maintain a competitive cost structure could have a material adverse effect on our business, financial condition and results of operations. 14 Index Our business is seasonal and is subject to substantial quarterly fluctuations, which impact our quarterly performance and working capital requirements .
Our inability to maintain a competitive cost structure could have a material adverse effect on our business, financial condition and results of operations. Our business is seasonal and is subject to substantial quarterly fluctuations, which impact our quarterly performance and working capital requirements .
Severe weather conditions and natural disasters, such as hurricanes, tornados, earthquakes and floods, could damage our properties and effect our operations, particularly our major manufacturing and distribution operations at foreign facilities in Canada, China, Mexico, Poland, Germany and Hungary and at our domestic facilities in Florida, Indiana, Kansas, South Carolina, Texas, Virginia, and Wisconsin.
Severe weather conditions and natural disasters, such as hurricanes, tornados, earthquakes and floods, could damage our properties and effect our operations, particularly our major manufacturing and distribution operations at foreign facilities in Canada, China, Denmark, Germany, Hungary, Mexico, Netherlands, Poland and Slovakia, and at our domestic facilities in Florida, Indiana, Kansas, South Carolina, Texas, Virginia, and Wisconsin.
Our suppliers’ ability to supply products to us is also subject to a number of risks, including the availability and cost of raw materials, the destruction of their facilities, work stoppages, cybersecurity incidents affecting their information systems or other limitations on their business operations, which could be caused by any number of factors, such as labor disruptions, financial distress, severe weather conditions and natural disasters, social unrest, economic and political instability, and public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 pandemic, war, terrorism or other catastrophic events.
Our suppliers’ ability to supply products to us is also subject to a number of risks, including the availability and cost of raw materials, the destruction of their facilities, work stoppages, cybersecurity incidents affecting their information systems or other limitations on their business operations, which could be caused by any number of factors, such as labor disruptions, financial distress, severe weather conditions and natural disasters, social unrest, economic and political instability, international hostilities and public health crises, including the occurrence of a pandemic, epidemic or widespread contagious disease or illness, war, terrorism or other catastrophic events.
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, 2023.
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.
Any of these occurrences could impair our ability to adequately manufacture or supply our customers due to all or a significant portion of our equipment or inventory being damaged.
Any of these occurrences could impair our ability to adequately manufacture or supply our customers due to all or a significant portion of our equipment or inventory being damaged or insufficient labor.
The Credit Agreement also contains customary events of default.
The 2024 Credit Agreement also contains customary events of default.
In addition, our business and operations could be materially adversely affected in the event of other serious disruptions at these facilities due to fire, electrical blackouts, power losses, telecommunications failures, wars, terrorist attack or similar events.
In addition, our business and operations could be materially adversely affected in the event of other serious disruptions at these facilities due to fire, electrical blackouts, power losses, telecommunications failures, wars, terrorist attack, widespread outbreak of infectious disease or similar events.
While we believe that we make reasonable estimates for warranty returns in accordance with our revenue recognition policies, actual returns may differ from our estimates. We have in the past incurred, and may in the future incur, material losses and significant costs as a result of our customers returning products to us for warranty-related issues in excess of anticipated amounts.
Actual returns may differ from our estimates for warranty returns in accordance with our revenue recognition policies . We have in the past incurred, and may in the future incur, material losses and significant costs as a result of our customers returning products to us for warranty-related issues in excess of anticipated amounts.
Many of our products carry a warranty ranging from a 90-day limited warranty to a lifetime limited warranty, which generally covers defects in materials or workmanship, and conformance to agreed upon specifications. In the event that our products fail to conform to these warranties, the affected products may be subject to warranty returns and/or product recalls.
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 or 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.
As such, our working capital requirements typically peak near the end of the second quarter, as the inventory build‑up of air conditioning products is converted to sales, and payments on the receivables associated with such sales have yet to be received. These increased working capital requirements are funded by borrowing from our revolving credit facility in our Credit Agreement.
As such, our working capital requirements typically peak near the end of the second quarter, as the inventory build‑up of air conditioning products is converted to sales, and payments on the receivables associated with such sales have yet to be received. These increased working capital requirements are funded by borrowings under our revolving credit facility.
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 $1.4 million at December 31, 2023.
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.
Although we maintain a comprehensive quality control program, 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. We accrue for warranty returns as a percentage of sales, after giving consideration to recent historical returns.
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. We accrue for warranty returns as a percentage of sales, after giving consideration to recent historical returns.
The interest rate swap agreement matures in May 2029. 20 Index The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.
The 2024 Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.
Based upon the results of the August 31, 2023 actuarial study, and all other available information to us, we increased our asbestos liability to 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 statement of operations.
Based upon the results of the August 31, 2024 actuarial study, and all other available information to us, we increased our asbestos liability to $99.6 million, the low end of the range, and recorded an incremental pre-tax provision of $29.3 million in loss from discontinued operations in the accompanying statement of operations.
In addition to the physical risks described above, global climate change has brought about certain risks associated with the anticipated transition to a lower-carbon economy, such as regulatory changes affecting vehicle emissions and fuel efficiency requirements, technological changes in vehicle architectures, changes in consumer demand, carbon taxes, greenhouse gas emissions tracking, and regulation of greenhouse gas emissions from certain sources.
In addition to the physical risks described above, global climate change attributable to increased levels of greenhouse gases has brought about certain risks associated with the anticipated transition to a lower-carbon economy, such as regulatory changes affecting vehicle emissions and fuel efficiency requirements, or establishing new sustainability-related disclosure requirements or new supply chain requirements, technological changes in vehicle architectures, changes in consumer demand, carbon taxes, greenhouse gas emissions tracking, and regulation of greenhouse gas emissions from certain sources.
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 also maintain insurance to cover our existing U.S. and Canadian facilities.
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.
The results of the August 31, 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 results of the August 31, 2024 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs, ranging from $99.6 million to $210.8 million for the period through 2065.
We also routinely use our information systems to send, receive, store, access and use sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive materials.
We also routinely use our information systems to send, receive, store, access and use sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive materials. Additionally, we may rely on our information systems to enable many of our employees to work remotely.
Due to the foregoing, though we have not experienced a material cybersecurity incident in 2023, 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.
We have not experienced a material cybersecurity incident in 2024, but we cannot guarantee that there 17 Index 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.
Any regulatory changes aimed to reduce or eliminate greenhouse gas emissions may require us to incur increased operating costs, such as to purchase and operate emissions control systems or other such technologies to comply with applicable regulations or reporting requirements.
Any regulatory changes aimed to reduce or eliminate greenhouse gas emissions may require us to change our manufacturing processes or undertake other actions that cause us to incur additional operating costs, such as to purchase and operate emissions control systems or other such technologies to comply with applicable regulations or reporting requirements.
Any such occurrences could be harmful to our business and our financial results. We may incur liabilities under government regulations and environmental laws, which may have a material adverse effect on our business, financial condition and results of operations .
The likelihood of such occurrences and their potential effect on us is unpredictable and may vary from country to country. Any such occurrences could be harmful to our business and our financial results. We may incur liabilities under government regulations and environmental laws, which may have a material adverse effect on our business, financial condition and results of operations .
We cannot be certain that we will be able to continue to attract or retain our key employees, 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. 19 Index Risks Related to Liquidity We are exposed to risks related to our receivables supply chain financing arrangements.
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.
A decline in the reputation of our brands as a result of events, such as 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. 18 Index Our revenue and results of operations may suffer upon the bankruptcy, insolvency or other credit failure of a significant customer.
A decline in the reputation of our brands as a result of events, such as 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.
Future legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2023 study, to range from $53.1 million to $105.2 million for the period through 2065.
Future legal costs, which are expensed as incurred and reported in loss from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2024 study, to range from $49.8 million to $115.9 million for the period through 2065.
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.
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. 22 Index Our future performance may be materially adversely affected by changes in technologies and improvements in the quality of new vehicle parts .
In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may lead to suppliers refusing to sell products to us at all. Our efforts to protect against and to minimize these risks may not always be effective.
In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may lead to suppliers refusing to sell products to us at all.
Depending upon the level of sales of receivables pursuant these agreements, a hypothetical, instantaneous and unfavorable change of 100 basis points in the reference rate may have an approximate $8.3 million negative impact on our earnings or cash flows.
Depending upon the level of sales of receivables pursuant these agreements, a hypothetical, instantaneous and unfavorable change of 100 basis points in the reference rate may have an approximate $8.8 million negative impact on our earnings or cash flows. 19 Index A significant increase in our indebtedness, or in interest rates, could negatively affect our financial condition, results of operations and cash flows.
The modification of existing laws, regulations or policies, or the adoption of new laws, regulations or policies could have a material adverse effect on our business, financial condition and results of operations. 22 Index 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.
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.
Our Operations could be adversely affected by interruptions or breaches in the security of our computer and information systems. We rely on information systems throughout our organization to conduct day-to-day business operations, including the management of our supply chain and our purchasing, receiving and distribution functions.
We rely on information systems throughout our organization to conduct day-to-day business operations, including the management of our supply chain and our purchasing, receiving and distribution functions.
Additionally, we rely on our information systems to enable many of our employees to work remotely as a result of more recent policies and practices enacted by us. 17 Index Despite security measures designed to prevent and mitigate the risk of cybersecurity incidents, our information systems, and the systems of our customers, suppliers and business partners, may be vulnerable to such incidents, including interruptions, outages, data breaches, phishing attacks, ransomware attacks, unauthorized access, attempts to hack into our network, and computer viruses.
Despite security measures designed to prevent and mitigate the risk of cybersecurity incidents, our information systems, and the systems of our customers, suppliers and business partners, may be vulnerable to such incidents, including interruptions, outages, data breaches, phishing attacks, ransomware attacks, unauthorized access, attempts to hack into our network, and computer viruses.
Furthermore, although w e believe our facilities are in labor markets with ready access to adequate numbers of skilled and unskilled workers, we compete with other businesses to fill many of our hourly positions in our distribution facilities, which historically have had high turnover rates, which can lead to increased training and retention costs, particularly in a competitive and shrinking labor market.
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.
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.
Our revenue and results of operations may suffer upon the bankruptcy, insolvency or other credit failure of a significant customer. 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.
Due to factors outside our control, such as the adoption or modification of domestic and foreign laws, regulations or policies, we may not be able to achieve the level of benefits that we expect to realize in these initiatives, or we may not be able to realize these benefits within the time frames we currently expect.
Due to factors outside our control, such as changes in U.S. trade policy resulting in new or higher tariffs, the adoption or modification of domestic and foreign laws, regulations or policies and other factors such as changes in our sales levels or the amount, timing and character of charges related to such initiatives, or a substantial delay in the completion of such initiatives , we may not be able to achieve the level of benefits that we expect to realize in these initiatives, or we may not be able to realize these benefits within the time frames we currently expect .
In accordance with the related purchase agreement, we agreed to assume the liabilities for all new claims filed after September 2001. Our ultimate exposure will depend upon the number of claims filed against us on or after September 2001, and the amounts paid for settlements, awards of asbestos-related damages, and defense of such claims.
Our ultimate exposure will depend upon the number of claims filed against us on or after September 2001, and the amounts paid for settlements, awards of asbestos-related damages, and defense of such claims. We do not have insurance coverage for the indemnity and defense costs associated with the claims we face.
In the event that we determine that our goodwill or other intangible assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition and results of operations.
In the event that we determine that our goodwill or other intangible assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition and results of operations. 21 Index Risks Related to Other External Factors We conduct our manufacturing and distribution operations on a worldwide basis and are subject to risks associated with doing business outside the United States.
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 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.
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.
The automotive industry is highly competitive, and our success depends on our ability to compete with domestic and international suppliers of automotive products. In the automotive aftermarket, we compete primarily with full-line suppliers, short- or value-line suppliers, tier suppliers and service part operations of original equipment manufacturers, including car dealerships, and the direct import programs of certain retailers.
In the automotive aftermarket, we compete primarily with full-line suppliers, short- or value-line suppliers, tier suppliers and service part operations of original equipment manufacturers, including car dealerships, and the direct import programs of certain retailers. In the diverse non-aftermarket end markets we supply, we compete primarily with global and regional tier suppliers of original equipment manufacturers.
In our Engineered Solutions business, our supply agreements with our customers are generally requirements contracts, and a decline in the production requirements of any of our significant customers could adversely impact our revenues and profitability.
In our Engineered Solutions business, our supply agreements with our customers are generally requirements contracts, and a decline in the production requirements of any of our significant customers could adversely impact our revenues and profitability. 18 Index In our Engineered Solutions business, our customers generally agree to purchase their requirements for specific products, and we receive volume forecasts of their requirements, but not long-term firm volume commitments.
In our Engineered Solutions business, our customers generally agree to purchase their requirements for specific products, and we receive volume forecasts of their requirements, but not long-term firm volume commitments. Furthermore, our customers typically reserve the right to change, delay or cancel their orders for products, and we have limited recourse in such events.
Furthermore, our customers typically reserve the right to change, delay or cancel their orders for products, and we have limited recourse in such events.
As of December 31, 2023, our total outstanding indebtedness was $156.2 million, including outstanding borrowings under the Credit Agreement of $156 million, consisting of current borrowings of $5 million and long-term borrowings of $151 million.
As of December 31, 2024 , our total outstanding indebtedness was $562.3 million , including outstanding borrowings under the 2024 Credit Agreement of $545.4 million , net of deferred financing costs, consisting of current borrowings of $25.2 million and long-term debt of $520.1 million .
There are a number of risks associated with doing business internationally, including: (a) exposure to local economic and political conditions; (b) social unrest such as risks of terrorism or other hostilities; (c) currency exchange rate fluctuations and currency controls; (d) the effect of potential changes in U.S. trade policy and international trade agreements; and (e) the potential for shortages of trained labor.
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) 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.
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.
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.
These customer demands have put continued pressure on our operating margins and profitability, resulted in periodic contract renegotiation to provide more favorable prices and terms to these customers, and significantly increased our working capital needs. 13 Index Our industry is highly competitive, and our success depends on our ability to compete with suppliers of automotive products, some of which may have substantially greater financial, marketing and other resources than we do .
These customer demands have put continued pressure on our operating margins and profitability, resulted in periodic contract renegotiation to provide more favorable prices and terms to these customers, and significantly increased our working capital needs.
In 1986, we acquired a brake business, which we subsequently sold in March 1998. When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by the seller of the acquired brake business.
When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by the seller of the acquired brake business. In accordance with the related purchase agreement, we agreed to assume the liabilities for all new claims filed after September 2001.
In the diverse non-aftermarket end markets we supply, we compete primarily with global and regional tier suppliers of original equipment manufacturers. Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do.
Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do.
Although we have had an adequate supply of purchased supplier raw materials, finished goods, equipment and component parts, disruptions in the global economy have impeded global supply chains, resulting in longer lead times and delays in procuring component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation.
Although we have historically had access to an adequate supply of raw materials, finished goods, equipment and component parts, we have experienced, and in the future are likely to experience, disruptions in our supply chains that result in longer lead times, delays in procuring component parts and raw materials, and higher input costs.
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. 15 Index We may be materially adversely affected by asbestos claims arising from products sold by our former brake business, as well as by other product liability claims .
We may be materially adversely affected by asbestos claims arising from products sold by our former brake business, as well as by other product liability claims . In 1986, we acquired a brake business, which we subsequently sold in March 1998.
Our three largest individual customers accounted for approximately 59% of our consolidated net sales in 2023. During 2023, O’Reilly Auto Parts, AutoZone and NAPA accounted for 29%, 16% and 14% of our consolidated net sales, respectively.
Our three largest individual customers accounted for approximately 60.7% of our consolidated net sales in 2024 . During 2024 , O’Reilly Auto Parts, AutoZone and NAPA accounted for 28.4% , 18.8% and 13.5% of our consolidated net sales, respectively. Net sales from each of the customers were reported in our Vehicle Control and Temperature Control operating segments.
Our cost savings is also predicated upon maintaining our sales levels. 16 Index Severe weather, natural disasters and other disruptions could adversely impact our operations at our manufacturing and distribution facilities.
Failure to achieve the benefits of our cost saving initiatives could have a material adverse effect on us. 16 Index Severe weather, natural disasters and other disruptions could adversely impact our operations at our manufacturing and distribution facilities.
Risks Related to External Factors We conduct our manufacturing and distribution operations on a worldwide basis and are subject to risks associated with doing business outside the United States. We have manufacturing and distribution facilities in many countries, including Canada, Mexico, Poland, Germany and Hungary, as well as joint-ventures in China.
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.
The applicable margin for the term benchmark borrowings ranges from 1.0% to 2.0%, and the applicable margin for alternate base rate borrowings ranges from 0% to 1.0%, in each case, based on the total net leverage ratio of the Company and its restricted subsidiaries.
Borrowings bear interest at the applicable interest rate index selected by the Company based on the particular currency borrowed plus a credit spread adjustment depending on the index, and a margin ranging from 1.25% to 2.25% per annum based on the total net leverage ratio of the Company and its restricted subsidiaries.
Furthermore, changes in U.S. trade policy, particularly as it relates to China, have resulted in the assessment of increased tariffs on goods that we import into the United States, and have caused uncertainty about the future of free trade generally. We benefit from free trade agreements, such as the U.S.-Mexico-Canada Agreement (USMCA).
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 do not have insurance coverage for the indemnity and defense costs associated with the claims we face. At December 31, 2023, 1,390 cases were outstanding for which we may be responsible for any related liabilities.
At December 31, 2024, 1,287 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2024, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $91.4 million .
Removed
Our ability to achieve any anticipated cost savings could be affected by a number of factors such as changes in the amount, timing and character of charges related to such initiatives, or a substantial delay in the completion of such initiatives. Failure to achieve the benefits of our cost saving initiatives could have a material adverse effect on us.
Added
Our industry is highly competitive, and our success depends on our ability to compete with suppliers of automotive products, some of which may have substantially greater financial, marketing and other resources than we do . The automotive industry is highly competitive, and our success depends on our ability to compete with other suppliers of automotive products.
Removed
In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including initiating cost savings initiatives and the pass through of higher costs to our customers.
Added
When we experience such supply disruptions, we may not be able to effectively mitigate the adverse impacts that such disruptions have on our business.
Removed
A significant increase in our indebtedness, or in interest rates, could negatively affect our financial condition, results of operations and cash flows. We have a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders.
Added
Our efforts to protect against and minimize these risks may not always be effective, which could materially and adversely affect our operations and cause us to incur significant cost increases. Our operations could be adversely affected by interruptions or breaches in the security of our computer and information systems.
Removed
The Credit Agreement provides for a $500 million credit facility comprised of a $100 million term loan facility and a $400 million multi-currency revolving credit facility available in U.S. Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the administrative agent and the lenders.
Added
General economic conditions, competition and other factors may adversely affect the solvency or creditworthiness of our customers.
Removed
Borrowings under our Credit Agreement bear interest, at the Company’s election, at a rate per annum equal to Term SOFR plus 0.10% plus an applicable margin, or an alternate base rate plus an applicable margin, where the alternate base rate is the greater of the prime rate, the federal funds effective rate plus 0.50%, and one-month Term SOFR plus 0.10% plus 1.00%.
Added
We may not be able to realize all of the expected revenues and cash flows from our acquisitions and investments, and any completed acquisitions and investments may be unsuccessful or consume significant resources.
Removed
Concurrently with the Company’s entry into the Credit Agreement, the Company also entered into a seven year interest rate swap agreement with Wells Fargo Bank, N.A., Co-Syndication Agent and lender under the Credit Agreement, on $100 million of borrowings under the Credit Agreement.
Added
Our ability to realize all of the expected enhanced revenue and cash flows from our acquisitions and investments will depend, in substantial part, on our ability to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions or successfully complete acquisitions in the future. Acquisitions and investments may involve significant cash expenditures, operating losses and expenses.
Removed
The repeal or modification of the USMCA or further increases to tariffs on goods imported into the United States could increase our costs to source materials, component parts and finished goods from other countries. The likelihood of such occurrences and their potential effect on us is unpredictable and may vary from country to country.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeCybersecurity Governance The Audit Committee of our Board of Directors oversees the adequacy and effectiveness of our internal controls, policies and procedures regarding cybersecurity, information security and data protection, and compliance with applicable laws and regulations concerning privacy. Our Chief Information Officer (“CIO”), in turn, is responsible for managing the Company’s cybersecurity risk management program and incident response procedures.
Biggest changeCybersecurity Governance The Audit Committee of our Board of Directors oversees the adequacy and effectiveness of our internal controls, policies and procedures regarding cybersecurity, information security and data protection, and compliance with applicable laws and 23 Index regulations concerning privacy.
Depending upon the results of the assessment, including the nature and magnitude of the event, our incident response procedures provide for oversight and management of an incident by the IRT, under the direction of the CIO, or, in the event of escalation, under the direction of the executive officers of the Company, with reporting to and oversight by the Audit Committee. 24 Index
Depending upon the results of the assessment, including the nature and magnitude of the event, our incident response procedures provide for oversight and management of an incident by the IRT, under the direction of the CIO, or, in the event of escalation, under the direction of the executive officers of the Company, with reporting to and oversight by the Audit Committee.
Added
Our Chief Information Officer (“CIO”), in turn, is responsible for managing the Company’s cybersecurity risk management program and incident response procedures.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed0 unchanged
Biggest changeThomas Canada Manufacturing 42,500 Owned Engineered Solutions Kirchheim-Teck Germany Distribution 27,500 2031 Pécel Hungary Manufacturing 59,500 Owned Milwaukee WI Manufacturing 84,000 2028 Sheboygan Falls WI Manufacturing 22,500 2025 Tijuana Mexico Distribution 13,800 2026 Tijuana Mexico Manufacturing 30,400 2026 Wuxi China Manufacturing 27,600 2029 Other Mississauga Canada Administration and Distribution 82,400 2028 Irving TX Training Center 13,400 2027 1 It is our intention to extend the leases that are set to expire in 2024. 2 These facilities are also utilized by the Engineered Solutions operating segment. 3 This facility is expected to have a phased opening beginning in 2024 and be fully operational in early 2025, and once operational, it will also be utilized by the Temperature Control and Engineered Solutions operating segments. 25 Index
Biggest changeThomas Canada Manufacturing 42,500 Owned 24 Index Engineered Solutions Kirchheim-Teck Germany Distribution 27,500 2031 Pécel Hungary Manufacturing 33,500 Owned Milwaukee WI Manufacturing 84,000 2028 Sheboygan Falls WI Manufacturing 22,500 2025 Tijuana Mexico Distribution 13,800 2026 Tijuana Mexico Manufacturing 30,400 2026 Wuxi China Manufacturing 27,600 2029 Nissens Automotive Cachtice Slovakia Manufacturing 143,900 2031 Horsens Denmark Administration and Manufacturing 91,100 Owned Horsens Denmark Manufacturing 19,600 Owned Horsens Denmark Distribution 211,500 Owned Horsens Denmark Distribution 54,300 2028 Niepolomice Poland Administration and Distribution 70,300 2025 Tilburg Netherlands Administration and Distribution 30,800 2027 Other Mississauga Canada Administration and Distribution 82,400 2028 Irving TX Training Center 13,400 2027 1 It is our intention to extend the lease in Reynosa, Mexico that is set to expire in 2025, and relocate operations from Niepolomice, Poland to a new location in Skawina, Poland upon expiration of the lease in 2025. 2 These facilities are also utilized by the Engineered Solutions operating segment. 3 This facility began a phased opening in 2024 and is expected to be fully operational in 2025.
Lauderdale FL Distribution 30,000 Owned Greenville 2 SC Manufacturing 184,500 Owned Independence 2 KS Manufacturing 337,400 Owned Long Island City NY Administration 75,800 2033 McAllen TX Distribution 120,300 2027 Mishawaka 2 IN Manufacturing 153,100 Owned Reynosa 2 Mexico Manufacturing 175,000 2025 Reynosa 2 Mexico Manufacturing 153,000 2031 Shawnee 3 KS Distribution 574,700 2033 Temperature Control Foshan City China Manufacturing 361,500 2028 Lewisville TX Administration and Distribution 415,000 2034 Reynosa 2 Mexico Manufacturing 82,000 2026 Reynosa 2 Mexico Manufacturing 117,500 2026 Reynosa Mexico Manufacturing 111,800 2024 St.
Lauderdale FL Distribution 30,000 Owned Greenville 2 SC Manufacturing 184,500 Owned Independence 2 KS Manufacturing 337,400 Owned Long Island City NY Administration 75,800 2033 McAllen TX Distribution 120,300 2027 Mishawaka 2 IN Manufacturing 153,100 Owned Reynosa 2 Mexico Manufacturing 175,000 2025 Reynosa 2 Mexico Manufacturing 153,000 2031 Shawnee 3 KS Distribution 574,700 2033 Temperature Control Foshan City China Manufacturing 361,500 2028 Lewisville TX Administration and Distribution 415,000 2034 Reynosa 2 Mexico Manufacturing 82,000 2026 Reynosa 2 Mexico Manufacturing 117,500 2026 Reynosa Mexico Manufacturing 274,000 2034 St.
ITEM 2. PROPERTIES We maintain our executive offices in Long Island City, New York. The table below describes our principal facilities as of December 31, 2023. Location State or Country Principal Business Activity Approx. Square Feet Owned or Expiration Date of Lease¹ Vehicle Control Bialystok Poland Manufacturing 154,800 2027 Disputanta VA Distribution 411,000 Owned Edwardsville KS Distribution 363,500 Owned Ft.
ITEM 2. PROPERTIES We maintain our executive offices in Long Island City, New York. The table below describes our principal facilities as of December 31, 2024. Location State or Country Principal Business Activity Approx. Square Feet Owned or Expiration Date of Lease¹ Vehicle Control Bialystok Poland Manufacturing 155,000 2032 Disputanta VA Distribution 411,000 Owned Edwardsville KS Distribution 363,500 Owned Ft.
Added
This facility is also utilized by the Temperature Control operating segment.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−1 removed0 unchanged
Biggest changeOur Credit Agreement permits dividends and distributions by us provided specific conditions are met. For information related to our Credit Agreement, see Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
Biggest changeFor information related to our 2024 Credit Agreement, see Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report. 25 Index There have been no unregistered offerings of our common stock during the fourth quarter of 2024 .
The graph shows the change in value of a $100 investment in the Company’s Common Stock and each of the above indices on December 31, 2018 and the reinvestment of all dividends.
The graph shows the change in value of a $100 investment in the Company’s Common Stock and each of the above indices on December 31, 2019 and the reinvestment of all dividends.
The comparisons in this table are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of the Company’s Common Stock or the referenced indices.
The comparisons in this table are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of the Company’s Common Stock or the referenced indices. Standard Motor Products, Inc.
As of February 20, 2024, there were 497 holders of record of our common stock. Dividends are declared and paid on the common stock at the discretion of our Board of Directors (the “Board”) and depend on our profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by our Board.
As of February 25, 2025, there were 492 holders of record of our common stock. Dividends are declared and paid on the common stock at the discretion of our Board of Directors (the “Board”) and depend on our profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by our Board.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades publicly on the New York Stock Exchange (“NYSE”) under the trading symbol “SMP.” The last reported sale price of our common stock on the NYSE on February 20, 2024 was $40.23 per share.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades publicly on the New York Stock Exchange (“NYSE”) under the trading symbol “SMP.” The last reported sale price of our common stock on the NYSE on February 25, 2025 was $30.93 per share.
There have been no unregistered offerings of our common stock during the fourth quarter of 2023. 26 Index Stock Performance Graph The following graph compares the five year cumulative total return on the Company’s Common Stock to the total returns on the Standard & Poor’s 500 Stock Index and the S&P 1500 Auto Parts & Equipment Index, which is a combination of automotive parts and equipment companies within the S&P 400, the S&P 500 and the S&P 600.
Stock Performance Graph The following graph compares the five year cumulative total return on the Company’s Common Stock to the total returns on the Standard & Poor’s 500 Stock Index and the S&P 1500 Auto Parts & Equipment Index, which is a combination of automotive parts and equipment companies within the S&P 400, the S&P 500 and the S&P 600.
Removed
SMP S&P 500 S&P 1500 Auto Parts & Equipment Index 2018 100 100 100 2019 112 131 133 2020 86 156 164 2021 114 200 201 2022 78 164 136 2023 92 207 145 * Source: S&P Capital IQ 27 Index ITEM 6. (RESERVED)
Added
Our 2024 Credit Agreement permits dividends and distributions by us provided specific conditions are met.
Added
S&P 500 Index S&P Composite 1500 Auto Parts & Equipment Index 2019 100.00 100.00 100.00 2020 76.80 118.40 123.10 2021 101.61 152.39 150.65 2022 69.31 124.79 101.83 2023 81.80 157.59 108.43 2024 65.89 197.02 86.10 * Source: S&P Capital IQ ITEM 6. (RESERVED) 26 Index

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+35 added−81 removed25 unchanged
Biggest changeDecember 31, (In thousands, except per share data) 2023 2022 2021 Net sales $ 1,358,272 $ 1,371,815 $ 1,298,816 Gross profit 388,826 382,539 376,931 Gross profit % 28.6 % 27.9 % 29 % Operating income 92,677 104,135 128,999 Operating income % 6.8 % 7.6 % 9.9 % Earnings from continuing operations before income taxes 81,716 98,332 130,465 Provision for income taxes 18,368 25,206 31,044 Earnings from continuing operations 63,348 73,126 99,421 Loss from discontinued operations, net of income taxes (28,996 ) (17,691 ) (8,467 ) Net earnings 34,352 55,435 90,954 Net earnings attributable to noncontrolling interest 204 84 68 Net earnings attributable to SMP 34,148 55,351 90,886 Per share data attributable to SMP – Diluted: Earnings from continuing operations $ 2.85 $ 3.30 $ 4.39 Discontinued operations (1.31 ) (0.80 ) (0.37 ) Net earnings per common share $ 1.54 $ 2.50 $ 4.02 Consolidated net sales for 2023 were $1,358.3 million, a decrease of $13.5 million, or 1% compared to net sales of $1,371.8 million in 2022; while consolidated net sales for 2022 increased $73 million, or 5.6%, compared to net sales of $1,298.8 million in 2021.
Biggest changeDecember 31, (In thousands, except per share data) 2024 2023 Net sales $ 1,463,849 $ 1,358,272 Gross profit 423,321 388,826 Gross profit % 28.9 % 28.6 % Operating income 80,624 92,677 Operating income % 5.5 % 6.8 % Earnings from continuing operations before income taxes 73,989 81,716 Provision for income taxes 19,385 18,368 Earnings from continuing operations 54,604 63,348 Loss from discontinued operations, net of income taxes (26,128) (28,996) Net earnings 28,476 34,352 Net earnings attributable to noncontrolling interest 976 204 Net earnings attributable to SMP 27,500 34,148 Per share data attributable to SMP – Diluted: Continuing operations $ 2.41 $ 2.85 Discontinued operations (1.17) (1.31) Net earnings per common share $ 1.24 $ 1.54 Consolidated net sales for 2024 were $1,463.8 million , a increase of $105.6 million, or 7.8% c ompared to net sales of $1,358.3 million in 2023.
If material adverse developments were to occur in any of these areas, there can be no assurance that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.
If material adverse developments were to occur in any of these areas, there can be no assurance that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our 2024 Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.
The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.
The 2024 Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.
The Company’s obligations under the Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions.
The 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.
In addition, if we default on any of our indebtedness, or breach any financial covenant in our Credit Agreement, our business could be adversely affected. For further information regarding the risks in our business, refer to Item 1A, “Risk Factors,” of this Report.
In addition, if we default on any of our indebtedness, or breach any financial covenant in our 2024 Credit Agreement, our business could be adversely affected. For further information regarding the risks in our business, refer to Item 1A, “Risk Factors,” of this Report.
Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables, and do not service the receivables after the sale. As such, these transactions are being accounted for as a sale.
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.
We anticipate that our cash flow from operations, available cash, and available borrowings under our Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months.
We anticipate that our cash flow from operations, available cash, and available borrowings under our 2024 Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months.
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.
If we are unable to reach this conclusion, then we would perform a quantitative impairment test. In performing the quantitative impairment test, the fair value of the reporting unit is compared to its carrying amount.
Future legal costs are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations. 41 Index We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future and whenever events or changes in circumstances indicate that additional provisions may be necessary.
Future legal costs are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations. We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future and whenever events or changes in circumstances indicate that additional provisions may be necessary.
All of our other cash commitments as of December 31, 2023 are not material. For additional information related to our material cash commitments, see Note 7, “Leases,” and Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
All of our other cash commitments as of December 31, 2024 are not material. For additional information related to our material cash commitments, see Note 7, “Leases,” and Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
The Credit Agreement also contains customary events of default. 38 Index In November 2023, our Polish subsidiary, SMP Poland sp. z.o.o., further amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce. The overdraft facility, as amended, provides for borrowings under the facility in Euros and U.S. Dollars.
The 2024 Credit Agreement also contains customary events of default. In November 2023, our Polish subsidiary, SMP Poland sp. z.o.o., further amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce. The overdraft facility, as amended, provides for borrowings under the facility in euros and U.S. dollars.
Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company. There were no borrowings outstanding under the overdraft facility at both December 31, 2023 and December 31, 2022.
Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company. There were no borrowings outstanding under the overdraft facility at both December 31, 2024 and December 31, 2023.
A charge in the amount of $46 million, $32 million and $11.5 million related to the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021, respectively.
A charge in the amount of $48.5 million , $46 million and $32 million related to the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022, respectively.
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 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.
Restructuring and Integration Programs For a detailed discussion on the restructuring and integration costs, see Note 3, “Restructuring and Integration Expense,” of the Notes Consolidated Financial Statements in Item 8 of this Report. Liquidity and Capital Resources Our primary cash requirements include working capital, capital expenditures, regular quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions.
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. 32 Index Liquidity and Capital Resources Our primary cash requirements include working capital, capital expenditures, quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions.
Under the amended terms, the overdraft facility provides for borrowings of up to Zloty 30 million (approximately $7.6 million) if borrowings are solely in Zloty, or up to 85% of the Zloty 30 million limit (approximately $6.5 million) if borrowings are in Euros and/or U.S. Dollars.
Under the amended terms, the overdraft facility provides for borrowings of up to Polish zloty 30 million (approximately $7.3 million) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $6.2 million) if borrowings are in euros and/or U.S. dollars.
You should be aware that preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.
The preparation of our consolidated financial statements requires us 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.
Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2023 and 2022, as well as other information available and considered by us, and legal expenses and other costs associated with our asbestos-related liability.
Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2024 and 2023 , as well as other available information, and legal expenses and other costs associated with our asbestos-related liability.
This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during each of the fiscal years in the three-year period ended December 31, 2023.
This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during each of the fiscal years in the two-year period ended December 31, 2024 .
The following table summarizes our primary sources of funds including ongoing net cash flows from operating activities and availability under our Credit Agreement.
The following table summarizes our primary sources of funds including ongoing net cash flows from operating activities and availability under our credit agreements (in thousands).
The loss from discontinued operations for the year ended December 31, 2023 and 2022 includes (1) a $23.8 million and $18.5 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2023 and 2022 actuarial studies; (2) legal and other miscellaneous expenses, before taxes, of $4.9 million and $5.4 million for 2023 and 2022, respectively, and (3) a $10.5 million pre-tax provision in 2023 related to a breach of contract legal proceeding.
The loss from discontinued operations for the year ended December 31, 2024 and 2023 includes (i) a $29.3 million and $23.8 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2024 and 2023 actuarial studies; (ii) legal and other miscellaneous expenses, before taxes, of $4.8 million and $4.9 million for 2024 and 2023 , respectively, and (iii) a $10.5 million pre-tax provision in 2023 related to a breach of contract legal proceeding.
Investing activities during 2023 consisted of (1) the payment of $4 million for our acquisition of an additional 15% equity interest in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co., Ltd.
Cash used in investing activities during 2023 primarily consisted of (i) the payment of $4.0 million for our acquisition of an additional 15% equity interest in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co., Ltd.
The methodology used to project asbestos-related liabilities and costs in our actuarial study considered: (1) historical data available from publicly available studies; (2) an analysis of our recent claims history to estimate likely filing rates into the future; (3) an analysis of our currently pending claims; (4) an analysis of our settlements and awards of asbestos-related damages to date; and (5) an analysis of closed claims with pay ratios and lag patterns in order to develop average future settlement values.
The methodology used to project asbestos-related liabilities and costs in our actuarial study considered: (i) historical data available from publicly available studies; (ii) an analysis of our recent claims history to estimate likely filing rates into the future; (iii) an analysis of our currently pending claims; (iv) an analysis of our settlements and awards of asbestos-related damages to date; and (v) an analysis of closed claims with pay ratios and lag patterns in order to develop average future settlement values.
If the benchmark reference rate increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows. In January 2023, one of our customers filed a petition for bankruptcy.
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.
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.
During the year ended December 31, 2024, our average daily alternative base rate loan balance was $0.7 million , compared to a balance of $0.1 million for the year ended December 31, 2023.
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.
The overdraft facility had an original 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. The facility automatically renewed in December 2024 to a March 2025 maturity date.
At December 31, 2023, the weighted average interest rate under our Credit Agreement was 5%, which consisted of $156 million in borrowings at 5% under Term SOFR, adjusted for the impact of the interest rate swap agreement on $100 million of borrowings.
At December 31, 2023, the weighted average interest rate under our 2022 Credit Agreement was 5.0%, under Term SOFR, adjusted for the impact of the interest rate swap agreement on $100 million of borrowings.
Material Cash Commitments Material cash commitments as of December 31, 2023 consist of required cash payments to service our outstanding borrowings of $156 million under our Credit Agreement with JPMorgan Chase Bank, N.A., as agent and the future minimum cash requirements of $131.7 million through 2034 under operating leases.
Material Cash Commitments Material cash commitments as of December 31, 2024 consist of required cash payments to service our outstanding borrowings of $545.4 million under our 2024 Credit Agreement with JPMorgan Chase Bank, N.A., as agent and the future minimum cash requirements of $144.8 million through 2034 under operating leases.
Pursuant to these agreements, we sold $830.8 million and $813.7 million of receivables for the years ended December 31, 2023 and 2022, respectively. Receivables presented at financial institutions and not yet collected as of December 31, 2023 were $4.5 million and remained in our receivable balance as of that date.
Pursuant to these agreements, we sold $884.7 million and $830.8 million of receivables for the years ended December 31, 2024 and 2023, respectively. Receivables presented at financial institutions and not yet collected as of December 31, 2024 and December 31, 2023 were approximately $5.8 million and $4.5 million, respectively, and remained in our accounts receivable balance for those periods.
In reviewing for impairment, we compare the carrying value of such assets to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.
In reviewing intangible assets having definite lives and other long-lived assets for impairment, we compare the carrying value of such assets to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.
The income tax provision for 2023 was $18.4 million at an effective tax rate of 22.5%, compared to $25.2 million at an effective tax rate of 25.6% in 2022.
The income tax provision for 2024 was $19.4 million at an effective tax rate of 26.2% , compared to $18.4 million at an effective tax rate of 22.5% in 2023 .
Gross margins, as a percentage of consolidated net sales, increased to 28.6% for 2023, compared to 27.9% for 2022.
Gross margins, as a percentage of consolidated net sales, increased to 28.9% f or 2024 , compared to 28.6% for 2023 .
During the years ended December 31, 2023 and 2022, we recorded a net loss of $29 million and $17.7 million from discontinued operations, respectively.
During the years ended December 31, 2024 and 2023 , we recorded a net loss of $26.1 million and $29 million from discontinued operations, respectively.
Other non-operating income, net was $2.3 million in 2023, compared to $4.8 million in 2022. The year-over-year decrease in other non-operating income, net results from the decrease in year-over-year equity income from our joint ventures, and the unfavorable impact of changes in foreign currency exchange rates.
Other non-operating income, net was $6.9 million in 2024 , compared to $2.3 million in 2023 . The year-over-year increase in other non-operating income, net results from the increase in year-over-year equity income from our joint ventures, and the favorable impact of changes in foreign currency exchange rates.
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 was included in selling, general and administrative expenses in our consolidated statement of operations. The bankruptcy court proceedings have continued into 2023.
In January 2023, one of our customers filed a petition for bankruptcy and we recorded a $7 million pre-tax charge in selling, general and administrative expenses in our consolidated statement of operations during the year ended December 31, 2022 to reduce our accounts receivable balance to our estimated recovery.
During 2023, we generated operating cash flow of $144.3 million by reducing our inventory to more normalized levels while actively managing our accounts receivable and accounts payable. We will continue to manage our working capital to maximize our operating cash flow.
During the year ended December 31, 2023, we generated significant operating cash flow by reducing our inventory to more normalized levels while actively managing our accounts receivable and accounts payable. We continue to actively manage our working capital to maximize our operating cash flow. Investing Activities .
Although we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates, or in the assumptions that we use in calculating the estimates, the uncertain future effects, if any, of the 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.
Although we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates, or in the assumptions that we use in calculating the estimates, the uncertain future effects, if any, of the 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. 36 Index Valuation of Long‑Lived and Intangible Assets and Goodwill The company accounts for business combinations using the acquisition method and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree are generally recorded at their acquisition date fair values.
Restructuring and integration expenses were $2.6 million in 2023 compared to restructuring and integration expenses of $1.9 million in 2022.
Restructuring and integration expenses were $7.7 million in 2024 compared to $2.6 million in 2023 .
Commencing in July 2023, on the date of our 15% increase in equity interest, the financial results of Gwo Yng were no longer accounted for under the equity method of accounting. Instead, Gwo Yng’s financial results were reported on a consolidated basis, resulting in lower joint venture equity income. Interest Expense.
Commencing on the date of our equity interest increase, the financial results of Gwo Yng were no longer accounted for under the equity method of accounting. Instead, Gwo Yng’s financial results are reported on a consolidated basis. As such, other non-operating income, net includes equity income of Gwo Yng of $0.7 million in 2023. Interest Expense.
Financing Activities . Cash used in financing activities was $109.6 million in 2023 compared to cash provided by financing activities of $55.5 million in 2022. During 2023, we (1) reduced our borrowings under our Credit Agreement by $83.5 million; and (2) paid dividends of $25.2 million and $0.7 million to shareholders of our noncontrolling interests, respectively.
These activities were funded with cash provided by our operating activities, in addition to borrowings under our 2024 Credit Agreement. During 2023, we (i) reduced our borrowings under our 2022 Credit Agreement by $83.5 million; and (ii) paid dividends of $25.2 million and $0.7 million to SMP shareholders and shareholders of our noncontrolling interests, respectively.
There were no receivables presented at financial institutions and not yet collected as of December 31, 2022. All receivables sold were reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale.
All receivables sold were reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale.
We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions. 40 Index We assess the impairment of long‑lived assets, identifiable intangibles assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
We assess long‑lived assets, identifiable intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Comparison of Liquidity and Capital Resources For Fiscal Years 2022 and 2021 For a detailed discussion of our Liquidity and Capital Resources comparison of fiscal year 2022 to fiscal year 2021, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussion and analysis of our financial condition and results of operations for fiscal year 2023 , and comparisons of fiscal years 2023 and 2022 can be found in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Given the uncertainties associated with projecting such matters into the future and other factors outside our control, we can give no assurance that additional provisions will not be required.
Given the uncertainties associated with projecting such matters into the future and other factors outside our control, we can give no assurance that additional provisions will not be required. We will continue to monitor events and changes in circumstances surrounding these potential liabilities in determining whether to perform additional actuarial evaluations and whether additional provisions may be necessary.
Selling, general and administrative expenses (“SG&A”) increased to $293.6 million, or 21.6% of consolidated net sales in 2023, as compared to $276.6 million, or 20.2% of consolidated net sales in 2022.
Selling, general and administrative expenses increased $41.5 million to $335.1 million , or 22.9% of consolidated net sales in 2024 , as compared to $293.6 million , or 21.6% of consolidated net sales in 2023 .
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.
Outstanding borrowings at December 31, 2024 under the 2024 Credit Agreement were $545.4 million , net of deferred financing costs, consisting of current borrowings of $25.2 million and long-term debt of $520.1 million; while outstanding borrowings at December 31, 2023, were $156 million, consisting of current borrowings of $5 million and long-term debt of $151 million.
Net earnings attributable to the noncontrolling interest were $204,000 and $84,000 during the years ended December 31, 2023 and 2022, respectively. For additional information on the Gwo Yng step acquisition, see Note 2, “Business Acquisitions and Investments,” in the notes to our consolidated financial statements (unaudited). Comparison of Results of Operations For Fiscal Years 2022 and 2021 Sales .
Net earnings attributable to the noncontrolling interest were $1.0 million and $0.2 million during the years ended December 31, 2024 and 2023 , 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.
Consolidated net sales for 2022 were $1,371.8 million, an increase of $73 million, or 5.6%, compared to $1,298.8 million in the same period of 2022, with the majority of our net sales to customers located in the United States. Consolidated net sales increased across all of our operating segments, when compared to the comparable period in the prior year.
Consolidated net sales for 2024 were $1,463.8 million , an increase o f $105.6 million, or 7.8%, c ompared to $1,358.3 million in 2023 , with the majority of our net sales to customers located in the United States. Consolidated net sales increased in all our operating segments when compared to the prior fiscal year.
The Company may request up to two one-year extensions of the maturity date. 37 Index The Company may, upon the agreement of one or more of then existing lenders or of additional financial institutions not currently party to the Credit Agreement, increase the revolving facility commitments or obtain incremental term loans by an aggregate amount not to exceed (x) the greater of (i) $168 million or (ii) 100% of consolidated EBITDA (as defined in the Credit Agreement) for the four fiscal quarters ended most recently before such date, plus (y) the amount of any voluntary prepayment of term loans, plus (z) an unlimited amount so long as, immediately after giving effect thereto, the pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement) does not exceed 2.5 to 1.0.
The Company may, subject to customary conditions, increase the global tranche or obtain incremental term loans in an aggregate amount not to exceed (x) the greater of (i) $168 million and (ii) 100% of consolidated EBITDA for the four fiscal quarters ended most recently before such date, plus (y) any voluntary prepayment of term loans, plus (z) any amount that, after giving effect to the increase, the pro forma First Lien Net Leverage Ratio (as defined in the 2024 Credit Agreement) does not exceed 2.75 to 1.00.
Asbestos Litigation In evaluating our potential asbestos-related liability, we have considered various factors including, among other things, an actuarial study of the asbestos related liabilities performed by an independent actuarial firm, our settlement amounts and whether there are any co-defendants, the jurisdiction in which lawsuits are filed, and the status and results of such claims.
Asbestos Litigation In evaluating our potential asbestos-related liability, we have considered various factors including, among other things, an actuarial study of the asbestos related liabilities performed by an independent actuarial firm, our settlement amounts and whether there are any co-defendants, the jurisdiction in which lawsuits are filed, and the status and results of such claims. 37 Index As is our accounting policy, we consider the advice of actuarial consultants with experience in assessing asbestos-related liabilities to estimate our potential claim liability; and perform an actuarial evaluation in the third quarter of each year and whenever events or changes in circumstances indicate that additional provisions may be necessary.
The Company may select interest periods of one, three or six months for Term SOFR borrowings. Interest is payable at the end of the selected interest period, but no less frequently than quarterly.
The Company may select interest periods of one, three or six months depending on the index. Interest is payable at the end of the selected interest period, but no less frequently than quarterly. The Company may prepay the borrowings, in whole or in part, at any time without premium or penalty, subject to certain conditions.
The following table summarizes gross margins by segment for the years ended December 31, 2023 and 2022, respectively (in thousands): Year Ended December 31, Vehicle Control Temperature Control Engineered Solutions Other Total 2023 Net sales $ 737,932 $ 337,754 $ 282,586 $ — $ 1,358,272 Gross margins 238,215 95,827 54,784 — 388,826 Gross margin percentage 32.3 % 28.4 % 19.4 % — 28.6 % 2022 Net sales $ 750,571 $ 351,237 $ 270,007 $ — $ 1,371,815 Gross margins 232,267 98,913 51,359 — 382,539 Gross margin percentage 30.9 % 28.2 % 19 % — 27.9 % Compared to 2022, gross margins at Vehicle Control increased 1.4 percentage points from 30.9% to 32.3%.
The following table summarizes gross margins by segment for the years ended December 31, 2024 and 2023 , respectively (in thousands): Year Ended December 31, Vehicle Control Temperature Control Engineered Solutions Nissens Automotive Other Total 2024 Net sales $ 762,560 $ 380,088 $ 285,456 $ 35,745 $ — $ 1,463,849 Gross margins 244,085 117,792 49,919 11,525 — 423,321 Gross margin percentage 32.0 % 31.0 % 17.5 % 32.2 % — 28.9 % 2023 Net sales $ 737,932 $ 337,754 $ 282,586 $ — $ — $ 1,358,272 Gross margins 238,215 95,827 54,784 — — 388,826 Gross margin percentage 32.3 % 28.4 % 19.4 % — — 28.6 % Compared to 2023 , gross margin percentage decreased from 32.3% to 32.0% at Vehicle Control , increased from 28.4% to 31.0% at Temperature Control, and decreased from 19.4% to 17.5% at Engineered Solutions.
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, 2024, the weighted average interest rate on borrowings under the 2024 Credit Agreement was 5.6% , primarily consisting of Term SOFR for borrowings in U.S. dollars and EURIBOR for borrowings in euros, adjusted for the impact of the interest rate swap agreement on $100 million of the U.S. dollar borrowings.
During 2023, cash provided by operating activities was $144.3 million compared to cash used in operating activities of $27.5 million in 2022.
During 2024, cash provided by operating activities was $76.7 million as compared to cash provided by operating activities of $144.3 million in 2023. Net earnings during 2024 were $28.5 million compared to $34.4 million in 2023.
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.
In July 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 under the program from time to time, in the open market or through private 35 Index transactions, as market conditions warrant.
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; (3) customer attrition rates; and (4) the discount rate.
Valuing intangible assets requires the use of significant estimates and assumptions. Significant estimates and assumptions used in valuing customer relationships include but are not limited to: (i) forecasted revenues attributable to existing customers; (ii) forecasted margins; (iii) customer attrition rates; and (iv) the discount rate.
Included in our operating margin were selling, general and administrative expenses (“SG&A”) of $293.6 million, or 21.6% of net sales in 2023, $276.6 million, or 20.2% of net sales in 2022, and $247.5 million, or 19.1% of net sales in 2021.
Included in our operating margin were selling, general and administrative expenses of $335.1 million , o r 22.9% of net sales in 2024 compared to $293.6 million , or 21.6% of net sales in 2023 .
Operating income was $104.1 million, or 7.6%, of consolidated net sales in 2022, compared to $129 million, or 9.9%, of consolidated net sales in 2021.
Operating Income. Operating income was $80.6 million , or 5.5% , of consolidated net sales in 2024 , compared to $92.7 million , or 6.8% , of consolidated net sales in 2023 .
Liquidity Our primary sources of funds are ongoing net cash flows from operating activities and availability under our Credit Agreement (as detailed below). In June 2022, we entered into a new Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (the “Credit Agreement”).
Liquidity Our primary sources of funds are ongoing net cash flows from operating activities and availability under our 2024 Credit Agreement (as detailed below).
Overall, our core automotive aftermarket business remains strong, and we continue to be optimistic about the long-term growth potential of the complementary markets served in our Engineered Solutions operating segment. New Distribution Facility in Shawnee, Kansas In May 2023, we signed a lease for a new distribution facility in Shawnee, Kansas with a lease commencement date of July 1, 2023.
Overall, our core automotive aftermarket business remains strong, and we are both excited and optimistic for the growth potential in our newly acquired operating segment, Nissens Automotive and the long-term growth potential of the complementary markets served in our Engineered Solutions operating segment.
Valuation of Long‑Lived and Intangible Assets and Goodwill 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.
At acquisition, we estimate and record the fair value of purchased intangible assets, which primarily consist of customer relationships, trademarks and trade names, and patents, developed technology and intellectual property. 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.
The following table summarizes consolidated net sales by segment and by major product group within each segment for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Vehicle Control Engine Management (Ignition, Emissions and Fuel Delivery) $ 450,180 $ 454,571 Electrical and Safety 221,782 230,487 Wire Sets and Other 65,970 65,513 Total Vehicle Control 737,932 750,571 Temperature Control AC System Components 237,756 245,484 Other Thermal Components 99,998 105,753 Total Temperature Control 337,754 351,237 Engineered Solutions Commercial Vehicle 83,025 80,275 Construction/Agriculture 43,402 42,385 Light Vehicle 92,759 91,533 All Other 63,400 55,814 Total Engineered Solutions 282,586 270,007 Other — — Total $ 1,358,272 $ 1,371,815 Vehicle Control’s net sales for the year ended December 31, 2023 decreased $12.7 million, or 1.7%, to $737.9 million compared to $750.6 million in the same period of 2022.
The 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): Year Ended December 31, 2024 2023 Vehicle Control Engine Management (Ignition, Emissions and Fuel Delivery) $ 467,460 $ 450,180 Electrical and Safety 229,361 221,782 Wire Sets and Other 65,739 65,970 Total Vehicle Control 762,560 737,932 Temperature Control AC System Components 274,926 237,756 Other Thermal Components 105,162 99,998 Total Temperature Control 380,088 337,754 Engineered Solutions Commercial Vehicle 89,171 79,376 Construction/Agriculture 35,832 41,665 Light Vehicle 91,548 92,701 All Other 68,905 68,844 Total Engineered Solutions 285,456 282,586 Nissens Automotive Engine Cooling 19,287 — Air Conditioning 9,214 — Engine Efficiency 7,244 — Total Nissens Automotive 35,745 35,745 — Other — — Total $ 1,463,849 $ 1,358,272 Vehicle Control’s net sales for 2024 increased $24.6 million , or 3.3% , to $762.6 million compared to $737.9 million in 2023 .
December 31, (In thousands) 2023 2022 Operating cash flows $ 144,260 $ (27,533 ) Total debt $ 156,211 $ 239,620 Cash and cash equivalents 32,526 21,150 Net debt $ 123,685 $ 218,470 Remaining borrowing capacity $ 334,180 $ 255,631 Total liquidity 366,706 276,781 Operating Activities.
December 31, 2024 2023 Operating cash flows $ 76,693 $ 144,260 Total debt $ 562,314 $ 156,211 Cash and cash equivalents 44,426 32,526 Net debt $ 517,888 $ 123,685 Remaining borrowing capacity 193,379 334,180 Total liquidity $ 237,805 $ 366,706 Operating Activities.
The decline in equity income from our joint ventures is due, in part, to lower production levels related to inventory reduction plans, and the impact of our acquisition of an additional 15% equity interest in Gwo Yng.
Equity income from our joint ventures increased irrespective of the year-over-year decline in the equity income of Gwo Yng, reflecting the impact of our acquisition of an additional 15% equity interest in Gwo Yng in July 2023.
The gross margin percentage increase in our Vehicle Control operating segment reflects the positive impact of increased pricing and operating performance, which more than offset increases in material and labor costs, as well as the lower fixed cost absorption due to lower production levels than those achieved in the same period in 2022.
Overall, the gross margin increase as a percentage of sales in 2024 primarily reflects the positive impact of higher sales volumes leading to higher fixed manufacturing cost absorption, improved operating performance including the impact of cost control measures, and increased pricing, which more than offset lingering inflationary increases in certain materials and labor costs .
The result was strong third quarter 2023 net sales, which was not enough to offset the slow start to the season. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.
The higher year-over-year Temperature Control net sales reflects higher customer demand due to the impact of warmer seasonal weather conditions in the U.S. compared to 2023. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.
Borrowings under the Credit Agreement were used to repay all outstanding borrowings under the 2015 Credit Agreement, and pay certain fees and expenses incurred in connection with the Credit Agreement, with future borrowings used for other general corporate purposes of the Company and its subsidiaries.
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.
While we anticipate continued margin pressure resulting from inflationary headwinds, we believe that our annual cost savings initiatives coupled with our ability to pass through higher prices to our customers should help to offset much of this impact to our gross margins. Selling, General and Administrative Expenses.
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, cost synergies related to our acquisition of Nissens Automotive.
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill and certain other intangible assets having indefinite lives are not amortized to earnings, but instead are subject to periodic testing for impairment. Intangible assets determined to have definite lives are amortized over their remaining useful lives.
Identifiable intangible assets with finite lives are amortized over their useful lives generally on a straight-line basis. Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.
Cash provided by our operating activities was used to reduce our borrowings under our Credit Agreement, fund our investing activities and pay dividends. In June 2022, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as agent.
Cash provided by our operating activities was used to reduce our borrowings under our 2022 Credit Agreement, fund our investing activities and pay dividend s. 33 Index Quarterly dividends were paid at a rate of $0.29 in 2024 and 2023 .
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 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.
The year-over-year decrease in operating income of $11.4 million is the result of lower net sales, higher SG&A expenses, consisting primarily of higher interest rate related costs of $14 million incurred in our supply chain financing arrangements, and higher restructuring and integration expenses offset, in part, by higher gross margins as a percentage of sales. Other Non-Operating Income (Expense), Net.
The year-over-year decrease in operating income of $12.1 million is primarily the result of higher selling, general and administrative expenses, including costs associated with the acquisition of Nissens Automotive, and higher restructuring and integration expenses, partially offset, by the impact of higher net sales and improved gross margin percentage. Other Non-Operating Income, Net.
Interest expense increased to $13.3 million in 2023, compared to $10.6 million in 2022. The year-over-year increase in interest expense reflects the impact of higher year-over-year average interest rates on our credit facilities when compared to 2022, which more than offset the impact of lower average outstanding balances. Income Tax Provision .
The 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, partly offset by slightly lower year-over-year average interest rates on our credit facilities, including the impact of our interest swap agreements.
During 2022, we (1) increased our borrowings under our revolving credit facilities by $114.2 million; (2) reduced our borrowings under lease obligations and our Polish overdraft facility by $2.9 million; (3) made cash payments of $2.1 million for debt issuance costs in connection with our refinancing; (4) made cash payments for the repurchase of shares of our common stock of $29.7 million; and (5) paid dividends of $23.4 million.
During 2024, we (i) increased our borrowings under our 2024 Credit Agreement by $392 million, (ii) paid dividends to SMP shareholders of $25.3 million, and (iii) made cash payments for the repurchase of shares of our common stock of $10.4 million.
Expenses related to the initiative for the year ended December 31, 2023 consist of (1) expenses of approximately $0.7 million related to a further sales force reduction, (2) expenses of $1.3 million of employee severance and bonuses related to our product line relocations, and (3) expenses of $0.5 million related to the relocation of machinery and equipment to our manufacturing facilities in Reynosa, Mexico.
Restructuring and integration expenses in 2024 consist of $7.3 million of costs related to workforce reductions and severance costs, and $0.4 million for the relocation of machinery and equipment ; while 2023 expenses primarily related to the Cost Reduction Initiative consist of $2 million of costs related to workforce reductions and severance costs, and $0.7 million for the relocation of machinery and equipment.
Term loan borrowings are being made at one-month Term SOFR. The applicable margin for the term benchmark borrowings ranges from 1.0% to 2.0%, and the applicable margin for alternate base rate borrowings ranges from 0% to 1.0%, in each case, based on the total net leverage ratio of the Company and its restricted subsidiaries.
Borrowings bear interest at the applicable interest rate index selected by the Company based on the particular currency borrowed plus a credit spread adjustment depending on the index, and a margin ranging from 1.25% to 2.25% per annum based on the total net leverage ratio of the Company and its restricted subsidiaries.
Gross margins, as a percentage of consolidated net sales, decreased to 27.9% for 2022, compared to 29% for 2021.
Gross margin as a percentage of net sales in 2024 was 28.9% a s compared to 28.6% in 2023 .
The lower effective tax rate in 2023 compared to 2022 reflects the impact of lower state and local income taxes due to changes in state laws, rates and filing methodologies, changes in foreign and domestic mix, and the effective rate impact of lower year-over-year pre-tax income. 32 Index Loss From Discontinued Operations.
The higher effective tax rate in 2024 compared to 2023 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 the effective tax rate impact of lower year-over-year pre-tax income. Loss From Discontinued Operations.
Letters of credit outstanding under the Credit Agreement were $2.3 million and $2.4 million at December 31, 2023 and 2022, respectively.
Letters of credit outstanding under the Credit Agreement were $2.5 million and $2.3 million at December 31, 2024 and 2023, respectively. 34 Index To manage the interest rate risk on the 2024 Credit Agreement, the Company has entered into interest rate swap agreements designated as cash flow hedges of a portion of the borrowings under the 2024 Credit Agreement to swap floating rate interest to a fixed rate.
The increase in cash provided by operating activities resulted primarily from the larger year-over-year decrease in accounts receivable, the decrease in inventories compared to an increase in inventories in the prior year, the increase in accounts payable compared to a decrease in accounts payable in the prior year, no change in prepaid expenses and other current assets compared to an increase in prepaid expenses and other current assets in the prior year, and the smaller year-over-year decrease in sundry payables and accrued expenses offset, in part, by the decrease in net earnings.
The decrease in cash provided by operating activities resulted primarily from an increase in inventories of $36.9 million compared to a decrease of $29.5 million in the prior year, as well as increases in other working capital accounts primarily due to higher net sales and preparation for pre-season orders in our Temperature Control segment, and lower net earnings.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeUnder the terms of the swap agreement, we will receive monthly variable interest payments based on one month Term SOFR and will pay interest based upon a fixed rate of 2.683% per annum, adjusted upward for the credit spread adjustment in the Credit Agreement of 0.10% and the loan margin in the Credit Agreement of 1.25% at December 31, 2023.
Biggest changeUnder the terms of the swap agreement, we will receive monthly variable interest payments based on one month EURIBOR and will pay interest based on a fixed rate of 2.11% per annum.
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 margin rate may have an approximate $8.3 million negative impact on our earnings or 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 margin rate may have an approximate $8.8 million negative impact on our earnings or cash flows.
As of December 31, 2023 and December 31, 2022, our monetary assets and liabilities which are subject to this exposure are immaterial, therefore, the potential immediate loss to us that would result from a hypothetical 10% change in foreign currency exchange rates would not be expected to have a material impact on our earnings or cash flows.
As of December 31, 2024 and December 31, 2023 , our monetary assets and liabilities which are subject to this exposure are immaterial, therefore, the potential immediate loss to us that would result from a hypothetical 10% change in foreign currency exchange rates would not be expected to have a material impact on our earnings or cash flows.
Exchange Rate Risk We have exchange rate exposure, primarily, with respect to the Canadian Dollar, the Euro, the British Pound, the Polish Zloty, the Hungarian Forint, the Mexican Peso, the Taiwan Dollar, the Chinese Yuan Renminbi and the Hong Kong Dollar.
Exchange Rate Risk We have exchange rate exposure, primarily, with respect to the Canadian dollar, the euro, the British pound, the Polish zloty, the Hungarian forint, the Mexican peso, the Danish kroner, the Taiwan dollar, the Chinese yuan renminbi and the Hong Kong dollar.
Our exposure to foreign exchange rate risk is due to certain costs, revenues and borrowings being denominated in currencies other than one of our subsidiary’s functional currency. Similarly, we are exposed to market risk as the result of changes in interest rates, which may affect the cost of our financing.
Our exposure to foreign exchange rate risk is due to certain costs, revenues and borrowings being denominated in currencies other than one of our subsidiary’s functional currency and net investments in our foreign subsidiaries. Similarly, we are exposed to market risk as the result of changes in interest rates, which may affect the cost of our financing.
Additionally, we invest our excess cash in highly liquid short-term investments. Based upon our current level of borrowings under our Credit Agreement and our excess cash, the effect of a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate may have an approximate $0.2 million annualized negative impact on our earnings or cash flows.
Additionally, we invest our excess cash in highly liquid short-term investments. Based upon our current level of borrowings under our 2024 Credit Agreement and our excess cash, the effect of a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate may have an approximate $5 million annualized negative impact on our earnings or cash flows.
The charge related to the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations. 43 Index
The charge related to the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations. 39 Index
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. During the year ended December 31, 2023, we sold $830.8 million of receivables.
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. During the year ended December 31, 2024 , we sold $884.7 million of receivables.
To reduce our market risk for changes in interest rates on our variable rate borrowings, and to manage a portion of our exposure to changes in interest rates, we occasionally enter into interest rate swap agreements. 42 Index In June 2022, we entered into a seven year interest rate swap agreement with a notional amount of $100 million that is to mature in May 2029.
To reduce our market risk for changes in interest rates on our variable rate borrowings, and to manage a portion of our exposure to changes in interest rates, we occasionally enter into interest rate swap agreements. In 2022, we entered into an interest rate swap agreement with a notional amount of $100 million that matures in May 2029.
As of December 31, 2023, we had approximately $156 million of outstanding borrowings under our Credit Agreement, of which approximately $56 million bears interest at variable rates of interest and $100 million bears interest at fixed rates, after consideration of the interest rate swap agreement entered into in June 2022.
As of December 31, 2024 , we had approximately $545.4 million of outstanding borrowings under our 2024 Credit Agreement, net of deferred financing costs, of which approximately $445.4 million bears interest at variable rates of interest and $100 million bears interest at fixed rates, after consideration of the interest rate swap agreements entered into in June 2022 and October 2024.
The interest rate swap agreement has been designated as a cash flow hedge of interest payments on $100 million of borrowings under our Credit Agreement.
The interest rate swap agreement is designated as a cash flow hedge of interest payments on euro denominated borrowings under our 2024 Credit Agreement equal to the notional amount of the interest rate swap agreement. The notional amount of the interest rate swap will decrease quarterly starting from June 2025.
Added
The interest rate swap agreement is designated as a cash flow hedge of interest payments on $100 million of borrowings 38 Index under our 2024 Credit Agreement. Under the terms of the swap agreement, we will receive monthly variable interest payments based on one month Term SOFR and will pay interest based on a fixed rate of 2.683% per annum.
Added
In October 2024, we entered into an interest rate swap agreement with an initial notional amount of €100 million that matures in March 2030. At December 31, 2024, the notional amount was $103.9 million or €100 million.

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