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What changed in STANDARD MOTOR PRODUCTS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of STANDARD MOTOR PRODUCTS, INC.'s 2022 and 2023 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 2023 report.

+325 added−316 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-22)

Top changes in STANDARD MOTOR PRODUCTS, INC.'s 2023 10-K

325 paragraphs added · 316 removed · 205 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

60 edited+43 added−66 removed5 unchanged
Biggest changeWe provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work, or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.
Biggest changeWe 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.
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, copper wire, 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 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.
Information on our ESG initiatives can be found in our most current sustainability report and on our corporate website at ir.smpcorp.com under “Environmental & Social Responsibility” and at smpcares.smpcorp.com. Information in our sustainability report and on our corporate websites regarding our ESG initiatives are referenced for general information only and are not incorporated by reference in this Report.
Information on our sustainability initiatives can be found in our most current sustainability report and on our corporate website at ir.smpcorp.com under “Environmental & Social Responsibility” and at smpcares.smpcorp.com. Information in our sustainability report and on our corporate websites regarding our sustainability initiatives are referenced for general information only and are not incorporated by reference in this Report.
We believe our product offering also contributes to a greener car parc through several key product categories that are critical components in automotive systems designed to improve fuel economy and reduce harmful emissions, such as fuel injectors, exhaust gas recirculation valves, sensors and tubes, and evaporative emission control system components.
Additionally, we believe our product offering contributes to a greener car parc through several key product categories that are critical components in automotive systems designed to improve fuel economy and reduce harmful emissions, such as fuel injectors, exhaust gas recirculation valves, sensors and tubes, and evaporative emission control system components.
Environmental Stewardship We have made significant strides with respect to our ESG initiatives, building awareness of the environmental impact of our operations, and challenging ourselves to reduce our impact by reducing our usage of energy and water, reducing our generation of waste, increasing our recycling efforts and reducing our Scope 1 and Scope 2 greenhouse gas emissions (“GHG”).
Environmental Stewardship We have made significant strides with respect to our sustainability initiatives, building awareness of the environmental impact of our operations, and challenging ourselves to reduce our impact by reducing our usage of energy and water, reducing our generation of waste, increasing our recycling efforts and reducing our Scope 1 and Scope 2 greenhouse gas emissions.
Environmental, Social and Governance (ESG) and Human Capital We support and seek continuous improvement in the pursuit of environmental, social and corporate governance (ESG) 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.
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.
These reports and other information are also available, free of charge, at www.sec.gov . 15 Index
These reports and other information are also available, free of charge, at www.sec.gov .
We market and distribute our products under our own brands, such as: Engine Management Products Temperature Control Products We also distribute our products to customers for resale under private labels and the following co-labels: Engine Management We have also developed our product offering and brand strategies to support our customers’ initiatives to market a tiered product assortment designed to satisfy end-user preferences for quality and value.
We 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.
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, which began in the fourth quarter of 2021.
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.
These discounts, allowances and incentives are a common practice throughout the automotive aftermarket industry, and we intend to continue to offer them in response to competitive pressures and to strategically support the growth of all our products.
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.
This ESG steering committee is tasked with developing specific strategies to ensure that our operations adhere to our corporate governance values and advance our ESG objectives.
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.
We deliver numerous training opportunities, provide rotational assignment opportunities, offer continuous learning and development, and implement methodologies to manage performance, provide feedback and develop talent opportunities for talent. 14 Index Our talent development programs are designed to provide employees with the resources they need to help achieve their career goals, build management skills and lead their organizations.
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.
In this manner, we direct a significant portion of our sales efforts to our customers’ customers to generate demand for our products, and we believe that the structure of our sales force facilitates these efforts by enabling us to implement our sales and marketing programs uniformly throughout the distribution channel.
We direct a significant portion of our sales efforts to our customers’ customers to generate demand for our products. The structure of our salesforce facilitates these efforts, enabling us to implement our sales and marketing programs uniformly throughout the distribution channel. Marketing Support .
Other economic factors such as the level of new vehicle sales and production rates, which more recently have been impacted by global supply chain disruptions, can have a more direct impact on the on-highway and off-highway end markets we supply, such as commercial and light vehicles, construction, agricultural, power sports and others.
In the diverse non-aftermarket end markets we supply, such as commercial and light vehicles, construction, agriculture, power sports and others, other economic factors such as the level of new vehicle sales and production rates, which more recently have been impacted by disruptions in the global supply chain and labor, tend to have a more direct impact.
Our 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 in our Credit Agreement.
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.
Emissions laws and fuel economy regulations have had a positive impact on sales of our ignition, emissions control and fuel delivery parts since vehicles failing these laws may require repairs utilizing parts sold by us.
For example, we believe emissions laws and fuel economy regulations have had a positive impact on sales of our ignition, emissions control and fuel delivery parts since vehicles not meeting emissions inspection standards may require repairs utilizing parts sold by us.
We permit our 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 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.
Working Capital and Inventory Management We seek continuous improvements in our inventory management system, which are designed to reduce inventory requirements and enhance our ability to compete on the basis of product availability, product coverage, order turn‑around time and order fill rate.
Working Capital and Inventory Management We maintain an inventory management system that is designed to reduce inventory requirements, and enhance our ability to compete on the basis of product availability (including order turn-around time and fill rate) and product coverage.
Governance Our commitment to ESG is spearheaded by our Board of Directors. Specifically, our Nominating and Corporate Governance Committee established an ESG steering committee among our executive officers including our Chief Executive Officer & President, Chief Legal Officer & Secretary, Chief Human Resources Officer, and Senior Vice President of North American Operations.
Specifically, our Nominating and Corporate Governance Committee established a sustainability steering committee among our executive officers including our Chief Executive Officer & President, Chief Legal Officer & Secretary, Chief Human Resources Officer, and Senior Vice President of North American Operations.
Our growth strategy is long-term and we do not expect growth to be linear given the nature of customized engineering and the period of time between the awarding of new business and start of production.
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.
Compensation and Benefits. We provide competitive compensation and benefits programs that meet the needs of our employees. 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, family care resources, and employee assistance programs. Talent Development.
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.
Another way we generate demand for our products is through our training program, which offers training seminars to professional automotive technicians. Our training program is accredited by the National Institute for Automotive Service Excellence (ASE) Training Managers Council.
We generate demand for our products through our technical training program, which offers training seminars to professional automotive technicians. Our training program is accredited by the National Institute for Automotive Service Excellence (ASE) Training Managers Council. Our seminars are taught by ASE certified instructors, and are available in-person and online through webinars and on-demand seminars.
In addition, the seasonality of our Temperature Control Segment requires that we increase our inventory during the winter season in preparation of the summer selling season. We accrue for overstock returns as a percentage of sales after giving consideration to recent returns history. Our profitability and working capital requirements are seasonal due to our sales mix of Temperature Control products.
In addition, as discussed further above under the heading “Seasonality”, the seasonality of our Temperature Control Segment requires that we increase our inventory during the winter season in preparation of the summer selling season. As such, our profitability and working capital requirements are seasonal due to our sales mix of Temperature Control products.
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. Over the last 5 years, approximately 50+% of our hires and promotions have been women or racially diverse individuals.
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.
In the case of cores for air conditioning compressors, diesel injectors, and diesel pumps, we obtain them either from exchanges with customers who return cores subsequent to purchasing remanufactured parts or through direct purchases from a network of core brokers.
Additionally, we use components and cores (used parts) in our remanufacturing processes for air conditioning compressors, diesel injectors, and diesel pumps. We obtain cores from exchanges with customers who return cores subsequent to purchasing remanufactured products, and from a network of core brokers who sell cores.
We also offer rebates and discounts to customers as advertising and sales force allowances, and allowances for warranty and overstock returns are also provided.
For example, we offer cash discounts for paying invoices in accordance with the specified discounted terms of the invoice. We also offer rebates and discounts to customers as advertising and sales force allowances, and allowances for warranty and overstock returns are also provided.
Similarly, as government-mandated safety devices, such as anti-lock braking systems and air bags mature, requiring servicing and repair, we anticipate increased sales opportunities for many of our products such as ABS sensors, TPMS sensors and traction control products. 7 Index Wire & Cable Products.
Similarly, as government-mandated safety devices, such as anti-lock braking systems and ADAS, proliferate with new vehicle production, we anticipate increased replacement opportunities for many of our products such as ABS sensors, TPMS sensors, traction control products and ADAS replacement parts.
Although the COVID-19 pandemic has led to some challenges in finding adequate labor, generally we believe that our facilities are in labor markets with ready access to adequate numbers of skilled and unskilled workers, and we believe our relations with our union and non‑union employees are good. Diversity, Equity, Inclusion, and Belonging.
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 have approximately 75 production employees in Edwardsville, Kansas who are covered by a contract with The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) that expires in August 2026. We also have approximately 1,400 employees in Mexico who are covered under union agreements negotiated at various intervals.
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.
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 who are registered to participate in such sessions through our online platform. 11 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.
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 SMP Cares ® initiative, we sponsor corporate giving and volunteering programs to encourage our employees to connect with our local communities and engage in the local causes that they are passionate about. Our volunteering efforts include organizing blood drives with the American Red Cross, and fundraising for the March of Dimes, United Way, and many others.
Through our SMP Cares® initiative, we sponsor corporate giving and volunteering programs to encourage our employees to connect with our local communities and engage in the local causes that they are passionate about. Governance Our commitment to sustainability is spearheaded by our Board of Directors.
Our customers have come to depend on our sales personnel as a reliable source for technical information and to assist with sales to their customers ( e.g. , jobber stores and professional technicians).
Our field sales support focuses on educating parts professionals ( e.g. , customer team members) and professional technicians in highly technical product categories. Our customers depend on our sales personnel as a reliable source for technical information and to assist with sales to their customers ( e.g. , jobber stores, professional technicians and individual consumers performing “do-it-yourself” repairs).
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 ESG initiatives ahead from all angles.
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.
We support our products with superior value-added services provided by our marketing and sales teams that provides our customers with offerings such as data-driven category management, technical support as well as product selection, assortment and application support for all of our products.
We support our customers with superior value-added services such as data-driven category management based on vehicles in operation, sophisticated parts catalogs, available online and through our mobile application, and technical support, including selection, assortment and application support for all of our products.
While generally a stable industry, the aftermarket tends to be influenced by trends such as the number of vehicles on the road, the average age of vehicles on the road, and the total number of miles driven per year. Weather extremes like unseasonably hot or cool temperatures in the summer can also have an impact on aftermarket product demand.
Industry Trends The automotive aftermarket is a mature industry that tends to be influenced by trends such as the number of vehicles on the road, the average age of vehicles on the road, and the total number of miles driven per year.
We sell our products primarily to automotive aftermarket retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin American countries. As of December 31, 2022, we managed our business pursuant to two operating segments, each focusing on a specific line of parts.
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 engineer, tool and manufacture many of the products we offer for sale and the components used in their assembly. We have found this level of vertical integration, in combination with our manufacturing footprint in low cost regions, provides advantages in terms of the cost, quality and availability of our products.
We believe this level of vertical integration, in combination with our manufacturing footprint in low cost regions, is a key competitive advantage in terms of the quality, cost and availability of our products.
Our customers buy directly from us and sell directly to jobber stores, professional technicians and to “do-it-yourselfers” who perform automotive repairs on their personal vehicles. In recent years, warehouse distributors have consolidated with other distributors, and an increasing number of distributors own their jobber stores or sell down channel to professional technicians.
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.
In addition to this seasonality, 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, as evidenced by the strong customer demand in 2022 fueled by the record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions in 2021.
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.
Our three largest individual customers accounted for approximately 59% of our consolidated net sales in 2022. During 2022, O’Reilly, AutoZone and NAPA accounted for 27%, 17%, and 15% of our consolidated net sales, respectively. Net sales from each of these customers were reported in both our Engine Management and Temperature Control Segments.
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.
ITEM 1. BUSINESS Overview We are a leading manufacturer and distributor of premium automotive parts used in the maintenance, service and repair of vehicles in the automotive aftermarket industry.
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.
In 2022, we strategically increased inventory levels to help offset potential supply chain risks associated with extended lead times and delays transporting our product. 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.
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.
We have a pack‑to‑order distribution system, which permits us to retain slow moving items in a bulk storage state until a related order is received. This system reduces the volume of a given part in inventory.
We seek continuous improvements in this system to improve inventory deployment, enhance collaboration with customers on forecasts and inventory assortments, and further integrate our supply chain with both our customers and suppliers. We also utilize a pack‑to‑order distribution system, which permits us to retain slow moving items in a bulk storage state until a related order is received.
It is in these quarters that demand for our products is typically the highest, specifically in the Temperature Control Segment of our business.
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.
Our employees share our corporate values of integrity, common decency and respect of others, values which have been established since our company was founded. As of December 31, 2022, we employed approximately 4,900 people, with 2,000 people in the United States and 2,900 people in Mexico, Canada, Poland, the U.K., Germany, Hungary, China, Hong Kong and Taiwan.
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.
We provide a series of employee workshops and mentoring programs that support professional growth and development. Our annual review process encourages manager and employee conversations throughout the year to enhance growth and development. Social Engagement and Community Service We believe that building connections between our employees, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace.
We utilize the results from these engagement surveys to better provide employees with the tools, resources and support that they need to succeed and grow in their SMP careers. Social Engagement and Community Service We believe that building connections between our employees, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace.
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 covered under union agreements negotiated at various intervals. For clarification, the employee numbers described above exclude the employees of our joint venture operations.
We leverage our footprint to improve our cost position by locating labor-intensive processes within our low-cost plants, and by investing in automation and undertaking continuous improvement initiatives in our domestic facilities. Our Products & Services The following describes our business more particularly under our existing operating segments as of December 31, 2022 – Engine Management and Temperature Control .
Our manufacturing footprint is geographically diverse with a greater presence in North America and Europe compared to many of our peers. We leverage our footprint to improve our cost position by locating labor-intensive processes within our low-cost plants, and by investing in automation and undertaking continuous improvement and expansion initiatives in our domestic facilities.
In addition, we acquire certain materials by purchasing products that are resold into the market, particularly by OEM sources and other domestic and foreign suppliers. 12 Index We believe there is an adequate supply of primary raw materials and cores; however, 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.
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.
We also bring to market alternative energy products, which utilize cleaner burning fuels or are designed for electric or hybrid electric vehicles. Our remanufacturing processes divert certain types of used automotive products from traditional waste streams and reprocess them for their original purpose.
We also bring to market alternative energy products, which utilize cleaner burning fuels or are designed for electric or hybrid electric vehicles, and we remanufacture key categories within our product portfolio, such as air conditioning compressors, diesel injectors and diesel pumps, through processes that save energy and reduce waste.
(“AutoZone”), and Canadian Tire Corporation, Limited. • Automotive aftermarket distributors, including warehouse distributors and program distribution groups , such as Genuine Parts Co. and National Automotive Parts Association (“NAPA”), Auto Value and All Pro/Bumper to Bumper (Aftermarket Auto Parts Alliance, Inc.), Automotive Distribution Network LLC, The National Pronto Association (“Pronto”), Federated Auto Parts Distributors, Inc.
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 Engineered Solutions segment will supply custom-engineered solutions to vehicle and equipment manufacturers in non-aftermarket end markets, such as- • Commercial and Light vehicles • Construction • Agriculture • Power Sports • Marine • Hydraulics • Lawn & Garden The Engineered Solutions segment sells into highly fragmented global end markets and is expected to provide a platform for future growth.
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 sales of sensors, switches, actuators, valves, solenoids and related parts have increased as automobile manufacturers continue to equip their cars with these more complex engine management systems. New sales opportunities have also arisen in the United States as a result of government regulations regarding safety and emissions.
As the complexity of these systems continues to develop and proliferate, we expect to benefit from increased demand for our sensors, switches, actuators, valves, solenoids and related parts, which are designed to function with these systems. We also expect to benefit from government regulations regarding vehicle safety and emissions.
Engine Management Segment Our Engine Management Segment manufactures and distributes a full line of critical components for most years, makes and models of vehicles on the road, including new technologies.
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.
Aftermarket manufacturers must be efficient producers of small lot sizes, and must distribute, with rapid turnaround times, products for nearly all domestic and import vehicles on the road today. We compete primarily on the basis of product quality, product availability, value-added services, product coverage, order turn‑around time, order fill rate, technical support and price.
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.
Other climate control parts accounted for $159.8 million, or 12%, of our consolidated net sales in 2022, $141.7 million, or 11%, of our consolidated net sales in 2021, and $118.9 million, or 11%, of our consolidated net sales in 2020. 8 Index Our Brands We believe that our brands are an important component of our value proposition, and serve to distinguish our premium engine management and temperature control products from those of our competitors.
We believe that our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors.
We offer a variety of strategic customer discounts, allowances and incentives to increase customer purchases of our products. For example, we offer cash discounts for paying invoices in accordance with the specified discounted terms of the invoice.
We believe we differentiate ourselves from our competition through the execution of our value proposition, discussed further above. In addition, in the automotive aftermarket, we offer a variety of strategic customer discounts, allowances and incentives to increase the sale of our products.
In addition, we have a team dedicated to providing technical training, in-person and virtually, on diagnosing and repairing vehicles equipped with complex systems. We are committed to expanding our design, engineering and manufacturing capabilities, and vertically integrating production processes to bring more manufacturing in-house.
We are committed to expanding our design, engineering and manufacturing capabilities, and vertically integrating production processes to bring more manufacturing in-house. We engineer, tool and manufacture many of the products we offer for sale and the components used in their assembly.
Recently, we have done so by adding late-model coverage for existing product categories, and new product categories in response to new and evolving vehicle technologies, including diesel control modules, pumps and components, turbochargers, evaporation emission control system components, exhaust gas temperature sensors, active grill shutters, battery current sensors, and Advanced Driver Assistance Systems (ADAS) components, including blind spot detection sensors, cruise control distance sensors, lane departure sensor cameras and park assist backup cameras.
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.
Some of our growth drivers in this segment include: • Developing new customer relationships • Cross-selling opportunities with existing customers • Introducing new products to both new and existing customers • Increasing content per unit Segment offerings include product categories from both of our legacy operating segments, and offer a broad array of conventional and future-oriented technologies, including those that are specific to vehicle electrification as well as those that are powertrain-neutral.
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.
Removed
Through organic growth and several recent acquisitions, described further below, we have strengthened our capabilities as a supplier of custom-engineered products for on-highway (commercial and light vehicles) and off-highway (construction and agriculture, and all other) applications.
Added
This operating segment structure better aligns our operations with our strategic focus on diversifying our business, provides greater transparency into our positioning to capture opportunities for growth in the future, and provides clarity regarding the unique dynamics and margin profiles of the markets served by each segment. 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.
Removed
Our Engine Management segment generates revenue from the sale of automotive engine parts, including ignition, emission control, fuel, electrical and safety related system products, and wire and cable parts. Our Temperature Control segment generates revenue from the sale of automotive temperature control systems parts, including air conditioning compressors and other climate control parts.
Added
Product categories include air injection and induction components, air management valves, regulators and solenoids, exhaust gas recirculation (EGR) components, fuel injectors and related components, fuel valves, ignition coils, connectors and sockets, modules, pumps, relays and fuses, starting and charging system parts, and vapor and purge components.
Removed
Beginning in the first quarter of 2023, our business will be organized into three operating segments – Engineered Solutions , Vehicle Control and Temperature Control . 3 Index Engineered Solutions is a new operating segment created by carving out all non-aftermarket business from our existing Engine Management and Temperature Control operating segments, which will now solely reflect parts sales to aftermarket channels.
Added
(2) Electrical & Safety , which includes components for the electrical and safety systems of vehicles, and are powertrain neutral vehicle technologies.
Removed
This will provide clarity regarding the unique dynamics and margin profiles of the markets served by each segment.
Added
Product categories include electrical switches and actuators, chassis and drivetrain sensors such as anti-lock brake and vehicle speed sensors, fluid level sensors, pressure sensors such as tire pressure monitoring, temperature sensors, and sensors for advanced driver assistance systems (ADAS), along with battery cables, pigtails, sockets and a wide range of electrical wire, terminals, connectors, and tools for servicing a vehicle’s electrical system.
Removed
Vehicle Control is the new name for our Engine Management operating segment; it will include our core aftermarket business after the carve out of all non-aftermarket business moved to the new Engineered Solutions operating segment.
Added
(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.
Removed
Within the Vehicle Control segment there will be three new major product groups: (1) Ignition, Emissions & Fuel , which will include the traditional internal combustion engine (ICE) dependent categories; (2) Wire Sets & Other , which will include spark plug wire sets and other related products, and are product categories we have noted to be in secular decline based upon product life cycle; and (3) Electrical & Safety , which will include powertrain neutral vehicle technologies such as electrical switches/relays, safety related products such as anti-lock brake and vehicle speed sensors, tire pressure monitoring, park assist sensors, and advanced driver assistance components.
Added
Our Temperature Control Segment also services our core automotive aftermarket customers through its offering of premium replacement parts within the following major product groups: (1) AC System Components , which includes compressors, air conditioning repair kits, connecting lines, heat exchangers, and expansion devices.
Removed
Our Temperature Control operating segment remains substantially unchanged, as only a small portion of its business will be moved to Engineered Solutions , and this legacy aftermarket business segment is poised to benefit from the broader adoption of more complex AC systems.
Added
(2) Other Thermal Components , which includes parts that provide engine, transmission, electric drive motor, and battery temperature management. We believe our Temperature Control Segment is poised to benefit from the broader adoption of more complex air conditioning systems that will provide passenger comfort regardless of the vehicle’s powertrain.
Removed
Those systems will provide passenger comfort regardless of the vehicles powertrain propulsion, and are being developed to cool batteries and other products used on electric vehicles.
Added
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.
Removed
Segment offerings will continue to provide thermal products in the aftermarket business under two major product groups: 4 Index (1) AC System Components , which includes compressors, connecting lines, heat exchangers, and expansion devices (2) Other Thermal Components , which includes parts that provide engine, transmission, electric drive motor, and battery temperature management This change will better align our operating segments with our strategic focus on diversification, and provide greater transparency into how we are positioned to capture growth opportunities of the future.
Added
(2) Sensors , covering applications in speed, position, temperature, pressure, level and particulate matter, among others. (3) Switches , covering applications in electrical performance, position, temperature, pressure, tilt and fluid levels, among others. (4) Power Distribution , covering applications in power switching, industrial solenoids, and voltage regulators.
Removed
The change will also better reflect the impact of our recent acquisitions.
Added
(5) Electrification & Electronics , which includes controller area network (CAN) devices, CAN bus wiring and splitting devices, and electronic controls, transmitters and components. (6) Injection & Fuel Delivery , covering an extensive array of applications in transportation, such as gasoline, diesel and alternative fuels, such as compressed natural gas, liquefied natural gas, liquefied petroleum gas, and hydrogen.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+22 added−16 removed64 unchanged
Biggest changeA 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. 18 Index 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, 2022.
Biggest changeSince 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.
If 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. 23 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.
If 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.
Our operations could be adversely affected by interruptions or breaches in the security of our computer and information technology systems. We rely on information technology 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.
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 also routinely use our information technology 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.
These factors may allow our competitors to: 16 Index • 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 we do; • undertake more extensive marketing campaigns; and • make more attractive offers to existing and potential customers and strategic partners.
The interest rate swap agreement matures in May 2029. 22 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 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.
We believe that our success depends, in part, on maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our customers through the support of their marketing initiatives.
In our automotive aftermarket business, we believe that our success depends, in part, on maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our aftermarket customers through the support of their marketing initiatives.
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 $8.1 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 $8.3 million negative impact on our earnings or cash flows.
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 .
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 .
If we do not respond appropriately to changes in automotive technologies, such as the adoption of new technologies and systems to make traditional, ICE vehicles more efficient, or the adoption of electric or hybrid electric vehicle architectures, we could experience less demand for our products thereby causing a decline in our results of operations or deterioration in our business and financial condition, and we may have a material adverse effect on our long-term performance.
If we do not respond appropriately to changes in automotive technologies, such as the adoption of new technologies and systems to make traditional, internal-combustion-engine vehicles more efficient, or the adoption of electric or hybrid electric vehicle architectures, we could experience less demand for our products thereby causing a decline in our results of operations or deterioration in our business and financial condition, and we may have a material adverse effect on our long-term performance.
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.
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 temperature control products is typically the highest.
Our cost savings is also predicated upon maintaining our sales levels. Severe weather, natural disasters and other disruptions could adversely impact our operations at our manufacturing and distribution facilities.
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.
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, cyber attacks on their information technology 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, 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 profitability may be materially adversely affected as a result of overstock inventory related returns by our customers in excess of anticipated amounts . We permit overstock returns of inventory that may be either new or non-defective or non-obsolete but that we believe we can re-sell.
Our profitability may be materially adversely affected as a result of overstock inventory related returns by our customers in excess of anticipated amounts . In our automotive aftermarket business, we permit overstock returns of inventory that may be either new or non-defective or non-obsolete but that we believe we can re-sell.
Because our sales are concentrated, and the market in which we operate is very competitive, we are under ongoing pressure from our customers to offer lower prices, extend payment terms, increase marketing allowances and other terms more favorable to these customers.
Because our sales are concentrated, and the markets in which we operate are very competitive, we are under ongoing pressure from our customers to offer lower prices, extend payment terms, increase marketing allowances and other terms more favorable to these customers.
The Credit Agreement provides for a $500 million credit facility comprised of a $100 million term loan facility (the “term loan”) and a $400 million multi-currency revolving credit facility available in U.S. Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the administrative agent and the lenders (the “revolving facility”).
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.
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, which began in the fourth quarter of 2021.
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.
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, 2022 study, to range from $53.2 million to $105.7 million for the period through 2065.
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.
Inflationary cost increases in raw materials, labor and transportation and a general worsening of economic conditions has put financial pressure on many of our customers and may threaten certain customers’ ability to maintain liquidity sufficient to repay their obligations to us as they become due.
Higher interest rates, inflationary cost increases in raw materials, labor and transportation and a general worsening of economic conditions have put financial pressure on many of our customers and may threaten certain customers’ ability to maintain liquidity sufficient to repay their obligations to us as they become due.
In addition, the size of the automobile replacement parts market depends, in part, upon the growth in number of vehicles on the road, increase in average vehicle age, change in total miles driven per year, new or modified environmental and vehicle safety regulations, including fuel economy and emissions reduction standards, increase in pricing of new cars and new car quality and related warranties.
In addition, the size of the automotive aftermarket depends, in part, upon the growth in number of vehicles on the road, increase in average vehicle age, change in total miles driven per year, new or modified environmental and vehicle safety regulations, including fuel economy and emissions reduction standards, increase in pricing of new cars and new car quality and related warranties.
We do not typically enter into long-term agreements with any of our customers. Instead, we enter into a number of purchase order commitments with our customers, based on their current or projected needs.
In our automotive aftermarket business, we do not typically enter into long-term agreements with any of our customers. Instead, we enter into a number of purchase order commitments with our aftermarket customers, based on their current or projected needs.
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 $1.5 million at December 31, 2022.
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.
Based upon the results of the August 31, 2022 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 $18.5 million in earnings (loss) from discontinued operations in the accompanying statement of operations.
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.
The automobile replacement parts market has been negatively impacted by the fact that the quality of more recent automotive vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle.
The automotive aftermarket has been negatively impacted by the fact that the quality of more recent automotive vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle.
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, which we refer to throughout this Report as our Credit Agreement.
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.
The bankruptcy, insolvency or other credit failure of any customer that has a substantial amount owed to us could have a material adverse effect on our operating revenue and results of operations. In January 2023, one of our customers filed a petition for bankruptcy.
The bankruptcy, insolvency or other credit failure of any customer that has a substantial amount owed to us could have a material adverse effect on our operating revenue and results of operations.
The results of the August 31, 2022 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs, ranging from $68.8 million to $111.6 million for the period through 2065.
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.
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.
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.
During this period, our working capital requirements were funded by borrowing from our revolving credit facility in our Credit Agreement. 17 Index Climate-related physical risks, such as changes to weather patterns and conditions may also impact the pattern of seasonality and variability in demand for our Temperature Control products discussed above, which may impact our quarterly performance and working capital requirements.
Climate-related physical risks, such as changes to weather patterns and conditions may also impact the pattern of seasonality and variability in demand for our Temperature Control products discussed above, which may impact our quarterly performance and working capital requirements.
As of December 31, 2022, our total outstanding indebtedness was $239.6 million, including outstanding borrowings under the Credit Agreement of $239.5 million, consisting of current borrowings of $55 million and long-term borrowings of $184.5 million.
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.
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.
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 three largest individual customers accounted for approximately 59% of our consolidated net sales in 2022. During 2022, O’Reilly, AutoZone and NAPA accounted for 27%, 17% and 15% of our consolidated net sales, respectively.
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 brands are an important component of our value proposition, and serve to distinguish our premium engine management and temperature control products from those of our competitors.
Our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors.
Generally, if parts last longer, there will be less demand for our products and the average useful life of automobile parts has been steadily increasing in recent years due to innovations in products and technology. In addition, the introduction by original equipment manufacturers of increased warranty and maintenance initiatives has the potential to decrease the demand for our products.
Generally, if parts last longer, there will be less demand for our aftermarket products and the average useful life of automotive parts has been steadily increasing in recent years due to innovations in products and technology.
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.
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.
Such environmental laws, including but not limited to those under the Comprehensive Environmental Response Compensation & Liability Act, may impose joint and several liability and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located. 24 Index The nature of our operations exposes us to the risk of claims with respect to such matters, and we can give no assurance that violations of such laws have not occurred or will not occur or that material costs or liabilities will not be incurred in connection with such claims.
Such environmental laws, including but not limited to those under the Comprehensive Environmental Response Compensation & Liability Act, may impose joint and several liability and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located.
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 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.
As such, our working capital typically peaks near the end of the second quarter, as the inventory build‑up of air conditioning products was converted to sales, and payments on the receivables associated with such sales were yet to be received.
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.
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.
These factors could have a material adverse effect on our business, financial condition and results of operations.
Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in the supply chain caused by the COVID-19 pandemic, Russia’s invasion of the Ukraine and the resultant sanctions imposed by the U.S. and other governments that may lead to a further increase in inventories to support our customers, and significant inflationary cost increases in 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 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.
Moreover, global climate change may cause these natural disasters to occur more frequently and/or with more intense effects, which could prevent us from, or cause delays in our ability to, manufacture and deliver products to our customers, and/or cause us to incur additional costs. 19 Index 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, terrorist attack or similar events.
Moreover, global climate change may cause these natural disasters to occur more frequently and/or with more intense effects, which could prevent us from, or cause delays in our ability to, manufacture and deliver products to our customers, and/or cause us to incur additional costs.
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.
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.
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.
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 .
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 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.
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, failure to meet industry published specifications and/or the result of installation error.
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.
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.
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 .
In addition to this seasonality, 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, as evidenced by the strong customer demand in 2022 fueled by the record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions in 2021.
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 expect these inflationary trends to continue for some time, and while we believe that we will be able to somewhat offset the impact, there can be no assurances that unforeseen future events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have a material adverse effect on our business, financial condition and results of operations.
We cannot assure that unforeseen future events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have a material adverse effect on our business, financial condition and results of operations. Additionally, supplier non-performance may consist of delivery delays or failures caused by production issues or delivery of non-conforming products.
In connection with the bankruptcy filing, we recorded a $7 million charge in 2022 to reduce our outstanding accounts receivable balance from the customer to our estimated recovery amount. 21 Index Risks Related to Liquidity We are exposed to risks related to our receivables supply chain financing arrangements.
We recorded a $7 million pre-tax charge in 2022 to reduce our outstanding accounts receivable balance from a customer that filed for bankruptcy in the first quarter of 2023 to our estimated recovery amount.
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. 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.
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.
When proper maintenance and repair procedures are followed, newer air conditioning (A/C) systems in particular are less prone to leak resulting in fewer A/C system repairs. These factors could have a material adverse effect on our business, financial condition and results of operations.
In addition, the introduction by original equipment manufacturers of increased warranty and maintenance initiatives has the potential to decrease the demand for our aftermarket products. When proper maintenance and repair procedures are followed, newer air conditioning (A/C) systems in particular are less prone to leak resulting in fewer A/C system repairs.
Additionally, we rely on our information technology systems to enable many of our employees to work remotely as a result of new policies and practices enacted by us. 20 Index Our information technology systems have been subject to cyber threats, including attempts to hack into our network and computer viruses.
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.
The transition risks associated with global climate change may cause us to incur significant costs.
Depending on the nature and magnitude of these events, they could have a material and adverse effect on our business, financial condition or results of operations. The transition risks associated with global climate change may cause us to incur significant costs.
Many of these restrictions have been eased, however, there can be no guarantee that they will not be implemented in the future. Any restrictions or limitations on our ability to perform such operations could have a material adverse effect on our business, results of operations and financial condition.
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.
In the Temperature Control Segment, we compete with: ACDelco, MAHLE GmbH, Denso Corporation, Motorcraft, Sanden International (U.S.A.), Inc., Continental AG, Dorman Products, Inc., and several privately-owned companies. In addition, automobile manufacturers supply many of the replacement parts we sell. Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do.
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.
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 domestic and international suppliers of automotive products.
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.
At December 31, 2022, 1,530 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2022, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $64.6 million.
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.
Removed
In the Engine Management Segment, we compete with: ACDelco, Aptiv Plc, Denso Corporation, Continental AG, Hitachi, Ltd., Motorcraft, Robert Bosch GmbH, Visteon Corporation, NGK Spark Plug Co., Ltd., Dorman Products, Inc. and several privately-owned companies primarily importing products from Asia.
Added
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.
Removed
While the COVID-19 pandemic caused large shifts in sales demand between quarters in 2020, our business has returned to a more normalized pattern of seasonality and variability in demand of our Temperature Control products in 2022 and 2021.
Added
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.
Removed
In the event that there are material deficiencies or defects in the design and manufacture of our products and/or installation error, the affected products may be subject to warranty returns and/or product recalls.
Added
Moreover, the technologies and techniques used to carry out cyber-attacks are continuously evolving, making it difficult to detect these changes or implement adequate measures in time to prevent or mitigate the impact of an attack.
Removed
Additionally, supplier non-performance may consist of delivery delays or failures caused by production issues or delivery of non-conforming products.
Added
In the event that our information systems, or the systems of our customers, suppliers or business partners, are subject to such incidents, we could experience errors, interruptions, delays, and/or the cessation of services in key portions of our information systems.
Removed
Such hacking attempts and computer viruses have not significantly impacted or interrupted our business operations.
Added
If critical information systems fail or otherwise become unavailable, our ability to process orders, maintain proper inventory levels, collect accounts receivable and disburse funds could be adversely affected.
Removed
While we implement security measures designed to prevent and mitigate the risk of cyber attacks, our information technology systems, and the systems of our customers, suppliers and business partners, may continue to be vulnerable to computer viruses, attacks by hackers, or unauthorized access caused by employee error or malfeasance.
Added
The foregoing matters could also cause significant damage to our business reputation, affect our relationships with our business partners, lead to claims against us, and/or subject us to fines or other penalties assessed by governmental authorities. Additionally, we may be required to incur substantial costs to remediate the damage caused by these disruptions or protect us against future cybersecurity incidents.
Removed
The exploitation of any such vulnerability could unexpectedly compromise our information security, or the security of our customers, suppliers and other business partners.
Added
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.
Removed
Furthermore, because the techniques used to carry out cyber attacks change frequently and in many instances are not recognized until after they are used against a target, we may be unable to anticipate these changes or implement adequate preventative measures.
Added
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.
Removed
If our information technology systems, or the systems of our customers, suppliers or business partners, are subject to cyber attacks, such as those involving significant or extensive system interruptions, sabotage, computer viruses or unauthorized access, we could experience disruptions to our business operations and incur substantial remediation costs, which could have a material adverse effect on our business, financial condition or results of operations.
Added
Changes, delays or cancellations by a significant customer or by a number of customers could adversely impact our results of operations by reducing the volumes of products we manufacture and sell, by causing a delay in the recovery of expenditures for raw materials and component parts procured to satisfy such orders, or by reducing our asset utilization, resulting in lower profitability.
Removed
General economic conditions, competition and other factors may adversely affect the solvency or creditworthiness of our customers.
Added
We also make key decisions based on our estimates of our customers’ requirements, including in planning our production schedules, raw material and component part purchases, personnel needs and other resource requirements. Changes in demand for our customers’ products would likely reduce our customers’ requirements and adversely impact our ability to accurately estimate their requirements in the future.
Removed
We have manufacturing and distribution facilities in many countries, including Canada, Mexico, Poland, Germany and Hungary, as well as a joint-venture in China. Increasing our manufacturing footprint in low cost regions is an important element of our strategy.
Added
Any significant decrease or delay in customer orders could have a material adverse effect on our business, financial condition and results of operations. Our inability to attract or retain key employees may have an adverse effect on our business, financial condition and results of operations.
Removed
Our business, results of operations and financial condition could be materially adversely affected by the effects of widespread public health crises, including the novel coronavirus (COVID-19) pandemic, that are beyond our control.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThomas Canada Manufacturing 42,500 Owned Reynosa Mexico Manufacturing 82,000 2026 Reynosa Mexico Manufacturing 117,500 2026 Reynosa Mexico Manufacturing 111,800 2024 Other Mississauga Canada Administration and Distribution 82,400 2028 Irving TX Training Center 13,400 2027 ¹It is our intention to extend the leases that are set to expire in 2023. 26 Index
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
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, 2022. Location State or Country Principal Business Activity Approx. Square Feet Owned or Expiration Date of Lease¹ Engine Management Ft. Lauderdale FL Distribution 23,300 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, 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.
Lauderdale FL Distribution 30,000 Owned Mishawaka IN Manufacturing 153,100 Owned Edwardsville KS Distribution 363,500 Owned Independence KS Manufacturing 337,400 Owned Long Island City NY Administration 75,800 2033 Greenville SC Manufacturing 184,500 Owned Disputanta VA Distribution 411,000 Owned Sheboygan Falls WI Manufacturing 22,000 2025 Milwaukee WI Manufacturing 84,000 2028 Wuxi China Manufacturing 27,600 2023 Kirchheim-Teck Germany Distribution 27,500 2031 Pécel Hungary Manufacturing 33,500 2031 Reynosa Mexico Manufacturing 175,000 2025 Reynosa Mexico Manufacturing 153,000 2023 Tijuana Mexico Manufacturing 37,500 2023 Tijuana Mexico Distribution 13,800 2023 Bialystok Poland Manufacturing 142,400 2027 Temperature Control McAllen TX Distribution 120,300 2027 Lewisville TX Administration and Distribution 415,000 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 111,800 2024 St.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The information required by this Item is incorporated herein by reference to the information set forth in Item 8, “Financial Statements and Supplementary Data” of this Report under the captions “Asbestos” and “Other Litigation” appearing in Note 23, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report. ITEM 4.
Biggest changeITEM 3. LEGAL PROCEEDINGS The information required by this Item is incorporated herein by reference to the information set forth in Item 8, “Financial Statements and Supplementary Data” of this Report under the caption “Asbestos” appearing in Note 23, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report. ITEM 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSMP S&P 500 S&P 1500 Auto Parts & Equipment Index 2017 100 100 100 2018 110 96 69 2019 123 126 92 2020 94 149 113 2021 125 192 138 2022 85 157 93 * Source: S&P Capital IQ 28 Index ITEM 6. (RESERVED)
Biggest changeSMP 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)
Our Credit Agreement permits dividends and distributions by us provided specific conditions are met. For information related to our revolving credit facility, see Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
Our 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.
There have been no unregistered offerings of our common stock during the fourth quarter of 2022. 27 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.
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.
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, 2017 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, 2018 and the reinvestment of all dividends.
As of February 17, 2023, there were 518 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 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.
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 17, 2023 was $41.17 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 20, 2024 was $40.23 per share.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table summarizes gross margins by segment for the years ended December 31, 2022 and 2021, respectively (in thousands): 32 Index Year Ended December 31, Engine Management Temperature Control Other Total 2022 Net sales (a) $ 975,243 $ 382,285 $ 14,287 $ 1,371,815 Gross margins 262,954 102,640 16,945 382,539 Gross margin percentage 27 % 26.8 % — % 27.9 % 2021 Net sales (a) $ 937,936 $ 348,423 $ 12,457 $ 1,298,816 Gross margins 266,961 95,138 14,832 376,931 Gross margin percentage 28.5 % 27.3 % — % 29 % (a) Segment net sales include intersegment sales in our Engine Management and Temperature Control segments.
Biggest changeThe following table summarizes gross margins by segment for the years ended December 31, 2022 and 2021, respectively (in thousands): Year Ended December 31, Vehicle Control Temperature Control Engineered Solutions Other Total 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 % 2021 Net sales $ 737,431 $ 324,080 $ 237,305 $ — $ 1,298,816 Gross margins 238,790 91,738 46,403 — 376,931 Gross margin percentage 32.4 % 28.3 % 19.6 % — 29 % Compared to 2021, gross margins at Vehicle Control decreased 1.5 percentage points from 32.4% to 30.9%, gross margins at Temperature Control decreased 0.1 percentage points from 28.3% to 28.2%, and gross margins at Engineered Solutions decreased 1.6 percentage points from 19.6% to 19%.
While we have not been impacted by the war to date, there can be no assurances that any escalation of the invasion will not have an adverse impact on our business, financial condition and results of operations. 30 Index Impact of Global Supply Chain Disruption and Inflation Disruptions in the global economy have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw materials, labor and transportation.
While we have not been impacted by the war to date, there can be no assurances that any escalation of the invasion will not have an adverse impact on our business, financial condition and results of operations. 29 Index Impact of Global Supply Chain Disruption and Inflation Disruptions in the global economy have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw materials, labor and transportation.
As discussed more fully in Note 23 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products. Net Earnings Attributable to Noncontrolling Interest. In May 2021, we acquired the Trombetta business for $111.7 million.
As discussed more fully in Note 23 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products. 35 Index Net Earnings Attributable to Noncontrolling Interest. In May 2021, we acquired the Trombetta business for $111.7 million.
Future legal costs are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations. 40 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. 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.
The gross margin percentage decrease in Temperature Control compared to the prior year reflects the impact of inflationary cost increases in raw materials, labor and transportation, and higher freight and related expenses resulting from higher inventory levels, which were somewhat offset by seasonal volume, customer mix and increased pricing.
The slight gross margin percentage decrease in Temperature Control compared to the prior year reflects the impact of inflationary cost increases in raw materials, labor and transportation, and higher freight and related expenses resulting from higher inventory levels, which were offset by seasonal volume, customer mix and increased pricing.
We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions. 39 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 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.
Comparison of Liquidity and Capital Resources For Fiscal Years 2021 and 2020 For a detailed discussion of our Liquidity and Capital Resources comparison of fiscal year 2021 to fiscal year 2020, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
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.
Under the amended terms, the overdraft facility provides for borrowings of up to Zloty 30 million (approximately $6.8 million) if borrowings are solely in Zloty, or up to 85% of the Zloty 30 million limit (approximately $5.8 million) if borrowings are in Euros and/or U.S. Dollars.
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.
In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including implementing cost savings initiatives and the pass through of higher costs to our customers in the form of price increases, and increasing inventory levels to minimize the obvious disruptions from out-of-stock raw materials and components to ensure higher fill rates with our customers.
In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including implementing cost savings initiatives and the pass through of higher costs to our customers in the form of price increases, and maintaining inventory at levels to minimize potential disruptions from out-of-stock raw materials and components to ensure higher fill rates with our customers.
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 Credit Agreement also contains customary events of default.
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.
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, 2022.
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.
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 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.
Borrowings under the amended overdraft facility will bear interest at a rate equal to (1) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.5% for borrowings in Polish Zloty, (2) the one month Euro Interbank Offered Rate (“EURIBOR”) + 1.5% for borrowings in Euros, and (3) the Mid-Point of the Fed Target Range + 1.75% for borrowings in U.S Dollars.
Borrowings under the 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.
In October 2021, our Board of Directors authorized the purchase of up to $30 million of our common stock under a stock repurchase program.
In October 2021, our Board of Directors authorized the purchase of up to an additional $30 million of our common stock under a stock repurchase program.
Restructuring and integration expenses incurred in 2022 of $1.9 million related to (1) severance costs of approximately $0.9 million in connection with a reduction in our sales force, (2) expenses of approximately $0.6 million consisting of employee severance costs related to our product line relocations from our Independence, Kansas manufacturing facility in our Engine Management Segment and from our St.
Restructuring and integration expenses incurred in 2022 of $1.9 million related to (1) severance costs of $0.9 million in connection with a reduction in our sales force, (2) expenses of $0.6 million consisting of employee severance costs related to our product line relocations from our Independence, Kansas manufacturing facility and from our St.
During the year ended December 31, 2022, our average daily alternative base rate loan balance was $5.6 million, compared to a balance of $1.1 million for the year ended December 31, 2021.
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.
A charge in the amount of $32 million, $11.5 million and $12.2 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, 2022, 2021 and 2020, respectively.
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.
The increase in cash used in operating activities resulted primarily from the decrease in net earnings, the smaller year-over-year decrease in accounts receivable, the decrease in accounts payable compared to a year-over-year increase in accounts payable, the larger year-over-year increase in prepaid expenses and other current assets, and the decrease in sundry payables and accrued expenses compared to a year-over-year increase in sundry payables and accrued expenses offset, in part, by the smaller year-over-year increase in inventories.
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.
In February 2021, our Board of Directors authorized the purchase of up to an additional $20 million of our common stock under a stock repurchase program. Stock repurchases under this program, during the year ended December 31, 2021, were 464,992 shares of our common stock at a total cost of $20 million, thereby completing the 2021 Board of Directors authorization.
Stock repurchases under this program during the year ended December 31, 2021 were 150,273 shares of our common stock at a total cost of $6.5 million thereby completing the 2020 Board of Directors authorization. In February 2021, our Board of Directors authorized the purchase of up to an additional $20 million of our common stock under a stock repurchase program.
The overdraft facility has an initial maturity date in December 2022, with automatic three-month renewals until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period.
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.
Investing activities during 2022 consisted of (1) the cash payment of $1.7 million for our acquisition of 100% of the capital stock of Kade Trading GmbH, a German company, (“Kade”) , net of $1 million of cash acquired and the $0.5 million earn-out; (2) the payment of $0.2 million for our 3.55% increase in equity ownership in Foshan Che Yijia New Energy Technology Co., Ltd., (“CYJ”), a China-based joint venture that manufactures automotive electric air conditioning compressors; and (3) capital expenditures of $26 million.
(“Gwo Yng”) and (2) capital expenditures of $28.6 million offset, in part, by cash acquired of $6.8 million in the Gwo Yng step acquisition. 36 Index Investing activities during 2022 consisted of (1) the cash payment of $1.7 million for our acquisition of 100% of the capital stock of Kade Trading GmbH, a German company, (“Kade”) , net of $1 million of cash acquired and the $0.5 million earn-out; (2) the payment of $0.2 million for our 3.55% increase in equity ownership in Foshan Che Yijia New Energy Technology Co., Ltd., (“CYJ”), a China-based joint venture that manufactures automotive electric air conditioning compressors; and (3) capital expenditures of $26 million.
As a result of our evaluation, we recorded a $7 million pre-tax charge during the year ended December 31, 2022 to reduce our accounts receivable balance to our estimated recovery. The $7 million pre-tax charge is included in selling, general and administrative expenses in our consolidated statement of operations.
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.
Thomas, Canada manufacturing facility in our Temperature Control Segment to our manufacturing facilities in Reynosa, Mexico, (3) relocation expenses of approximately $0.1 million in our Engine Management Segment of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland, and (4) the $0.2 million increase in environmental cleanup costs for ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York location. 33 Index Restructuring and integration expenses incurred in 2021 of $0.4 million related to relocation in our Engine Management Segment of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland.
Thomas, Canada manufacturing facility to our manufacturing facilities in Reynosa, Mexico, (3) relocation expenses of $0.2 million of certain inventory, machinery, and equipment acquired in our 2021 soot sensor acquisition to our facilities in Independence, Kansas and Bialystok, Poland, and (4) the $0.2 million increase in environmental cleanup costs for ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York location.
Included in our operating margin were selling, general and administrative expenses (“SG&A”) of $276.6 million, or 20.2% of net sales in 2022, $247.5 million, or 19.1% of net sales in 2021, and $224.7 million, or 19.9% of net sales in 2020.
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.
While we anticipate continued margin pressures at both Engine Management and Temperature Control resulting from inflationary cost increases, we believe that our annual cost initiatives, and our ability to pass through higher prices to our customers, will help to offset the impact of the inflationary increases on our margins. Selling, General and Administrative Expenses.
While we anticipate continued margin pressures across all of our segments resulting from inflationary cost increases, we believe that our annual cost initiatives, and our ability to pass through higher prices to our customers, will help to offset the impact of the inflationary increases on our margins. Selling, General and Administrative Expenses.
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 the COVID-19 pandemic, Russia’s invasion of the Ukraine and resultant sanctions imposed by the U.S. and other governments, future increases in interest rates, inflation, macroeconomic uncertainty, and other unforeseen changes in the industry, or business, could materially impact the estimates, and may have a material adverse effect on our business, financial condition and results of operations.
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.
Temperature Control’s increase in net sales for the year ended December 31, 2022, when compared to the same period in 2021, reflects the impact of continued strong customer demand, with the elevated demand we saw in 2021 holding firm, fueled by record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions in 2021, and the impact of price increases, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs.
The increase in net sales in our Temperature Control segment reflects the impact of continued strong customer demand, with the elevated demand we saw in 2021 holding firm, fueled by record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions in 2021, and the impact of price increases, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs.
Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in the supply chain caused by the COVID-19 pandemic, Russia’s invasion of the Ukraine and resultant sanctions imposed by the U.S. and other governments, future increases in interest rates, and significant inflationary cost increases in raw materials, labor and transportation that we are unable to pass through our customers, macroeconomic uncertainty, and that there will be no material adverse developments in our business, liquidity or capital requirements.
Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in the supply chain caused by geo-political risks, future increases in interest rates, and significant inflationary cost increases in raw materials, labor and transportation that we are unable to pass through our customers, macroeconomic uncertainty, and that there will be no material adverse developments in our business, liquidity or capital requirements.
Outstanding borrowings at December 31, 2022 under the Credit Agreement were $239.5 million, consisting of current borrowings of $55 million and long-term debt of $184.5 million; while outstanding borrowings at December 31, 2021 under the 2015 Credit Agreement were $125.3 million, consisting of current borrowings.
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.
SG&A expenses in 2022 were favorably impacted by the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower SG&A expenses as a percentage of sales. Restructuring and Integration Expenses. Restructuring and integration expenses were $1.9 million in 2022 compared to restructuring and integration expenses of $0.4 million in 2021.
SG&A expenses in 2022 were favorably impacted by the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower SG&A expenses as a percentage of sales. 34 Index Restructuring and Integration Expenses.
During 2022 (1) the decrease in accounts receivable was $6.9 million compared to the year-over-year decrease in accounts receivable of $28.5 million in 2021; (2) the increase in inventories was $67.5 million compared to the year-over-year increase in inventories of $107.6 million in 2021; (3) the decrease in accounts payable was $48.6 million compared to the year-over-year increase in accounts payable of $33 million in 2021; (4) the increase in prepaid expenses and other current assets was $5.5 million compared to the year-over-year increase in prepaid expenses and other current assets of $0.8 million in 2021; and (5) the decrease in sundry payables and accrued expenses was $29.1 million compared to the year-over-year increase in sundry payables and accrued expenses of $13.4 million in 2021.
During 2023, (1) the decrease in accounts receivable was $8 million compared to the year-over-year decrease in accounts receivable of $6.9 million in 2022; (2) the decrease in inventories was $29.5 million compared to the year-over-year increase in inventories of $67.5 million in 2022; (3) the increase in accounts payable was $19.6 million compared to the year-over-year decrease in accounts payable of $48.6 million in 2022; (4) there was no change in prepaid expenses and other current assets compared to the year-over-year increase in prepaid expenses and other current assets of $5.5 million in 2022; and (5) the decrease in sundry payables and accrued expenses was $4.3 million compared to the year-over-year decrease in sundry payables and accrued expenses of $29.1 million in 2022.
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 2021, with the majority of our net sales to customers located in the United States.
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.
Stock repurchases under this program, during the year ended December 31, 2022 and 2021 were 692,067 and 7,000 shares of our common stock, respectively, at a total cost of $29.7 million and $0.3 million, respectively, thereby completing the October 2021 Board of Directors authorization.
Stock repurchases under this program, during the year ended December 31, 2021 and 2022 were 7,000 and 692,067 shares of our common stock, respectively, at a total cost of $0.3 million and $29.7 million, respectively, thereby completing the October 2021 Board of Directors authorization. 39 Index In July 2022, our Board of Directors authorized the purchase of up to an additional $30 million of our common stock under a new stock repurchase program.
Net earnings during 2022 were $55.4 million compared to $91 million in 2021.
Net earnings during 2023 were $34.4 million compared to $55.4 million in 2022.
Cash provided by borrowings under our credit facilities were used to fund our operating activities, investing activities, reduce our borrowings under lease obligations and our Polish overdraft facility, pay debt issuance costs in connection with the refinancing, purchase shares of our common stock and pay dividends. 35 Index Cash provided by financing activities was $69 million in 2021.
Cash provided by borrowings under our credit facilities were used to fund our operating activities, investing activities, reduce our borrowings under lease obligations and our Polish overdraft facility, pay debt issuance costs in connection with the refinancing, purchase shares of our common stock and pay dividends. Dividends of $25.2 million and $23.4 million were paid in 2023 and 2022, respectively.
During 2022, cash used in operating activities was $27.5 million compared to cash provided by operating activities of $85.6 million in 2021.
During 2023, cash provided by operating activities was $144.3 million compared to cash used in operating activities of $27.5 million in 2022.
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.
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.
Interest is payable at the end of the selected interest period, but no less frequently than quarterly. 36 Index 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 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.
Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company. At December 31, 2021, borrowings under the overdraft facility were Zloty 12.3 million (approximately $3 million). There were no borrowings outstanding under the overdraft facility at December 31, 2022.
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.
The soot sensor product line relocation has been substantially completed. Operating Income. 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 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.
Material Cash Commitments Material cash commitments as of December 31, 2022 consist of required cash payments to service our outstanding borrowings of $239.5 million under our Credit Agreement with JPMorgan Chase Bank, N.A., as agent, the future minimum cash requirements of $60.2 million through 2033 under operating leases, and future cash payments relating to our restructuring and integration activities of $4.9 million.
Material Cash Commitments 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.
The gross margin percentage decrease in Engine Management compared to the prior year reflects the impact of lower fixed cost absorption due to lower and more normalized production, inflationary cost increases in raw materials, labor and transportation, which were somewhat offset by increased pricing, the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower gross margins but comparable operating margin, and higher freight and related expenses resulting from higher inventory levels.
The gross margin percentage decrease in Vehicle Control compared to the prior year reflects the impact of lower fixed cost absorption due to lower and more normalized production, inflationary cost increases in raw materials, labor and transportation, which were somewhat offset by increased pricing, and higher freight and related expenses resulting from higher inventory levels.
December 31, (In thousands, except per share data) 2022 2021 2020 Net sales $ 1,371,815 $ 1,298,816 $ 1,128,588 Gross profit 382,539 376,931 336,655 Gross profit % 27.9 % 29 % 29.8 % Operating income 104,135 128,999 108,895 Operating income % 7.6 % 9.9 % 9.6 % Earnings from continuing operations before income taxes 98,332 130,465 107,379 Provision for income taxes 25,206 31,044 26,962 Earnings from continuing operations 73,126 99,421 80,417 Loss from discontinued operations, net of income taxes (17,691 ) (8,467 ) (23,024 ) Net earnings 55,435 90,954 57,393 Net earnings attributable to noncontrolling interest 84 68 — Net earnings attributable to SMP 55,351 90,886 57,393 Per share data attributable to SMP – Diluted: Earnings from continuing operations $ 3.30 $ 4.39 $ 3.52 Discontinued operations (0.80 ) (0.37 ) (1.01 ) Net earnings per common share $ 2.50 $ 4.02 $ 2.51 Consolidated net sales for 2022 were $1,371.8 million, an increase of $73 million, or 5.6% compared to net sales of $1,298.8 million in 2021, and an increase of $170.2 million, or 15.1%, compared to net sales of $1,128.6 million in 2020.
December 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.
While we anticipate continued margin pressure resulting from inflationary cost increases, we believe that our annual cost initiatives and our ability to pass through higher prices to our customers, will help to mitigate the impact of the inflationary increases on our margins. 29 Index Operating margin as a percentage of net sales in 2022 was 7.6% as compared to 9.9% in 2021 and 9.6% in 2020.
While we anticipate continued margin pressure resulting from inflationary headwinds, we believe that our annual cost savings initiatives coupled with our ability to pass through higher prices to our customers should help to offset much of this impact to our gross margins. Operating margin as a percentage of net sales in 2023 was 6.8% as compared to 7.6% in 2022.
In October 2022, our Polish subsidiary, SMP Poland sp. z.o.o., amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce to provide for borrowings under the facility in Euros and U.S. Dollars.
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.
Stock repurchases under this program, during the years ended December 31, 2021 and 2020, were 150,273 and 323,867 shares of our common stock, respectively, at a total cost of $6.5 million and $13.5 million, respectively, thereby completing the 2020 Board of Directors authorization.
Stock repurchases under this program during the year ended December 31, 2021 were 464,992 shares of our common stock at a total cost of $20 million, thereby completing the February 2021 Board of Directors authorization.
All receivables sold were reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale.
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.
The higher SG&A expenses in 2022 is principally due to the impact of (1) higher interest rate related costs of $20.6 million incurred in our supply chain financing arrangements, (2) the impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from one of our customers that filed a petition for bankruptcy in January 2023 to our estimated recovery amount, (3) incremental expenses of $7.2 million from our soot sensor, Trombetta and Stabil acquisitions, including amortization of intangible assets acquired, and (4) inflationary cost increases resulting in higher distribution and freight costs.
The $17 million increase in SG&A expenses as compared to 2022 is principally due to the impact of (1) higher interest related costs of $14 million incurred in our supply chain financing arrangements and (2) higher distribution cost, all of which more than offset the positive 2023 comparative impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from one of our customers that filed a petition for bankruptcy in January 2023 to our estimated recovery amount.
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. 34 Index Liquidity and Capital Resources Operating Activities.
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.
The Company may select interest periods of one, three or six months for Term SOFR borrowings.
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.
Financing Activities . Cash provided by financing activities was $55.5 million in 2022 compared to $69 million in 2021. In June 2022, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as agent.
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.
Engine Management’s increase in net sales for the year ended December 31, 2022 compared to the same period in 2021, reflects the impact of the positive contribution of incremental sales from our soot sensor, Trombetta and Stabil acquisitions, strong customer demand, and price increases implemented in 2022, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs.
The increase in net sales in our Vehicle Control operating segment reflects the impact of strong customer demand and price increases implemented in 2022, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs. 33 Index Temperature Control’s net sales for the year ended December 31, 2022 increased $27.1 million, or 8.4%, to $351.2 million compared to $324.1 million in the same period of 2021.
New $500 Million Credit Facility In June 2022, we entered into a new Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (the “Credit Agreement”).
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”).
The Credit Agreement provides for a $500 million credit facility comprised of a $100 million term loan facility (the “term loan”) and a $400 million multi-currency revolving credit facility (the “revolving facility”).
The Credit Agreement provides for a $500 million credit facility comprised of a $100 million term loan facility (the “term loan”) and a $400 million multi-currency revolving credit facility available in U.S. Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the administrative agent and the lenders (the “revolving facility”).
Quarterly dividends were paid at a rate of $0.27 in 2022 and $0.25 in 2021. In February 2023, our Board of Directors voted to increase our quarterly dividend from $0.27 per share in 2022 to $0.29 per share in 2023.
Quarterly dividends were paid at a rate of $0.29 in 2023 and $0.27 in 2022.
In July 2022, our Board of Directors authorized the purchase of up to an additional $30 million of our common stock under a new stock repurchase program. Stock will be purchased under the program from time to time, in the open market or through private transactions, as market conditions warrant.
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.
Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels. Gross Margins. Gross margins, as a percentage of consolidated net sales, decreased to 27.9% for 2022, compared to 29% for 2021.
Gross margins, as a percentage of consolidated net sales, decreased to 27.9% for 2022, compared to 29% for 2021.
Receivables presented at financial institutions and not yet collected as of December 31, 2021 were $1.3 million and remained in our receivable balance as of that date. There were no receivables presented at financial institutions and not yet collected as of December 31, 2022.
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.
At December 31, 2021, the weighted average interest rate on our 2015 Credit Agreement was 1.4%, which consisted of $125 million in direct borrowings at 1.4% and alternative base rate loan of $0.3 million at 3.5%.
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.
For additional information related to our material cash commitments, see Note 3, “Restructuring and Integration Expenses”, Note 7, “Leases,” and Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report. 38 Index 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 Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months.
Net sales in the wire and cable product group for the year ended December 31, 2022 were $150.6 million, an decrease of $0.8 million, or 0.5%, compared to $151.4 million in the same period of 2021.
Engineered Solutions’ net sales for the year ended December 31, 2023 increased $12.6 million, or 4.7%, to $282.6 million compared to $270 million in the same period of 2022.
Letters of credit outstanding under the Credit Agreement were $2.4 million at December 31, 2022, and $2.6 million under the 2015 Credit Agreement at December 31, 2021. Borrowings at December 31, 2021 under the 2015 Credit Agreement have been classified as current liabilities based upon accounting rules and certain provisions in the agreement.
Letters of credit outstanding under the Credit Agreement were $2.3 million and $2.4 million at December 31, 2023 and 2022, respectively.
The gross margin decrease as a percentage of sales in 2022 reflects the impact of lower fixed cost absorption due to lower and more normalized production, inflationary cost increases in raw materials, labor and transportation, which were somewhat offset by increased pricing, the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower gross margins but comparable operating margin, and higher freight and related expenses resulting from higher inventory levels.
Overall, the gross margin increase as a percentage of sales in 2023 reflects the positive impact of increased pricing, improved operating performance, and the favorable customer sales mix in Engineered Solutions, which more than offset ongoing inflationary increases in certain raw materials, labor and transportation costs, as well as the lower fixed cost absorption due to lower production levels than those achieved in 2022 as we worked down inventory levels, and the weakening of the U.S. dollar on our international operations.
Liquidity Our primary cash requirements include working capital, capital expenditures, regular quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions. Our primary sources of funds are ongoing net cash flows from operating activities and availability under our Credit Agreement (as detailed below).
The following table summarizes our primary sources of funds including ongoing net cash flows from operating activities and availability under our Credit Agreement.
Temperature Control’s net sales increased $33.9 million, or 9.7%, to $382.3 million for the year ended December 31, 2022. Net sales in the compressors product group for the year ended December 31, 2022 were $222.5 million, an increase of $15.8 million, or 7.6%, compared to $206.7 million in the same period of 2021.
Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels. Engineered Solutions’ net sales for the year ended December 31, 2022 increased $32.7 million, or 13.8%, to $270 million compared to $237.3 million in the same period of 2021.
Incremental net sales from our soot sensor, Trombetta and Stabil acquisitions of $44.6 million were included in the net sales of the ignition, emission control, fuel and safety related system product group for the year ended December 31, 2022.
The increase in net sales in our Engineered Solutions operating segment reflects the impact of the positive contribution of incremental sales from our soot sensor, Trombetta and Stabil acquisitions of $44.6 million. Compared to the year ended December 31, 2021, excluding the incremental net sales from the acquisitions, Engineered Solutions net sales decreased $11.9 million, or 5%. Gross Margins.
Gross margins as a percentage of net sales in 2022 was 27.9% as compared to 29% in 2021 and 29.8% in 2020. Although the gross margin percentage decreased in 2022, gross margin dollars increased in 2022 to $382.5 million compared to $376.9 million in 2021 and $336.7 in 2020.
Gross margins, as a percentage of consolidated net sales, increased to 28.6% for 2023, compared to 27.9% for 2022.
Compared to 2021, gross margins at Engine Management decreased 1.5 percentage points from 28.5% to 27%, while gross margins at Temperature Control decreased 0.5 percentage points from 27.3% to 26.8%.
Gross margins at Temperature Control increased 0.2 percentage points from 28.2% to 28.4%, and gross margins at Engineered Solutions increased 0.4 percentage points from 19% to 19.4%.
Consolidated net sales increased in both our Engine Management and Temperature Control Segments.
Consolidated net sales decreased in our Vehicle Control and Temperature Control operating segments, while net sales in our Engineered Solutions operating segment increased when compared to the comparable period in the prior year.
We will continue to monitor the circumstances surrounding the bankruptcy in determining whether additional provisions may be necessary. In March 2020, our Board of Directors authorized the purchase of up to $20 million of our common stock under a stock repurchase program.
Although the courts have named us a “critical supplier,” the funds allocated to us have not yet been determined and, as such, we have not recorded an adjustment to the $7 million pre-tax charge previously recorded. In March 2020, our Board of Directors authorized the purchase of up to $20 million of our common stock under a stock repurchase program.
Removed
The increase in net sales in 2022 reflects the favorable impact of multiple factors including: • the price increases in both our segments, which were implemented to pass through inflationary increases in raw materials, distribution and labor costs, • incremental net sales in our Engine Management Segment from our soot sensor, Trombetta and Stabil acquisitions, and • continued strong customer demand in both our segments, and in particular in our Temperature Control Segment where the elevated customer demand we saw in 2021 held firm in 2022 fueled by record heat across the country and the replenishment of customer inventory levels after very warm summer conditions in 2021.
Added
Our net sales performance in 2023 reflects the impact of multiple factors including: • lower sales in our Vehicle Control operating segment reflecting the impact of lower sales to a customer that filed for bankruptcy in the first quarter, as well as the negative impact of lower customer pipeline orders and softer fourth quarter sales, • lower sales in our Temperature Control operating segment reflecting the impact of a slow start to the season caused by a rainy spring and cool early summer temperatures across key markets.
Removed
SG&A expenses in 2022 were favorably impacted by the higher mix of non-aftermarket parts sales from recent acquisitions, which have a different profile than our aftermarket business with lower SG&A expenses as a percentage of sales. Overall, our core automotive aftermarket business demand remains strong, and we continue to make major strides into new complementary markets with upside potential.
Added
Although customer demand and net sales increased significantly in the third quarter of 2023 as summer temperatures increased, the strong third quarter 2023 net sales were not enough to offset the slow start to the season, and • strong demand and new business wins in our Engineered Solutions operating segment with continued optimism about the long-term growth potential of the complementary markets served in this newly created segment. 28 Index Gross margins as a percentage of net sales in 2023 was 28.6% as compared to 27.9% in 2022.
Removed
Concurrently with our entry into the Credit Agreement, we also entered into a seven year interest rate swap agreement with Wells Fargo Bank, N.A., Co-Syndication Agent and lender under the Credit Agreement on $100 million of borrowings under the Credit Agreement to manage exposure to interest rate changes. The interest rate swap agreement matures in May 2029.
Added
The gross margin percentages in 2023 increased year-over-year in each of our Vehicle Control, Temperature Control and Engineered Solutions operating segments.
Removed
Borrowings under the Credit Agreement were used to repay all outstanding borrowings under the existing 2015 Credit Agreement, and pay certain fees and expenses incurred in connection with the Credit Agreement, with future borrowings used for other general corporate purposes of the Company and its subsidiaries.
Added
The higher SG&A expenses in 2023 is principally due to the impact of (1) higher interest rate related costs of $14 million incurred in our supply chain financing arrangements and (2) higher distribution costs, all of which more than offset the positive 2023 comparative impact of the $7 million charge recorded in 2022 to reduce our outstanding accounts receivable balance from a customer that filed for bankruptcy in the first quarter of 2023 to our estimated recoverable amount.
Removed
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 Credit Agreement matures on June 1, 2027. The Company may request up to two one-year extensions of the maturity date.
Added
Excluding the impact of the incremental interest rate costs incurred in our supply chain financing arrangements, SG&A expenses in the year ended December 31, 2023 were 20.6% of consolidated net sales, just slightly higher than the percentage in the comparable prior year period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−0 removed7 unchanged
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 1.50% at December 31, 2022. 41 Index As of December 31, 2022, we had approximately $239.5 million of outstanding borrowings under our credit facilities, of which approximately $139.5 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.
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.
As of December 31, 2022 and December 31, 2021, 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, 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.
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 $8.1 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 $8.3 million 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. 42 Index
The charge related to the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations. 43 Index
Additionally, we invest our excess cash in highly liquid short-term investments. Based upon our current level of borrowings under our facilities 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 $1.2 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 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.
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, 2022, we sold $813.7 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, 2023, we sold $830.8 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.
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.
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. 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 has been designated as a cash flow hedge of interest payments on $100 million of borrowings under our Credit Agreement.
Added
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.

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