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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.10pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.06pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.15pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
weakness+6
adversely+3
fail+3
incidents+2
harm+2
Positive rising
able+3
effective+3
assure+1
successful+1
successfully+1
Risk Factors (Item 1A)
7,864 words
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business and results of operations. If any of the stated risks actually occur, they could materially and adversely affect our business, financial condition or operating results.
Risks Related to Our Operations
We depend on a limited number of key customers, and the loss of any such customer, or a significant reduction in purchases by such customer, could have a material adverse effect on our business, financial condition and results of operations .
In 2025, t hree customers each accounted for more than 10% of our consolidated net sales at 25.2% , 18.6% and 10.5%, respectively. Net sales from each of the customers were reported in our Vehicle Control and Temperature Control operating segments. The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them, could have a materially adverse impact on our business, financial condition and results of operations. In addition, any consolidation among our key customers may further increase our customer concentration risk.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
adverse+1
lag+1
retaliatory+1
exposed+1
retaliation+1
Positive rising
gains+3
favorable+2
profitable+2
strong+1
optimistic+1
MD&A (Item 7)
6,703 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview of Financial Performance
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto. This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during each of the fiscal years in the two-year period ended December 31, 2025 . Discussion and analysis of our financial condition and results of operations for fiscal year 2024 , and comparisons of fiscal years 2024 and 2023 can be
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found in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Year Ended December 31,
(In thousands, except per share data)
Net sales
Gross profit
Gross profit %
Operating income
Operating income %
Earnings from continuing operations before income taxes
Provision for income taxes
Earnings from continuing operations
Loss from discontinued operations, net of income taxes
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 have in the past, and may in the future, lose customers or lose a particular product line of a customer due to the highly competitive conditions in the automotive aftermarket industry, including pricing pressures, consolidation of customers, customer initiatives to buy direct from foreign suppliers and/or to pursue a private brand strategy, or other business considerations. A decision by any significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to materially decrease the amount of products purchased from us, to change their manner of doing business with us, or to stop doing business with us, including a decision to source products directly from a low cost region such as Asia, could have a material adverse effect on our business, financial condition and results of operations. 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. 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.
Our industry is highly competitive, and our success depends on our ability to compete with suppliers of automotive products, some of which may have substantially greater financial, marketing and other resources than we do .
The automotive industry is highly competitive, and our success depends on our ability to compete with other suppliers of automotive products. In the automotive aftermarket, we compete primarily with full-line suppliers, short- or value-line suppliers, tier suppliers and service part operations of original equipment manufacturers, including car dealerships, and the direct import programs of certain retailers. In the diverse non-aftermarket end markets we supply, we compete primarily with global and regional tier suppliers of original equipment manufacturers. Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do. These factors may allow our competitors to:
• respond more quickly than we can to new or emerging technologies, such as the identification of potential uses and successful adoption of artificial intelligence ("AI") technologies, and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive products and services;
• engage in more extensive research and development;
• sell products at a lower price than us;
• undertake more extensive marketing campaigns; and
• make more attractive offers to existing and potential customers and strategic partners.
We cannot assure you that our competitors will not develop products or services that are equal or superior to our products or that achievegreater market acceptance than our products or that in the future other companies involved in the
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automotive industry will not expand their operations into product lines produced and sold by us. We also cannot assure you that additional entrants will not enter the automotive industry or that companies in the industry will not consolidate. Furthermore, if we do not invest in or effectively use AI capabilities, or if competitors leverage these technologies more successfully, our competitive position could suffer. Any such competitive pressures could cause us to lose market share or could result in significant price decreases and could have a material adverse effect upon our business, financial condition and results of operations.
There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure .
There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure. This is the result of a number of industry trends, including the impact of offshore suppliers in the marketplace (particularly in China) which do not have the same infrastructure costs as we do, the consolidated purchasing power of large customers, and actions taken by some of our competitors in an effort to ‘‘win over’’ new business. We have in the past reduced prices to remain competitive and may do so again in the future. Price reductions have impacted our sales and profit margins and may do so again in the future. Our future profitability will depend in part upon our ability to respond to changes in product and distribution channel mix, to continue to improve our manufacturing efficiencies, to generate cost reductions, including reductions in the cost of components purchased from outside suppliers, to maintain a cost structure that will enable us to offer competitive prices, and to pass through higher distribution, raw materials and labor costs to our customers. 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 .
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.
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 such, our working capital requirements typically peak near the end of the second quarter, as the inventory build‑up of air conditioning products is converted to sales, and payments on the receivables associated with such sales have yet to be received. These increased working capital requirements are funded by borrowings under our revolving credit facility.
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.
We may incur material losses and significant costs as a result of warranty-related returns by our customers in excess of anticipated amounts or product recalls .
Our products are required to meet rigorous standards imposed by our customers and our industry. Many of our products carry a warranty ranging from a 90-day limited warranty to a limited lifetime warranty, which generally cover defects in materials and workmanship, and conformance to agreed upon specifications. If our products fail to conform to these warranties, the affected products may be subject to warranty returns and/or product recalls. Furthermore, non-conformities that affect motor vehicle safety or compliance with applicable motor vehicle safety standards or guidelines, or non-conformities in products sold to original equipment manufacturers or their tier suppliers or system integrators could result in significant costs and lost sales, investigations and/or enforcement actions by state and federal governments, as well as negative publicity and damage to our reputation that could reduce future demand for our products. We cannot give any assurance that our products will not suffer from defects or other deficiencies or that we will not experience material warranty returns or product recalls in the future.
We accrue for warranty returns as a percentage of sales, after giving consideration to recent historical returns. Actual returns may differ from our estimates for warranty returns in accordance with our revenue recognition policies. We have in the past incurred, and may in the future incur, material losses and significant costs as a result of our customers returning products to us for warranty-related issues in excess of anticipated amounts. Deficiencies or defects in our products in the future may result in warranty returns and product recalls in excess of anticipated amounts and may have a material adverse effect on our business, financial condition and results of operations.
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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. Customers are generally limited to returning overstocked inventory according to a specified percentage of their annual purchases from us. In addition, a customer’s annual allowance cannot be carried forward to the upcoming year. We accrue for overstock returns as a percentage of sales, after giving consideration to recent historical returns. While we believe that we make reasonable estimates for overstock returns in accordance with our revenue recognition policies, actual returns may differ from our estimates. To the extent that overstocked returns are materially in excess of our projections, our business, financial condition and results of operations may be materially adversely affected.
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. 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. 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.
At December 31, 2025, approximately 945 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2025, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $105.2 million. A substantial increase in the number of new claims, or increased settlement payments, or awards of asbestos-related damages, could have a material adverse effect on our business, financial condition and results of operations.
In accordance with our policy to perform an annual actuarial evaluation in the third quarter of each year, an actuarial study was performed as of August 31, 2025. The results of the August 31, 2025 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs, ranging from $127.5 million to $275.9 million for the period through 2065. Based upon the results of the August 31, 2025 actuarial study, in September 2025 we increased our asbestos liability to $127.5 million , the low end of the range, and recorded an incremental pre-tax provision of $44.4 million in loss from discontinued operations in the accompanying consolidated statement of operations. Future legal costs, which are expensed as incurred and reported in loss from discontinued operations in the accompanying consolidated statements of operations, are estimated, according to the August 31, 2025 study, to range from $48.5 million to $115.3 million for the period through 2065.
Given the uncertainties associated with projecting asbestos-related matters into the future and other factors outside our control, we cannot give any assurance that significant increases in the number of claims filed against us will not occur, that awards of asbestos-related damages or settlement awards will not exceed the amount we have in reserve, or that additional provisions will not be required. Management will continue to monitor the circumstances surrounding these potential liabilities in determining whether additional reserves and provisions may be necessary. We plan on performing an annual actuarial analysis 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.
In addition to asbestos-related claims, our product sales entail the risk of involvement in other product liability actions. We cannot give any assurance that current or future policy limits of our product liability insurance coverage will be sufficient to cover all possible liabilities. Further, we can give no assurance that adequate product liability insurance will continue to be available to us in the future or that such insurance may be maintained at a reasonable cost to us. In the event of a successful product liability claim against us, a lack or insufficiency of insurance coverage could have a material adverse effect on our business, financial condition and results of operations.
We may not be able to achieve the benefits that we expect from our cost savings initiatives.
We expect to realize the continued benefit of discretionary cost reduction measures, along with the continued cost savings anticipated from several ongoing and/or recently completed restructuring and integration initiatives. Due to factors outside our control, such as changes in U.S. trade policy resulting in new or higher tariffs, the adoption or modification of domestic and foreign laws, regulations or policies and other factors such as changes in our sales levels or the amount, timing and
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character of charges related to such initiatives, or a substantial delay in the completion of such initiatives , we may not be able to achieve the level of benefits that we expect to realize in these initiatives, or we may not be able to realize these benefits within the time frames we currently expect . Failure to achieve the benefits of our cost saving initiatives could have a material adverse effect on us.
Severe weather, natural disasters and other disruptions could adversely impact our operations at our manufacturing and distribution facilities.
Severe weather conditions and natural disasters, such as hurricanes, tornados, earthquakes and floods, could damage our properties and effect our operations, particularly our major manufacturing and distribution operations at foreign facilities in Canada, China, Denmark, Germany, Hungary, Mexico, Netherlands, Poland and Slovakia, and at our domestic facilities in Florida, Indiana, Kansas, South Carolina, Texas, Virginia, and Wisconsin. 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.
In addition, our business and operations could be materially adversely affected in the event of other seriousdisruptions at these facilities due to fire, electrical blackouts, power losses, telecommunications failures, wars, terrorist attack, widespread outbreak of infectious disease or similar events. Any of these occurrences could impair our ability to adequately manufacture or supply our customers due to all or a significant portion of our equipment or inventory being damaged or insufficient labor. If our existing manufacturing or distribution facilities become incapable of producing and supplying products for any reason, we may not be able to satisfy our customers’ requirements and we may lose revenue and incur significant costs and expenses that may not be recoverable through our business interruption insurance.
Disruptions in the supply of raw materials, manufactured components, or equipment could materially and adversely affect our operations and cause us to incur significant cost increases.
We source various types of raw materials, finished goods, equipment, and component parts from suppliers as part of a global supply chain, and we may be materially and adversely affected by the failure of those suppliers to perform as expected. Although we have historically had access to an adequate supply of raw materials, finished goods, equipment and component parts, we have experienced, and in the future are likely to experience, disruptions in our supply chains that result in longer lead times, delays in procuring component parts and raw materials, and higher input costs. When we experience such supply disruptions, we may not be able to effectively mitigate the adverse impacts that such disruptions have on our business. 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. Our suppliers’ ability to supply products to us is also subject to a number of risks, including the availability and cost of raw materials, the destruction of their facilities, work stoppages, cybersecurity incidents affecting their information systems or other limitations on their business operations, which could be caused by any number of factors, such as labor disruptions, financial distress, severe weather conditions and natural disasters, social unrest, economic and political instability, international hostilities and public health crises, including the occurrence of a pandemic, epidemic or widespread contagious disease or illness, war, terrorism or other catastrophic events. In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may lead to suppliers refusing to sell products to us at all. Our efforts to protect against and minimize these risks may not always be effective, which could materially and adversely affect our operations and cause us to incur significant cost increases.
Our operations could be adversely affected by interruptions or breaches in the security of our computer and information systems.
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 systems to send, receive, store, access and use sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive materials. Additionally, we may rely on our information systems to enable many of our employees to work remotely.
Despite security measures designed to prevent, detect and mitigate the risk of cybersecurity incidents, our information systems, and the systems of our customers, suppliers and business partners, have been subject to and remain vulnerable to
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harm from such incidents, including interruptions, outages, data breaches, phishing attacks, ransomware attacks, unauthorized access, attempts to hack into our network, and computer viruses. Moreover, the technologies and techniques used to carry out cyber-attacks are continuously evolving, making it difficult to detect these changes or implement adequate measures in time to prevent, detect or mitigate the impact of an attack.
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, adversely affecting our ability to process orders, maintain proper inventory levels, collect accounts receivable, disburse funds and perform key business operations. Such incidents could also result in the theft of our intellectual property and proprietary business information, unauthorized access to personnel information, damage to our business reputation and our relationships with our business partners, and lead to claimsagainst us and fines or other penalties assessed by governmental authorities. Additionally, we may be required to incur substantial costs to remediate the damage caused by these disruptions or to protect us against future cybersecurity incidents.
Furthermore, artificial intelligence ("AI") technologies are increasingly being used in our industry. The use of AI-based solutions by our business partners could lead to the public disclosure of confidential and proprietary business information (including personal data) in contravention of our policies, contractual requirements and applicable data protection laws. The use of AI tools by our customers, suppliers and business partners may also increase our vulnerability to cybersecurity incidents.
Depending on the nature and magnitude of these events, they could have a material and adverse effect on our business, financial condition or results of operations.
The transition risks associated with global climate change may cause us to incur significant costs.
In addition to the physical risks described above, global climate change attributable to increased levels of greenhouse gases has brought about certain risks associated with the anticipated transition to a lower-carbon economy, such as regulatory changes affecting vehicle emissions and fuel efficiency requirements, or establishing new sustainability-related disclosure requirements or new supply chain requirements, technological changes in vehicle architectures, changes in consumer demand, carbon taxes, greenhouse gas emissions tracking, and regulation of greenhouse gas emissions from certain sources. Any regulatory changes aimed to reduce or eliminate greenhouse gas emissions may require us to change our manufacturing processes or undertake other actions that cause us to incur additional operating costs, such as to purchase and operate emissions control systems or other such technologies to comply with applicable regulations or reporting requirements. These regulations, as well as shifts in consumer demand due to public awareness and concern of climate change, could affect the timing and scope of their proliferation and may also adversely impact our sales of products designed for internal combustion engines. As we monitor the rapid developments in this area, we may be required to adjust our business strategy to address the various transition risks posed by climate change.
Failure to maintain the value of our brands could have an adverse effect on our reputation, cause us to incur significant costs and negatively impact our business.
Our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors. In our automotive aftermarket business, we believe that our success depends, in part, on maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our aftermarket customers through the support of their marketing initiatives. A decline in the reputation of our brands as a result of events, such as the proliferation of private labels by certain retail customers, deficiencies or defects in the design or manufacture of our products, or from legal proceedings, product recalls or warranty claims resulting from such deficiencies or defects, may harm our reputation as a manufacturer and distributor of premium automotive parts, reduce demand for our products and adversely affect our business.
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. General economic conditions, competition and other factors may adversely affect the solvency or creditworthiness of our customers. Higher interest rates, inflationary cost increases in raw materials, labor and transportation, the availability of supplier finance programs to purchase goods and services and the terms of such programs, and a general worsening of economic conditions have put financial pressure on many of our customers and may threaten certain customers’ ability to maintain liquidity sufficient to repay their obligations to us as they become due. The bankruptcy, insolvency or other credit
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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 our Engineered Solutions business, our supply agreements with our customers are generally requirements contracts, and a decline in the production requirements of any of our significant customers could adversely impact our revenues and profitability.
In our Engineered Solutions business, our 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. 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.
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. 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.
Our success is dependent upon our ability to attract, retain and motivate certain key employees, including our management and our skilled workforce of engineers, technically-trained sales force employees and other qualified personnel. Many of our key employees have many years of experience with our Company and would be difficult to replace without allotment of a significant amount of time for knowledge transfer. Furthermore, we compete with other businesses to fill many of our hourly positions in certain distribution facilities, which historically have had high turnover rates, and has led to increased training and retention costs, particularly in a competitive and shrinking labor market. We cannot be certain that we will be able to continue to attract or retain our key employees or other labor needs, which could cause us to fail to execute our value proposition, fail to achieve operational efficiencies, and incur increased labor costs, which could have an adverse effect our business, financial condition and results of operations.
We may not be able to realize all of the expected revenues and cash flows from our acquisitions and investments, and any completed acquisitions and investments may be unsuccessful or consume significant resources.
Our ability to realize all of the expected enhanced revenue and cash flows from our acquisitions and investments will depend, in substantial part, on our ability to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions or successfully complete acquisitions in the future. Acquisitions and investments may involve significant cash expenditures, operating losses and expenses. Our business strategy includes acquiring businesses and making investments and we continue to analyze and evaluate the acquisition of strategic businesses to strengthen our position in the markets we supply or that diversify our business in target markets or geographies. Acquisitions involve other risks, including diversion of management time and attention from daily operations and difficulties integrating acquired businesses, technologies and personnel into our business. It may be difficult for us to integrate acquisitions or investments into our business operations, and our acquisitions or investments may not be successful and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks Related to Liquidity
We are exposed to risks related to our receivables supply chain financing arrangements.
We are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable without recourse to such customers’ financial institutions. To the extent that these arrangements are terminated, our financial condition, results of operations, cash flows and liquidity could be adversely affected by extended payment terms, delays or failures in collecting trade accounts receivables.
The utility of the supply chain financing arrangements also depends upon a benchmark reference rate for the purpose of determining the discount rate on the sale of the underlying trade accounts receivable. If the benchmark reference rate increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our
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customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows. Depending upon the level of sales of receivables pursuant these agreements, the effect of a hypothetical, instantaneous and unfavorable change of 100 basis points in the margin rate may have an approximate $9.8 million negative impact on our earnings or cash flows.
A significant increase in our indebtedness, or in interest rates, could negatively affect our financial condition, results of operations and cash flows.
In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). The 2024 Credit Agreement matures on September 16, 2029 and provides for an approximately $750 million credit facility, comprised of (i) a $430 million multi-currency revolving credit facility ("global tranche"); (ii) a $10 million multi-currency revolving credit facility, available to one or more wholly-owned Danish subsidiaries of the Company ("Danish tranche"); (iii) a $200 million term loan facility in U.S. dollars; and (iv) a 100 million euros term loan facility. The revolving credit facility has a $25 million sublimit for the issuance of letters of credit, and a $30 million sublimit for the borrowing of swingline loans. As of December 31, 2025 , our total outstanding indebtedness was $618.7 million , including outstanding borrowings under the 2024 Credit Agreement of $598.1 million, net of deferred financing costs, consisting of current borrowings of $45.3 million and long-term debt of $552.8 million .
Borrowings bear interest at the applicable interest rate index selected by the Company based on the particular currency borrowed plus a credit spread adjustment depending on the index, and a margin ranging from 1.25% to 2.25% per annum based on the total net leverage ratio of the Company and its restricted subsidiaries. The Company may select interest periods of one, three or six months depending on the index. Interest is payable at the end of the selected interest period, but no less frequently than quarterly.
The significant increase in our indebtedness could:
• increase our borrowing costs;
• limit our ability to obtain additional financing or borrow additional funds;
• require that a substantial portion of our cash flow from operations be used to pay principal and interest in our indebtedness, instead of funding working capital, capital expenditures, acquisitions, dividends, stock repurchases, or other general corporate purposes;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
• increase our vulnerability to general adverse economic and industry conditions.
In addition, the Company’s obligations under the 2024 Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions. The collateral security described above also secures certain banking services obligations and interest rate swaps and currency or other hedging obligations of the Company owing to any of the then existing lenders or any affiliates thereof. In 2022 and 2024, we entered into interest rate swap agreements with a total notional amount of $213.0 million that mature in May 2029 and March 2030, respectively. The interest rate swap agreements are designated as a cash flow hedges of interest payments on borrowings in U.S. dollars and euros under our 2024 Credit Agreement.
The 2024 Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The 2024 Credit Agreement also contains customary events of default. If we were default on any of these covenants, or on any of our indebtedness, if interest rates were to significantly increase, or the financial institution that is a party to our interest rate swap agreement were to default, or if we are unable to obtain necessary liquidity, our business could be adversely affected.
We may not be able to generate the significant amount of cash needed to satisfy our obligations or maintain sufficient liquidity through borrowing capacities.
Our ability either to make payments on or to refinance our indebtedness, or to fund planned capital expenditures and research and development efforts, will depend on our ability to generate cash in the future. Our ability to generate cash is in part subject to:
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• general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control;
• the ability of our customers to pay timely the amounts we have billed; and
• our ability to sell receivables under supply chain financing arrangements.
The foregoing factors could result in reduced cash flow, which could have a material adverse effect on us. When cash generated by earnings is not sufficient for the Company’s liquidity needs, the Company seeks external financing. Our access to funding sources in amounts adequate to finance our activities on terms that are beneficial to us could be impaired by factors that affect us specifically or the economy generally. During periods of disruptions in the credit and capital markets, potential sources of external financing could be reduced, and borrowing costs could increase. A significant downgrade in the company’s credit ratings could increase its borrowing costs and limit access to capital.
Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our 2024 Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months. Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in global supply chains, which have resulted in longer lead times and delays in procuring component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation, and that there will be no material adverse developments in our business, liquidity or capital requirements. 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.
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 2024 Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs. In addition, if we default on any of our indebtedness, or breach any financial covenant in our 2024 Credit Agreement, our business could be adversely affected.
We have significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on our financial condition and results of operations.
A significant portion of our long-term assets consists of goodwill and other intangible assets recorded as a result of past acquisitions. We do not amortize goodwill and certain other intangible assets having indefinite lives, but rather test them for impairment on an annual basis or in interim periods if an event occurs or circumstances change that may indicate the fair value is below its carrying amount. The process of evaluating the potential impairment of goodwill and other intangible assets requires significant judgement, specifically with respect to applying assumptions and estimates to the analysis of identifiable intangibles and long‑lived asset impairment including projecting revenues, interest rates, tax rates and the cost of capital. Many of the factors used in assessing fair value are outside our control and it is reasonably likely that assumptions and estimates will change in future periods. These changes could result in impairment charges against our goodwill and other intangible assets. In the event that we determine that our goodwill or other intangible assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition and results of operations.
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Risks Related to Other External Factors
We conduct our manufacturing and distribution operations on a worldwide basis and are subject to risks associated with doing business outside the United States.
We have manufacturing and distribution facilities in many countries, including Mexico, Canada, Denmark, France, Germany, Hungary, Italy, Netherlands, Poland, Slovakia, Spain and the United Kingdom, as well as joint-ventures in China. Our global operations subject us to a variety of political, economic and regulatory risks that are associated with doing business internationally, including: (a) changes in economic conditions in the countries in which we operate; (b) political uncertainty, instability, civil unrest and the risks of terrorism or other hostilities; (c) foreign currency exchange rate fluctuations and currency controls; (d) changes in U.S. trade policy and international trade agreements, resulting in political tension and trade disputes between the U.S. and foreign governments, and new or higher tariffs or changes to customs requirements or procedures; and (e) the potential for shortages of trained labor.
Changes in U.S. trade policy, particularly as it relates to Mexico, Canada and China, have caused significant uncertainty in our business, and could have a substantial adverse effect on our business, financial condition and results of operations. We believe that new or higher tariffs on imports to the United States from countries in which we source raw materials, component parts and finished goods could have a substantial adverse effect on the automotive industry and our business . Further, any retaliatory tariffs imposed by foreign governments would exacerbate the impact.
In addition, we have foreign currency exchange rate exposure, primarily, with respect to the Canadian dollar, the euro, the British pound, the Polish zloty, the Hungarian forint, the Mexican peso, the Danish kroner, the Taiwan dollar, the Chinese yuan renminbi and the Hong Kong dollar. Our exposure to exchange rate risk is due to certain costs, revenues and borrowings being denominated in currencies other than one of our subsidiary’s functional currency and net investments in our foreign subsidiaries. While we actively monitor our exposure, and use derivative instruments to manage exchange rate risk, exchange rates may be volatile and could adversely impact our financial results and the comparability of results from period to period.
Historically, there has been social unrest in Hong Kong and Mexico and any recurrence, or increased violence in or around our facilities in such countries could be disruptive to our business operations at such facilities, or present risks to our employees who may be directly affected by the violence and may result in a decision by them to relocate from the area, or make it difficult for us to recruit or retain talented employees at such facilities.
The likelihood of such occurrences and their potential effect on us is unpredictable and may vary from country to country. Any such occurrences could be harmful to our business and our financial results.
We may incur liabilities under government regulations and environmental laws, which may have a material adverse effect on our business, financial condition and results of operations .
Domestic and foreign political developments and government laws and regulations directly affect automotive consumer products in the United States and abroad. In the United States, these laws and regulations include standards relating to vehicle safety, fuel economy and emissions, among others. Furthermore, increased public awareness and concern regarding climate change may result in new laws and regulations designed to reduce or mitigate the effects of greenhouse gas emissions or otherwise effect the transition to a lower-carbon economy. 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.
Our operations and properties are subject to federal, state, local and international laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of materials, substances and wastes, the remediation of contaminated soil and groundwater and the health and safety of employees. Such environmental laws, including but not limited to those under the Comprehensive Environmental Response Compensation & Liability Act, may impose joint and several liability and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located.
The nature of our operations exposes us to the risk of claims with respect to such matters, and we can give no assurance that violations of such laws have not occurred or will not occur or that material costs or liabilities will not be incurred in connection with such claims. We can give no assurance that the future cost of compliance with existing environmental laws and the liability for known environmental claims pursuant to such environmental laws will not give rise to additional significant expenditures or liabilities that would be material to us. In addition, future events, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement policies of federal, state or local regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations.
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Our future performance may be materially adversely affected by changes in technologies and improvements in the quality of new vehicle parts .
Changes in automotive technologies can impact our business, such as the adoption of new technologies and systems to make traditional, internal-combustion-engine vehicles more efficient, the adoption of electric or hybrid electric vehicle architectures, or changes in access to vehicle-generated data needed to service and repair vehicles. These factors could result in less demand for our products thereby causing a decline in our results of operations or deterioration in our business and financial condition, and we may have a material adverse effect on our long-term performance.
As vehicles have become more complex and reliant on software, electronics and telematics systems, access to vehicle-generated data has become increasingly important to diagnose, service and repair vehicles. If access to this vehicle-generated data is limited to the service part operations of original equipment manufacturers, our aftermarket customers, including professional technicians and individual consumers performing “do-it-yourself” repairs on their personal vehicles, may be prevented from servicing and repairing vehicles. These limitations could also adversely effect our ability to design, develop, manufacture and sell our aftermarket products, which could have a material adverse effect on our business, financial condition and results of operations.
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. 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. 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. 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. These factors could have a material adverse effect on our business, financial condition and results of operations.
If we fail to maintain an effective system of internal controls or identify a material weakness or significant deficiency in our internal control over financial reporting, our ability to report our financial condition and results of operations in a timely and accurate manner could be adversely affected, investor confidence in our company could diminish, and the value of our securities may decline.
As a public company, we are required to comply with Section 404 of the Sarbanes Oxley Act of 2002 (“SOX”), which requires, among other things, that companies maintain disclosure controls and procedures to ensure timely disclosure of material information, and that management reviews the effectiveness of those controls on a quarterly basis.
During fiscal year 2025, we identified a material weakness in our internal control over financial reporting related to information technology general controls at our Nissens Automotive operating segment, which we acquired in November 2024. Specifically, the material weakness related to its information technology general controls over certain IT systems that support financial transactions and reporting. As a result of this material weakness, we have commenced remedial action; however, such actions are ongoing and we cannot guarantee that they will be sufficient to remediate the material weakness or that we will not have a material weakness in the future.
Furthermore, we cannot be certain that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of SOX. If we fail to maintain the adequacy of our internal controls, we cannot assure our stockholders that we will be able to conclude in the future that we have effective internal control over financial reporting, and/or we may encounter difficulties in implementing or improving our internal controls, which could harm our operating results or cause us to fail to meet our reporting obligations. If we fail to maintain effective internal controls, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our securities may be negatively affected, and we could be subject to sanctions or investigation by regulatory authorities, such as the SEC or NYSE.
Net earnings attributable to noncontrolling interest
Net earnings attributable to SMP
Net earnings per share data attributable to SMP – Diluted:
Continuing operations
Discontinued operations
Net earnings per common share
Consolidated net sales for 2025 were $1,791.2 million, an increase of $327.3 million, or 22.4% compared to net sales of $1,463.8 million in 2024. The increase in net sales in 2025 refl ects the impact of multiple factors including:
• $269.6 million higher net sales in 2025 due to the inclusion of a full year performance of our new segment, Nissens Automotive which was acquired on November 1, 2024, as compared to two months in 2024,
• strong demand in our Temperature Control operating segment primarily reflecting the impact of growth in certain product categories and gains in market share,
• stable demand in our Vehicle Control aftermarket segment, offset by
• lower net sales in our Engineered Solutions operating segment as growth from business wins and successful cross-selling efforts offset lower demand due to cyclical softness across global end markets.
Gross margin as a percentage of net sales in 2025 was 31.2% a s compared to 28.9% in 2024 . Overall, the increase in gross margin as a percentage of sales in 2025 primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar. In addition, we experienced the positive impact of higher sales volumes in our legacy segments lead to higher fixed manufacturing cost absorption, improved operating performance including the impact of cost control measures, and increased pricing primarily to incorporate higher tariffs on imports into the United States, which more than offset increases in certain materials and labor costs and a lag in the timing of updating pricing for the impact of higher tariffs. We anticipate that the ongoing benefits from our cost-savings initiatives and synergies with our newly acquired operating segment, Nissens Automotive, will mitigate continued pressure on margins. While our business in U.S. markets could be impacted by additional tariffs, we expect to mitigate the impact with a combination of price increases and cost reduction efforts.
Operating margin as a percentage of net sales in 2025 wa s 7.6% as compared to 5.5% in 2024 . Overall the increase in operating margin as a percentage of sales primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which resulted in improved gross margin, as well as lower acquisition related costs and restructuring expenses. Included in our operating margin were selling, general and administrative expenses of $420.7 million , o r 23.5% of net sales in 2025 compared to $335.1 million , or 22.9% of net sales in 2024 . The $85.6 million increase i n selling, general and administrative expenses in 2025 is principally due to ( i) $79.3 million in selling, general and administrative expenses for Nissens Automotive as the results reflect a full year of activity compared to two months from the close of the acquisition in 2024, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales and costs associated with the transition away from our Edwardsville, Kansas distribution center to our new
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distribution facility in Shawnee, Kansas, and (iii) increased general and administrative costs related to company-wide strategic initiatives, offset by (iv) lower costs associated with our acquisition of Nissens Automotive.
The global automotive aftermarket industry continues to be resilient with a growing number of older vehicles on the road. Our global automotive aftermarket business remains strong with demand for our products driven by the quality, brand recognition and high levels of customer service that we provide. We are optimistic about our business and are well positioned to capitalize on these favorable trends and the long-term growth potential in the coming years.
United States Trade Policy
Since February 2025, the United States government imposed new tariffs on imports to the United States from certain countries and regions, including Canada, Mexico, China, the European Union and many other countries. Certain foreign governments have implemented retaliatory actions in response to the change in United States trade policy. We operate manufacturing plants in, and rely on imports primarily from Canada, Mexico, China and the European Union to serve our customers in the United States, and therefore, we are exposed to the adverse impacts of higher tariffs on imported raw materials, components and finished goods. In response, we have taken, and will continue to take actions to optimize our operations to minimize the impact of such tariffs and maintain our profitability through cost and pricing measures. We believe our diverse global footprint provides a competitive advantage and resiliency within our supply chain. More than one-half of our sales in the United States are from products manufactured in North America, which are currently mostly exempt from tariffs under the United States-Mexico-Canada Agreement. Products sourced from China represent approximately one-quarter of our sales in the United States, with the remainder of our sales in the United States from products sourced from other regions of the world which are currently subject to lower tariffs. Furthermore, our recent acquisition of Nissens Automotive provides sales diversification outside of the United States. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the United States and affected countries, retaliation imposed by other countries, tariff exemptions, and decisions to pause, reimpose or increase tariffs. We will continue to actively monitor international trade developments and evaluate the potential impact on our results of operations and financial condition.
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Results of Operations
Sales . Consolidated net sales for 2025 were $1,791.2 million, an increase of $327.3 million, or 22.4%, compared to $1,463.8 million i n 2024 , with the majority of our net sales to customers located in the United States. Consolidated net sales increased in all of our automotive aftermarket operating segments when compared to the prior fiscal year.
The following table summarizes consolidated net sales by segment and by major product group within each segment (in thousands):
Year Ended December 31,
Vehicle Control
Engine Management (Ignition, Emissions and Fuel Delivery)
Electrical and Safety
Wire Sets and Other
Total Vehicle Control
Temperature Control
AC System Components
Other Thermal Components
Total Temperature Control
Nissens Automotive
Air Conditioning
Engine Cooling
Engine Efficiency
Total Nissens Automotive
Engineered Solutions
Light Vehicle
Commercial Vehicle
Construction/Agriculture
All Other
Total Engineered Solutions
Intersegment sales
Total
Vehicle Control’s net sales for 2025 increased $22.8 million, or 3%, to $785.4 million compared to $762.6 million in 2024 . Increases in net sales within engine management and electrical safety product groups reflected strong demand from customers, and was tempered by the continued secular decline in sales of wire sets.
Temperature Control’s net sales for 2025 increased $46.3 million, or 12%, to $426.4 million compared to $380.1 million in 2024. The higher year-over-year Temperature Control net sales reflects continued very strong customer demand compared to the same period in 2024 benefiting from a longer peak season, growth in certain product categories and gains in market share as our existing customers continued to grow. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.
Nissens Automotive's net sales for 2025 increased by $269.6 million from $35.7 million in 2024 to $305.4 million in 2025 due to a full year of sales activity as compared to two months from the acquisition date in 2024. Nissens Automotive's net sales exceeded our expectations in 2025 reflecting gains in market share. Demand for Nissens Automotive products follow a similar annual seasonal pattern as the Temperature Control segment, as demand for many products generally increases with warmer weather. We expect to benefit from revenue synergies resulting from the acquisition in 2026 and beyond.
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Engineered Solutions’ net sales for 2025 decreased $11.0 million, or 4%, to $274.5 million compared to $285.5 million in 2024 . Overall, net sales in our Engineered Solutions operating segment declined year-over-year as growth from new business wins and successful cross-selling efforts, was more than offset by slower demand from existing customers. We are optimistic that demand will stabilize in 2026.
Gross Margins. Gross margins, as a percentage of consolidated net sales, increased to 31.2% f or 2025 , compared to 28.9% for 2024 . The following table summarizes gross margins by segment (in thousands):
Year Ended
December 31,
Vehicle
Control
Temperature
Control
Nissens Automotive
Engineered
Solutions
Other
Total
Net sales
Gross margins
Gross margin percentage
Net sales
Gross margins
Gross margin percentage
Compared to 2024, gross margin percentage at our Temperature Control and Nissens Automotive operating segments increased by 3.0 percentage points from 31.0% to 34.0%, and 7.2% percentage points from 32.2% to 39.4%, respectively. Gross margin percentage at our Vehicle Control and Engineered Solutions operating segments decreased slightly by 0.5 percentage points from 32.0% to 31.5% and 0.4 percentage points from 17.5% to 17.1%, respectively.
The gross margin percentage in our Vehicle Control operating segment decreased slightly as higher sales volume and higher fixed cost absorption due to higher production levels than those achieved in 2024, was more than offset by the impact of passing higher tariffs on imports into the United States through to customers at cost.
The gross margin percentage increase in our Temperature Control operating segment reflected higher sales volume, higher customer pricing, improved operating performance from cost savings initiatives, lower seasonal returns and favorable fixed cost absorption due to higher production levels than those achieved in 2024.
The gross margin percentage at our Nissens Automotive operating segment reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which included more profitable periods within the seasonal calendar. Inventory fair value adjustments in 2025 of $4.6 million related to the application of accounting for business combinations were fully amortized by the end of the second quarter of 2025.
Despite lower net sales, the gross margin percentage in our Engineered Solutions operating segment remained close to flat as compared to 2024 due to a favorable customer sales mix, partially offset by costs associated with the discontinuation of a customer program.
While we anticipate continued margin pressure resulting from a competitive market environment, we believe that our cost savings and product rationalization initiatives should mitigate much of this impact to our gross margins as well as, revenue and cost synergies related to the continued integration of our new segment, Nissens Automotive. While our business in U.S. markets could be impacted by additional tariffs, we expect to mitigate the impact with a combination of price increases and cost reduction efforts.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $85.6 million to $420.7 million, or 23.5% of consolidated net sales in 2025 , as compared to $335.1 million , or 22.9% of consolidated net sales in 2024 . The $85.6 million increase i n selling, general and administrative expenses in 2025 is principally due to ( i) $79.3 million in selling, general and administrative expenses for Nissens Automotive as the results reflect a full year of activity compared to two months from the close of the acquisition in 2024, (ii) higher distribution and freight expenses in our legacy business primarily due to higher sales and costs associated with the transition away from our Edwardsville, Kansas distribution center to our new distribution facility in Shawnee, Kansas, and (iii) increased general and administrative costs related to company-wide strategic initiatives, offset by (iv) lower costs associated with our acquisition of Nissens Automotive.
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Restructuring Expenses. Restructuring expenses of $2.6 million in 2025, primarily consisted of costs to relocate machinery and equipment within the Cost Reduction Initiative initiated in 2022, as compared to $7.7 million in 2024 which primarily consisted of severance and other benefitenhancements within the Separation Program initiated in 2024 . Additional restructuring expenses related to these programs are expected to be immaterial.
Operating Income. Operating income was $136.5 million, or 7.6% , of consolidated net sales in 2025 , compared to $80.6 million , or 5.5% , of consolidated net sales in 2024 . The year-over-year increase in operating income of $55.9 million primarily reflects the inclusion of Nissens Automotive segment results for a full year, as compared to two months in 2024, which resulted in improved gross margin, as well as lower acquisition related costs and restructuring expenses, offset by higher selling, general and administrative expenses.
Other Non-Operating Income, Net. Other non-operating income, net was $5.4 million in 2025, compared to $6.9 million in 2024. The year-over-year decrease in other non-operating income, net primarily results from less favorable impact of changes in foreign currency exchange rates and a decrease in year-over-year equity income from our joint ventures.
Interest Expense. Interest expense increased to $31.3 million in 2025 , compared to $13.5 million in 2024 . The year-over-year increase in interest expense reflects the impact of higher average outstanding balances due to borrowings under our 2024 Credit Agreement to fund our acquisition of Nissens Automotive in 2024, partly offset by slightly lower year-over-year average interest rates on our credit facilities, including the impact of our interest rate swap agreements.
Income Tax Provision . The income tax provision for 2025 was $30.6 million at an effective tax rate of 27.7%, compared to $19.4 million at an effective tax rate of 26.2% in 2024. The higher effective tax rate in 2025 compared to 2024 reflects an increase in earnings from international as compared to U.S. operations, and an increase in future tax liabilities associated with unrepatriated earnings from international operations.
Loss From Discontinued Operations. Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2025 and 2024 , as well as other available information, and legal expenses and other costs associated with our asbestos-related liability. During the years ended December 31, 2025 and 2024 , we recorded a net loss of $37.7 million and $26.1 million from discontinued operations, respectively. The loss from discontinued operations for the years ended December 31, 2025 and 2024 includes a $44.4 million and $29.3 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2025 and 2024 actuarial studies, and legal and other miscellaneous expenses, before taxes, of $5.2 million and $4.8 million for 2025 and 2024 , respectively. As discussed more fully in Note 23 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.
Net Earnings Attributable to Noncontrolling Interest. Net earnings attributable to noncontrolling interest relates to the minority shareholders’ interest in Trombetta Asia, Ltd., our 70% owned joint venture in Hong Kong, with operations in China and, in Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co. Ltd., our 80% owned joint venture in China. Net earnings attributable to the noncontrolling interest were $0.9 million and $1.0 million during the years ended December 31, 2025 and 2024 , respectively.
Restructuring Programs
For a detailed discussion on the restructuring and integration costs, see Note 3, “Restructuring Expenses,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
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Liquidity and Capital Resources
Our primary cash requirements include working capital, capital expenditures, quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions. The following table summarizes our primary sources of funds including ongoing net cash flows from operating activities and availability under our credit agreements (in thousands).
December 31,
Operating cash flows
Total debt
Cash and cash equivalents
Net debt
Remaining borrowing capacity
Total liquidity
Operating Activities. During 2025, cash provided by operating activities was $57.4 million as compared to cash provided by operating activities of $76.7 million in 2024.
Net earnings during 2025 were $42.2 million compared to $28.5 million in 2024. The decrease in cash provided by operating activities resulted primarily from an increase in inventories of $81.6 million compared to a increase of $36.9 million in the prior year, primarily due to higher net sales, additional tariff costs capitalized into inventory, preparation for and delivery timing of expected orders in early 2026. We continue to actively manage our working capital to maximize our operating cash flow.
Investing Activities . Cash used in investing activities was $35.7 million in 2025 as compared to $418.7 million in 2024. Investing activities during 2025 primarily consisted of capital expenditures of $38.7 million as compared to 2024 which primarily consisted of $372.5 million of cash paid for the acquisition of 100% of the shares of Nissens Automotive, net of cash acquired of $24.6 million, and capital expenditures of $44.0 million. The year-over-year decrease in capital expenditures primarily relates to lower spending as our new distribution facility in Shawnee, Kansas reaches completion.
We regularly review our plans for capital investment and believe we have sufficient liquidity to meet our needs.
Financing Activities . Cash used in financing activities was $0.3 million in 2025 as compared to cash provided by financing activities of $349.5 million in 2024 . In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). Borrowings under the 2024 Credit Agreement were used to repay all outstanding borrowings under the 2022 Credit Agreement and to finance the Company's acquisition of Nissens Automotive and related transaction costs, and will be used for general corporate purposes of the Company and its subsidiaries.
During 2025, we paid dividends to SMP shareholders of $27.3 million funded with net borrowings under our 2024 Credit Agreement and cash provided by our operating activities.
During 2024 , we increase d our borrowings by $392.0 million under our 2024 Credit Agreement; and paid dividends of $25.3 million and $2.3 million to SMP shareholders and shareholders of our noncontrolling interests, respectively. Cash provided by our operating activities in 2024 was used to reduce our borrowings under our 2022 Credit Agreement, fund our investing activities and pay dividend s.
Quarterly dividends were paid at a rate of $0.31 in 2025 and $0.29 in 2024 .
Liquidity
Our primary sources of funds are ongoing net cash flows from operating activities and availability under our 2024 Credit Agreement (as detailed below).
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In May 2024 and July 2024, the Company amended it's then-existing Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders ("2022 Credit Agreement"), to transition from the Canadian Dollar Offered Rate to the Canadian Overnight Repo Rate Average for benchmark borrowings denominated in Canadian dollars and to provide for a new $125 million term loan and the use of funds available under the revolving credit facility to finance the acquisition of Nissens Automotive and related transaction costs. For additional information on our agreement to acquire Nissens Automotive see Note 2, “Business Combinations,” in the Notes to Consolidated Financial Statements in Item 8 of this Report.
In September 2024, the Company refinanced its existing 2022 Credit Agreement with a new five-year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (“2024 Credit Agreement”). The 2024 Credit Agreement matures on September 16, 2029 and provides for an approximately $750 million credit facility, comprised of (i) a $430 million multi-currency revolving credit facility ("global tranche"); (ii) a $10 million multi-currency revolving credit facility, available to one or more wholly-owned Danish subsidiaries of the Company ("Danish tranche"); (iii) a $200 million term loan facility in U.S. dollars; and (iv) a 100 million euros term loan facility. The revolving credit facility has a $25 million sublimit for the issuance of letters of credit, and a $30 million sublimit for the borrowing of swingline loans.
Borrowings under the 2024 Credit Agreement were used to repay all outstanding borrowings under the 2022 Credit Agreement and to finance the Company's acquisition of Nissens Automotive and related transaction costs, and will be used for general corporate purposes of the Company and its subsidiaries. The term loans amortize in quarterly installments of 1.25% in each of the first two years following the funding, 1.875% for the next year, and 2.50% in each quarter thereafter. The Company may request up to two one-year extensions of the maturity date.
The Company may, subject to customary conditions, increase the global tranche or obtain incremental term loans in an aggregate amount not to exceed (x) the greater of (i) $168 million and (ii) 100% of consolidated EBITDA for the four fiscal quarters ended most recently before such date, plus (y) any voluntary prepayment of term loans, plus (z) any amount that, after giving effect to the increase, the pro forma First Lien Net Leverage Ratio (as defined in the 2024 Credit Agreement) does not exceed 2.75 to 1.00. The Company may also, subject to customary conditions, request to increase the Danish tranche by up to $5 million.
Borrowings bear interest at the applicable interest rate index selected by the Company based on the particular currency borrowed plus a credit spread adjustment depending on the index, and a margin ranging from 1.25% to 2.25% per annum based on the total net leverage ratio of the Company and its restricted subsidiaries. The Company may select interest periods of one, three or six months depending on the index. Interest is payable at the end of the selected interest period, but no less frequently than quarterly.
The Company may prepay the borrowings, in whole or in part, at any time without premium or penalty, subject to certain conditions.
The Company’s obligations under the 2024 Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions. The collateral security described above also secures certain banking services obligations and interest rate swaps and currency or other hedging obligations of the Company owing to any of the then existing lenders or any affiliates thereof.
Outstanding borrowings, net of unamortized deferred financing costs, and letters of credit under the 2024 Credit Agreement consist of the following (in millions):
December 31, 2025
December 31, 2024
Current maturities of debt
Long-term debt
Total outstanding borrowings
Letters of credit
To manage the interest rate risk on the 2024 Credit Agreement, the Company has entered into interest rate swap agreements designated as cash flow hedges of a portion of the borrowings under the 2024 Credit Agreement to swap floating rate interest to a fixed rate. For additional information see Note 17, "Derivative Financial Instruments" of the Notes to Consolidated Financial Statements in Item 8 of this Report.
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The weighted average interest rate on borrowings under the 2024 Credit Agreement, adjusted for the impact of interest rate swap agreements, was 4.8% and 5.6% at December 31, 2025 and 2024 , respectively. Interest rates primarily consist of Term SOFR for borrowings in U.S. dollars and the Euro Interbank Offered Rate ("EURIBOR") for borrowings in euros. The average daily alternative base rate swingline loan balance was $1.5 million and $0.7 million during the years ended December 31, 2025 and 2024 , respectively.
The 2024 Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The 2024 Credit Agreement also contains customary events of default.
In 2023, 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 of up to Polish zloty 30 million (approximately $8.3 million ) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $7.1 million ) if borrowings are in euros and/or U.S. dollars. The overdraft facility automatically renews every three months until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period. Borrowings under the amended overdraft facility bear interest at a rate equal to (i) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.0% for borrowings in Polish zloty, (ii) the one month EURIBOR + 1.0% for borrowings in Euros, and (iii) the Mid-Point of the Fed Target Range + 1.25% for borrowings in U.S dollars. Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company. There were $3.6 million borrowings outstanding under the overdraft facility at December 31, 2025 and none at December 31, 2024.
In order to reduce our accounts receivable balances and improve our cash flow, we are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions. We sell our undivided interests in certain of these receivables at our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables, and do not service the receivables after the sale. As such, these transactions are accounted for as a sale.
Pursuant to these agreements, we sold $978.6 million and $884.7 million of receivables for the years ended December 31, 2025 and 2024, respectively. Receivables presented at financial institutions and not yet collected as of December 31, 2025 and December 31, 2024 were approximately $1.3 million and $5.8 million, respectively, and remained in our accounts receivable balance for those periods. All receivables sold were reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale. A charge in the amount of $45.3 million , $48.5 million and $46 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, 2025, 2024 and 2023, respectively.
To the extent that these arrangements are terminated, our financial condition, results of operations, cash flows and liquidity could be adversely affected by extended payment terms, delays or failures in collecting trade accounts receivables. The utility of the supply chain financing arrangements also depends upon a benchmark reference rate for the purpose of determining the discount rate applicable to each arrangement. If the benchmark reference rate increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows.
In 2022 , our Board of Directors authorized the purchase of up to $30 million of our common stock under a stock repurchase program. Stock will be purchased under the program from time to time, in the open market or through private transactions, as market conditions warrant. To date, there have been 321,229 shares purchased for a total cost of $10.4 million, all of which occurred in 2024. There were no purchases of our common stock in 2025 .
Material Cash Commitments
Material cash commitments as of December 31, 2025 consist of required cash payments to service our outstanding borrowings of $598.1 million under our 2024 Credit Agreement with JPMorgan Chase Bank, N.A., as agent and the future minimum cash requirements of $138.4 million through 2034 under operating leases. All of our other cash commitments as of December 31, 2025 are not material. For additional information related to our material cash commitments, see Note 7, “Leases,” and Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
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We anticipate that our cash flow from operations, available cash, and available borrowings under our 2024 Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months. 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. If material adverse developments were to occur in any of these areas, there can be no assurance that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our 2024 Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs. In addition, if we default on any of our indebtedness, or breach any financial covenant in our 2024 Credit Agreement, our business could be adversely affected.
For further information regarding the risks in our business, refer to Item 1A, “Risk Factors,” of this Report.
Critical Accounting Policies and Estimates
We have identified the two accounting policies and estimates below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies and estimates on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies and estimates affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 1, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. We can give no assurances that actual results will not differ from those estimates. Although we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates, or in the assumptions that we use in calculating the estimates, the uncertain future effects, if any, of 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.
Valuation of Long‑Lived and Intangible Assets and Goodwill
The company accounts for business combinations using the acquisition method and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree are generally recorded at their acquisition date fair values. At acquisition, we estimate and record the fair value of purchased intangible assets, which primarily consist of customer relationships, trademarks and trade names, and patents, developed technology and intellectual property. Intangible assets acquired through business combinations are subject to potential adjustments within the measurement period, which is up to one year from the acquisition date.
Valuing intangible assets requires the use of significant estimates and assumptions. Significant estimates and assumptions used in valuing customer relationships include but are not limited to: (i) forecasted revenues attributable to existing customers; (ii) forecasted margins; (iii) customer attrition rates; and (iv) the discount rate.
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. The primary drivers that generate goodwill are the value of synergies between the acquired entities and the company and the acquired assembled workforce, neither of which qualifies as a separately identifiable intangible asset. Goodwill and certain other intangible assets having indefinite lives are not amortized to earnings, but instead are subject to periodic testing for impairment. Intangible assets determined to have definite lives are amortized over their remaining useful lives generally on a straight-line basis. We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions.
We assess long‑lived assets, identifiable intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. With respect to goodwill and identifiable intangible assets having indefinite lives, we test for impairment on an annual basis or in interim periods if an event occurs or circumstances change that may indicate the fair value is below its carrying amount. Factors we consider important, which could trigger an impairment review, include the following: (a) significant underperformance relative to expected historical or projected future operating results; (b) significant changes in the manner of our use of the acquired assets or the strategy
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for our overall business; and (c) significant negative industry or economic trends. We review the fair values using the discounted cash flows method and market multiples.
When performing our evaluation of goodwill for impairment, if we conclude qualitatively that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then a quantitative impairment test would not be required. If we are unable to reach this conclusion, then we would perform a quantitative impairment test. In performing the quantitative impairment test, the fair value of the reporting unit is compared to its carrying amount. A charge for impairment is recognized by the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
Identifiable intangible assets having indefinite lives are reviewed for impairment on an annual basis using a methodology similar with that used to evaluate goodwill. Intangible assets having definite lives and other long-lived assets are reviewed for impairment whenever events such as product discontinuance, plant closures, product dispositions or other changes in circumstances indicate that the carrying amount may not be recoverable. In reviewing intangible assets having definite lives and other long-lived assets for impairment, we compare the carrying value of such assets to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. When the estimated undiscounted future cash flows are less than their carrying amount, an impairmentloss is recognized equal to the difference between the assets fair value and their carrying value.
There are inherent assumptions and estimates used in developing future cash flows requiring our judgment in applying these assumptions and estimates to the analysis of identifiable intangibles and long‑lived asset impairment including projecting revenues, interest rates, tax rates and the cost of capital. Many of the factors used in assessing fair value are outside our control and it is reasonably likely that assumptions and estimates will change in future periods. These changes can result in future impairments. In the event our planning assumptions were modified resulting in impairment to our assets, we would be required to include an expense in our statement of operations, which could materially impact our business, financial condition and results of operations.
Asbestos Litigation
In evaluating our potential asbestos-related liability, we have considered various factors including, among other things, an actuarial study of the asbestos related liabilities performed by an independent actuarial firm, our settlement amounts and whether there are any co-defendants, the jurisdiction in which lawsuits are filed, and the status and results of such claims. As is our accounting policy, we consider the advice of actuarial consultants with experience in assessing asbestos-related liabilities to estimate our potential claim liability; and perform an actuarial evaluation in the third quarter of each year and whenever events or changes in circumstances indicate that additional provisions may be necessary. The methodology used to project asbestos-related liabilities and costs in our actuarial study considered: (i) historical data available from publicly available studies; (ii) an analysis of our recent claims history to estimate likely filing rates into the future; (iii) an analysis of our currently pending claims; (iv) an analysis of our settlements and awards of asbestos-related damages to date; and (v) an analysis of closedclaims with pay ratios and lag patterns in order to develop average future settlement values. Based on the information contained in the actuarial study and all other available information considered by us, we have concluded that no amount within the range of settlement payments and awards of asbestos-related damages was more likely than any other and, therefore, in assessing our asbestos liability we compare the low end of the range to our recorded liability to determine if an adjustment is required. Future legal costs are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations.
We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future and whenever events or changes in circumstances indicate that additional provisions may be necessary. Given the uncertainties associated with projecting such matters into the future and other factors outside our control, we can give no assurance that additional provisions will not be required. We will continue to monitor events and changes in circumstances surrounding these potential liabilities in determining whether to perform additional actuarial evaluations and whether additional provisions may be necessary. At the present time, however, we do not believe that any additional provisions would be reasonably likely to have a material adverse effect on our liquidity or consolidated financial position. See Note 23, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.
Recently Issued Accounting Pronouncements
For a detailed discussion on recently issued accounting pronouncements and their impact on our consolidated financial statements, see Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8 of this Report.
