10-K - SMP - Equibles

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number: 001-04743

Standard Motor Products, Inc.
(Exact name of registrant as specified in its charter)
New York	11-1362020
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(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
37-18 Northern Blvd., Long Island City, New York	11101
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code:	(718) 392-0200
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
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Common Stock, par value $2.00 per share	SMP	New York Stock Exchange LLC
Securities registered pursuant to Section 12(g) of the Act:	None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☑	Accelerated Filer ☐
Non-Accelerated Filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The aggregate market value of the voting common stock based on the closing price on the New York Stock Exchange on June 30, 2021 (the last business day of registrant’s most recently completed second fiscal quarter) of $43.35 per share held by non-affiliates of the registrant was $868,423,747. For purposes of the foregoing calculation only, all directors and officers have been deemed to be affiliates, but the registrant disclaims that any of such are affiliates.

As of February 17, 2022, there were 21,962,762 outstanding shares of the registrant’s common stock, par value $2.00 per share.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report is incorporated herein by reference from the registrant’s definitive proxy statement relating to its annual meeting of stockholders to be held on May 19, 2022.

STANDARD MOTOR PRODUCTS, INC.

INDEX

PART I.		Page No.
Item 1.	Business	3
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	26
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	(Reserved)	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	43
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	88
Item 9A.	Controls and Procedures	88
Item 9B.	Other Information	89
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	89
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	89
Item 11.	Executive Compensation	89
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	89
Item 13.	Certain Relationships and Related Transactions, and Director Independence	90
Item 14.	Principal Accountant Fees and Services	90
PART IV.
Item 15.	Exhibits and Financial Statement Schedules	90
Item 16.	Form 10-K Summary	90
	Signatures	94

Index

PART I

In this Annual Report on Form 10-K, “Standard Motor Products,” “we,” “us,” “our,” “SMP,” and the “Company” refer to Standard Motor Products, Inc. and its subsidiaries, unless the context requires otherwise. This Report, including the documents incorporated herein by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this Report are indicated by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “estimates,” “projects,” “strategies” and similar expressions. These statements represent our expectations based on current information and assumptions and are inherently subject to risks and uncertainties. Our actual results could differ materially from those which are anticipated or projected as a result of certain risks and uncertainties, including, but not limited to, changes or loss in business relationships with our major customers and in the timing, size and continuation of our customers’ programs; changes in our supply chain financing arrangements, such as changes in terms, termination of contracts and/or the impact of rising interest rates; the ability of our customers to achieve their projected sales; competitive product and pricing pressures; increases in production or material costs, including procurement costs resulting from higher tariffs, and inflationary cost increases in raw materials, labor and transportation, that cannot be recouped in product pricing; the performance of the aftermarket, heavy duty, industrial equipment and original equipment markets; changes in the product mix and distribution channel mix; economic and market conditions; successful integration of acquired businesses; our ability to achieve benefits from our cost savings initiatives; product liability and environmental matters (including, without limitation, those related to asbestos-related contingent liabilities and remediation costs at certain properties); the effects of widespread public health crises, including the coronavirus (COVID-19) pandemic; climate-related risks, such as physical risks and transition risks; as well as other risks and uncertainties, such as those described under Risk Factors, Quantitative and Qualitative Disclosures About Market Risk and those detailed herein and from time to time in the filings of the Company with the SEC. Forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. In addition, historical information should not be considered as an indicator of future performance.

ITEM 1.	BUSINESS

Overview

We are a leading manufacturer and distributor of premium replacement parts utilized in the maintenance, repair and service of vehicles in the automotive aftermarket industry. In addition, we continue to increase our supplier capabilities with a complementary focus on specialized original equipment parts for manufacturers across multiple industries such as agriculture, heavy duty, and construction equipment. We believe that our extensive design and engineering capabilities have afforded us opportunities to expand our product coverage in our aftermarket business and enter newer specialized markets that require application-specific knowledge, such as those mentioned above.

Our business strategy centers on providing our customers with full-line product coverage as well as a suite of services tailored to our customers’ needs. This combination of broad product coverage along with specificity in our customer service helps drive higher end-user demand for our products.

We sell our products primarily to automotive aftermarket retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin American countries.

The Automotive Aftermarket

The automotive aftermarket replacement parts business is a mature industry that primarily tends to follow trends, such as:

Index

•	number of vehicles on the road;
•	average age of vehicles on the road; and
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•	total number of miles driven per year.
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Other general trends including economic factors such as the level of light vehicle production can have a more indirect impact on the aftermarket, and a more direct impact on the specialized industries discussed above.

The automotive aftermarket industry is comprised of a large number of diverse manufacturers varying in product specialization and size. In addition to manufacturing, aftermarket companies must allocate resources towards an efficient distribution process in order to maintain the flexibility and responsiveness on which their customers depend. Aftermarket manufacturers must be efficient producers of small lot sizes, and must distribute, with rapid turnaround times, products for nearly all domestic and import vehicles on the road today.

In 2021, we completed three acquisitions that expanded our business into original equipment (OE) specialized markets that complement our core aftermarket business. In addition to providing access to product technologies suitable to the aftermarket, and manufacturing and engineering capabilities to support our operating strategy to bring more product manufacturing in-house, these acquisitions provide geographic expansion in Europe and Asia.

Our Business Strategy

Our mission is to be the best full-line, full-service supplier of premium engine management and temperature control products.

The key elements of our strategy are as follows:

•

Maintain Our Strong Aftermarket Competitive Position in our Engine Management and Temperature Control Businesses. We are a leading independent manufacturer and distributor serving North America<br> and other geographic areas in our core businesses of Engine Management and Temperature Control. We believe that our success is attributable to our emphasis on product quality, the breadth and depth of our product lines for both domestic<br> and import vehicles, and our reputation for outstanding value-added services.

To maintain our strong competitive position, we remain committed to the following:

•	strengthening our capabilities as a leading manufacturer of parts and ensuring our global manufacturing footprint continues to meet the demands and expectations of our customers worldwide;
•	providing our customers with full-line coverage of high quality engine management and temperature control products and new technologies for most years, makes and models of vehicles on the road;
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•	supporting our products with the highest level of value-added services;
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•	supply chain excellence through supplier and customer focused initiatives, and continuing to maximize our production, supply chain and distribution efficiencies;
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•	continuing to improve our cost position through increased global sourcing, increased manufacturing at our low-cost plants, and strategic transactions with manufacturers in low-cost regions;
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•	focusing on our engineering development efforts including a focus on bringing more product manufacturing in-house; and
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Index

•	further expanding our parts coverage to include a broader product mix in categories such as electrification, including electric vehicles (EVs) and hybrid electric vehicles (HEVs), and connectivity as well as safety-related systems,<br> such as various sensors including anti-lock brake (ABS), vehicle speed, tire pressure monitoring (TPMS), park assist and Advanced Driver Assistance Systems (ADAS) components to meet the growing needs of our customers.
•	Provide Superior Value-Added Services and Product Availability. Our goal is to increase sales to existing and new customers by leveraging our skills in rapidly filling orders, maintaining high<br> levels of product availability and offering a product portfolio that provides comprehensive coverage for all vehicle applications. Although the automotive industry continues to experience supply chain disruptions related to COVID-19<br> (particularly with respect to goods sourced from China), we believe that, with respect to product availability and fill rates, we have benefited from our geographically diversified manufacturing footprint and our strategy to bring more<br> product manufacturing in-house. Our marketing support provides insightful customer category management, technical support and award-winning programs, and our technically skilled sales personnel provide our customers with product<br> selection, assortment and application support related to our products. In addition, we have a team dedicated to providing in-person and virtual technical training on diagnosing and repairing vehicles equipped with complex systems.
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•	Expand Our Product Lines. Vehicle manufacturers continue to introduce new technologies and systems creating opportunities for us to expand our product lines. In addition, we intend to increase<br> our sales by continuing to develop internally, or through potential acquisitions, the range of engine management and temperature control products that we offer to our customers. We are committed to investing the resources necessary to<br> maintain and expand our technical capability to manufacture product lines that incorporate the latest technologies, including product lines relating to safety, advanced driver assistance and collision avoidance systems. We believe that<br> the three complementary acquisitions consummated in 2021 (discussed above) and our internal product development efforts better position us to satisfy customer demand for both traditional, internal combustion engine (or ICE) applications,<br> and non-ICE (electric or hybrid electric) applications. We estimate that approximately half of our product offering is powertrain neutral, or suitable for electric, hybrid electric and/or alternative energy vehicles.
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•	Diversify our Business. We seek to diversify our business primarily by (a) leveraging our manufacturing and distribution capabilities to secure additional business globally with original<br> equipment manufacturers; (b) supporting the service part operations of vehicle and equipment manufacturers with value-added services and product support for the life of the part; (c) developing new product lines that complement our<br> existing product offering and have the potential for high growth; (d) expanding our product offering in the medium and heavy duty, commercial vehicle, construction and agricultural equipment, power sports, and other segments; and (e)<br> executing our acquisition strategy.
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•	Improve Operating Efficiency and Cost Position. Our management places significant emphasis on improving our financial performance by achieving operating efficiencies and improving asset<br> utilization, while maintaining product quality and high customer order fill rates.
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•	Cash Utilization. We intend to apply any excess cash flow from operations and the management of working capital primarily to reduce our outstanding indebtedness, pay dividends to our<br> shareholders, expand our product lines by investing in new tooling and equipment, grow revenues through potential acquisitions, and repurchase shares of our common stock.
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Index

•	Environmental, Social & Governance. We support and seek continuous improvement in the pursuit of environmental, social and corporate governance (ESG) practices that embody our culture and<br> what we believe it means to be a good corporate citizen.

Our Products & Services

Engine Management Segment

Our Engine Management Segment manufactures and distributes a full line of critical components for most years, makes and models of vehicles on the road, including new technologies. Key product categories within our engine management portfolio include: (i) ignition, such as electronic ignition control modules, camshaft and crankshaft position sensors, ignition wires and coils; (ii) electrical, such as switches and relays; (iii) emissions, such as exhaust gas recirculation valves, pressure and temperature sensors and variable valve timing (VVT) components; (iv) fuel, such as mass airflow sensors, fuel pressure sensors, electronic throttle bodies and fuel injectors, including diesel injectors and pumps (new and remanufactured); and (v) safety-related systems, such as various sensors including anti-lock brake (ABS), vehicle speed, tire pressure monitoring (TPMS) and park assist sensors.

We continuously look to expand our product offering. Recently, we have done so by adding late-model coverage for existing product categories, and new product categories in response to new and evolving vehicle technologies, including diesel control modules, pumps and components, turbochargers, evaporation emission control system components, exhaust gas temperature sensors, active grill shutters, battery current sensors, and Advanced Driver Assistance Systems (ADAS) components, including blind spot detection sensors, cruise control distance sensors, lane departure sensor cameras and park assist backup cameras. For example, our offering includes more than seventy product categories for one of the first mass-produced hybrid electric vehicles (HEVs). As more HEVs enter the aftermarket, we intend to expand our product offering to service this important segment.

Ignition, Emission Control, Fuel & Safety Related System Products. Replacement parts for ignition, emission, fuel and safety related systems accounted for $786.5 million, or 61%, of our

      consolidated net sales in 2021, $691.7 million, or 61%, of our consolidated net sales in 2020, and $706 million, or 62%, of our consolidated net sales in 2019.

As the use and complexity of vehicle systems continue to develop and proliferate, we expect to identify and benefit from new sales opportunities. All new vehicles are factory‑equipped with numerous electronic control modules designed to monitor and control the internal combustion process and the emissions, transmission, safety and comfort systems of the vehicle. Newer automotive systems include Advanced Driver Assistance Systems and Collision Avoidance Systems to alert the driver to potential problems, or to avoid collisions by implementing safeguards. Many of these systems use on-board computers to monitor inputs from sensing devices located throughout the vehicle. Our sales of sensors, switches, actuators, valves, solenoids and related parts have increased as automobile manufacturers continue to equip their cars with these more complex engine management systems.

New sales opportunities have also arisen in the United States as a result of government regulations regarding safety and emissions. Legally, automobiles must now comply with emissions standards from the time they were manufactured and, in most states, until the last day they are in use. Emissions laws and fuel economy regulations have had a positive impact on sales of our ignition, emissions control and fuel delivery parts since vehicles failing these laws may require repairs utilizing parts sold by us. Similarly, as government-mandated safety devices, such as anti-lock braking systems and air bags mature, requiring servicing and repair, we anticipate increased sales opportunities for many of our products such as ABS sensors, TPMS sensors and traction control products.

Wire & Cable Products. Wire and cable parts accounted for $151.4 million, or 12%, of our consolidated net sales in 2021, $144 million, or 13%, of our consolidated net sales in 2020, and $143.2

      million, or 13%, of our consolidated net sales in 2019.  These products include spark plug wire sets, battery cables, pigtails, sockets and a wide range of electrical wire, terminals, connectors and tools for servicing an automobile’s electrical
      system.

Index

Temperature Control Segment

Our Temperature Control Segment manufactures and distributes a full line of critical components for the temperature control (air conditioning and heating) systems, engine cooling systems, power window accessories and windshield washer systems of motor vehicles. Key product categories within our temperature control portfolio include: air conditioning compressors (new and remanufactured), air conditioning repair kits, clutch assemblies, blower and radiator fan motors (brushless and brushed), filter dryers, evaporators, accumulators, actuators, hose assemblies, thermal expansion devices, heater valves, heater cores, A/C service tools and chemicals, fan assemblies, fan clutches, oil coolers, window lift motors, window regulators and assemblies, and windshield washer pumps.

We continuously look to improve our cost position through strategic transactions with manufacturers in low cost regions. In 2014, we formed Foshan GWOYNG SMP Vehicle Climate Control & Cooling Products Co. Ltd., a China-based joint venture that manufactures light vehicle and heavy duty air conditioning accumulators, filter driers, hose assemblies, and switches; in 2017, we formed Foshan FGD SMP Automotive Compressor Co., Ltd., a China-based joint venture that manufactures light vehicle and heavy duty belt driven air conditioning compressors; and in 2019, we acquired a minority interest ownership position in Foshan Che Yijia New Energy Technology Co., Ltd., a China-based manufacturer of electric air conditioning compressors. We believe that these transactions will enhance our position as a basic low-cost manufacturer and a leading supplier of temperature control parts and allow an opportunity for growth in the China OE market, while providing key complementary manufacturing capabilities and synergy opportunities with our other manufacturing facilities. The synchronization and complimentary strategies between our operational and distribution facilities provides a more reliable supply of products, and supports our customers’ needs for consistent and reliable service levels.

Compressors. Compressors accounted for $206.7 million, or 16%, of our consolidated net sales in 2021, $163.1 million, or 14%, of our consolidated net sales in 2020, and $160.5 million, or 14%, of our

      consolidated net sales in 2019. Included in consolidated net sales for the compressor product line is the revenue generated from the sale of kits.

Other Climate Control Parts. Other climate control parts accounted for $141.7 million, or 11%, of our consolidated net sales in 2021, $118.9 million, or 11%, of our consolidated net sales in 2020, and

      $117.9 million, or 10%, of our consolidated net sales in 2019.

Financial Information About Our Operating Segments

For additional information related to our operating segments, and the disaggregation of operating segment net sales by geographic area, major product group and major sales channel, see Note 19 “Industry Segment and Geographic Data” and Note 20 “Net Sales”, respectively, of the Notes to Consolidated Financial Statements in Item 8 of this Report.

Our Brands

We believe that our brands are an important component of our value proposition, and serve to distinguish our premium engine management and temperature control products from those of our competitors. We market and distribute our aftermarket products under our own brands, such as:

Index

Engine<br><br> <br>Management<br><br> <br>Products
Temperature<br><br> <br>Control<br><br> <br>Products

We also distribute our products to customers for resale under private labels and the following co-labels:

Engine Management

We have also developed our product offering and brand strategies to support our customers’ initiatives to market a tiered product assortment designed to satisfy end-user preferences for quality and value. We believe that this alignment makes us an invaluable business partner to our customers.

Our Customers

We sell our products primarily to:

•	Automotive aftermarket retailers, such as O’Reilly Automotive, Inc. (“O’Reilly”), AutoZone, Inc. (“AutoZone”), and Canadian Tire Corporation, Limited.
•	Automotive aftermarket distributors, including warehouse distributors and program distribution groups, such as Genuine Parts Co. and National Automotive Parts Association (“NAPA”), Auto Value<br> and All Pro/Bumper to Bumper (Aftermarket Auto Parts Alliance, Inc.), Automotive Distribution Network LLC, The National Pronto Association (“Pronto”), Federated Auto Parts Distributors, Inc. (“Federated”), Pronto and Federated’s<br> affiliate, the Automotive Parts Services Group or The Group, and Icahn Automotive Group LLC (doing business as Pep Boys, Auto Plus, AAMCO and Precision Tune Auto Care).
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•	Original equipment manufacturers and original equipment service part operations, such as General Motors Co., Ford Motor Co., Woodward, Inc., Deere & Company, Caterpillar Inc., Daimler Truck<br> AG, Case/New Holland, Eberspacher, Mobile Climate Control, Volvo/Mack Truck, and Harley.
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Index

Our three largest individual customers accounted for approximately 57% of our consolidated net sales in 2021. During 2021, O’Reilly, NAPA and AutoZone accounted for 26%, 17%, and 14% of our consolidated net sales, respectively. Net sales from each of these customers were reported in both our Engine Management and Temperature Control Segments.

Competition

We compete primarily on the basis of product quality, product availability, value-added services, product coverage, order turn‑around time, order fill rate, technical support and price. We believe we differentiate ourselves from our competitors primarily through:

•	a value‑added, knowledgeable sales force;
•	continuous product development, engineering & technical advancement;
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•	extensive market leading product coverage in conjunction with market leading brands;
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•	knowledgeable category management, including inventory stocking recommendations for our distributors to get the right parts on the shelf for their marketplace needs;
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•	rigorous product qualification standards to ensure that our parts meet or exceed exacting performance specifications;
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•	sophisticated parts cataloging systems, including catalogs available online through our website and our mobile application;
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•	inventory levels and responsive logistical systems sufficient to meet the critical delivery requirements of customers;
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•	breadth of manufacturing capabilities; and
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•	award-winning marketing programs, sales support and technical training.
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We are one of the leading independent manufacturers and distributors serving North America and other geographic areas in our core businesses of Engine Management and Temperature Control. In the Engine Management Segment, we compete with: ACDelco, Aptiv Plc, Denso Corporation, Continental AG, Hitachi, Ltd., Motorcraft, Robert Bosch GmbH, Visteon Corporation, NGK Spark Plug Co., Ltd., Dorman Products, Inc. and several privately-owned companies primarily importing products from Asia. In the Temperature Control Segment, we compete with: ACDelco, MAHLE GmbH, Denso Corporation, Motorcraft, Sanden International (U.S.A.), Inc., Continental AG, Dorman Products, Inc., and several privately-owned companies.

Our business operates in highly competitive markets, and we face substantial competition in all markets that we serve. In addition, in the aftermarket, we face competition from automobile manufacturers who supply many of the replacement parts sold by us, although these manufacturers generally supply parts only for cars they sell through OE dealerships.

Sales and Distribution

In the traditional aftermarket channel, we sell our products to warehouse distributors and retailers. Our customers buy directly from us and sell directly to jobber stores, professional technicians and to “do-it-yourselfers” who perform automotive repairs on their personal vehicles. In recent years, warehouse distributors have consolidated with other distributors, and an increasing number of distributors own their jobber stores or sell down channel to professional technicians. Retailers are also consolidating with other retailers and have begun to increase their efforts to sell to professional technicians adding additional competition in the “do-it-for-me,” or the professional technician segment of our industry. As automotive parts and systems become more complex, “do-it-yourselfers” are less likely to service their own vehicles and may become more reliant on professional technicians.

Index

In the heavy duty aftermarket, we sell our products to recognized distributors who buy directly from us and sell directly to fleet operators and repair facilities for use in the repair and maintenance of medium to heavy duty vehicles. We also sell our products to the service parts divisions of heavy duty OEMs for distribution into the independent heavy duty aftermarket.

In the original equipment market we sell our products to manufacturers of automotive, heavy duty truck, construction, agriculture, alternative energy, lawn/garden and powersports/marine vehicles and equipment, as well as their tier suppliers and system integrators. We also sell and support the service part divisions of each of our customers.

We sell our products primarily in the United States, with additional sales in Canada, Europe, Asia, Mexico and other Latin American countries. Our sales are substantially denominated in U.S. dollars. For information on revenues and long-lived assets by geographic area, see Note 19 “Industry Segment and Geographic Data” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

Our customers have come to depend on our sales personnel as a reliable source for technical information and to assist with sales to their customers (e.g., jobber stores and professional technicians).

      In this manner, we direct a significant portion of our sales efforts to our customers’ customers to generate demand for our products, and we believe that the structure of our sales force facilitates these efforts by enabling us to implement our
      sales and marketing programs uniformly throughout the distribution channel.

Another way we generate demand for our products is through our training program, which offers training seminars to professional automotive technicians. Our training program is accredited by the National Institute for Automotive Service Excellence (ASE) Training Managers Council. Our seminars are taught by ASE certified instructors in real time either in-person or by webinars online and feature more than 30 different topics. We also offer on-demand training webinars online on more than 150 different topics. Through our training program, we typically teach approximately 60,000 technicians annually how to diagnose and repair vehicles equipped with complex systems related to our products, and we have approximately 16,000 technicians who are registered to participate in such sessions through our online platform.

We offer a variety of strategic customer discounts, allowances and incentives to increase customer purchases of our products. For example, we offer cash discounts for paying invoices in accordance with the specified discounted terms of the invoice. We also offer rebates and discounts to customers as advertising and sales force allowances, and allowances for warranty and overstock returns are also provided. We believe these discounts, allowances and incentives are a common practice throughout the automotive aftermarket industry, and we intend to continue to offer them in response to competitive pressures and to strategically support the growth of all our products.

Seasonality

Historically, our operating results have fluctuated by quarter, with the greatest sales occurring in the second and third quarters of the year and revenues generally being recognized at the time of shipment. It is in these quarters that demand for our products is typically the highest, specifically in the Temperature Control Segment of our business. In addition to this seasonality, the demand for our Temperature Control products during the second and third quarters of the year may vary significantly with the summer weather and customer inventories. Ordinarily, a warm summer, as we experienced in 2021, would increase the demand for our Temperature Control products, while a somewhat mild summer, as we experienced in 2019, may lessen such demand. While the COVID-19 pandemic caused large shifts in sales demand between quarters in 2020, our business returned to a more normalized pattern of seasonality and variability in demand of our Temperature Control products in 2021. As such, our working capital typically peaks near the end of the second quarter, as the inventory build-up of air conditioning products was converted to sales, and payments on the receivables associated with such sales were yet to be received. During this period, our working capital requirements were funded by borrowing from our revolving credit facility.

Index

Working Capital and Inventory Management

Automotive aftermarket companies have been under increasing pressure to provide broad SKU (stock keeping unit) coverage due to parts and brand proliferation. In response to this, we have made, and continue to make, changes to our inventory management system designed to reduce inventory requirements. We have a pack‑to‑order distribution system, which permits us to retain slow moving items in a bulk storage state until an order for a specific branded part is received. This system reduces the volume of a given part in inventory. We also expanded our inventory management system to improve inventory deployment, enhance our collaboration with customers on forecasts and inventory assortments, and further integrate our supply chain both to customers and suppliers.

We face inventory management issues as a result of overstock returns. We permit our customers to return new, undamaged products to us within customer-specific limits (which are generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories. In addition, the seasonality of our Temperature Control Segment requires that we increase our inventory during the winter season in preparation of the summer selling season and customers purchasing such inventory have the right to make returns. We accrue for overstock returns as a percentage of sales after giving consideration to recent returns history.

Our profitability and working capital requirements are seasonal due to our sales mix of Temperature Control products. Our working capital requirements typically peak near the end of the second quarter, as the inventory build‑up of air conditioning products is converted to sales and payments on the receivables associated with such sales have yet to be received. These increased working capital requirements are funded by borrowings from our revolving credit facility.

Production and Engineering

An important component of our business strategy is to invest the resources necessary to expand our technical capabilities and bring more product manufacturing in-house. We engineer, tool and manufacture many of the products that we offer for sale and the components used in the assembly of those products, and we continue to evaluate opportunities to bring new product categories in-house. For example, we perform our own plastic molding operations, stamping and machining operations, wire extrusion, automated electronics assembly and a wide variety of other processes. In the case of remanufactured components, we conduct our own teardown, diagnostics and rebuilding for air conditioning compressors, diesel injectors, and diesel pumps. We have found this level of vertical integration, in combination with our manufacturing footprint in low cost regions, provides advantages in terms of cost, quality and availability.

Suppliers

We source materials through a global network of suppliers to ensure a consistent, high quality and low cost supply of materials and key components for our product lines. As a result of the breadth of our product offering, we are not dependent on any single raw material.

The principal raw materials purchased by us consist of brass, electronic components, fabricated copper (primarily in the form of magnet and insulated cable), steel magnets, laminations, tubes and shafts, stamped steel parts, copper wire, stainless steel coils and rods, aluminum coils, fittings, rods, cast aluminum parts, lead, steel roller bearings, rubber molding compound, thermo‑set and thermo plastic molding powders, and chemicals. Additionally, we use components and cores (used parts) in our remanufacturing processes for air conditioning compressors, diesel injectors, and diesel pumps.

In the case of cores for air conditioning compressors, diesel injectors, and diesel pumps, we obtain them either from exchanges with customers who return cores subsequent to purchasing remanufactured parts or through direct purchases from a network of core brokers. In addition, we acquire certain materials by purchasing products that are resold into the market, particularly by OEM sources and other domestic and foreign suppliers.

Index

We believe there is an adequate supply of primary raw materials and cores; however, disruptions in the global economy in 2020 and the lingering impacts into 2021 have impeded global supply chains, resulting in longer lead times and delays in procuring component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation. In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including initiating cost savings initiatives and the pass through of higher costs to our customers, which began in the fourth quarter of 2021. We believe that we have also benefited from our geographically diversified manufacturing footprint and our strategy to bring more product manufacturing in-house, especially with respect to product availability and fill rates.

Environmental, Social and Governance (ESG) and Human Capital

Our Culture

Our Company was founded in 1919 on the values of integrity, common decency and respect for others. These values continue to this day and are embodied in our Code of Ethics, which has been adopted by the Board of Directors of the Company to serve as a statement of principles to guide our decision-making and reinforce our commitment to these values in all aspects of our business. These values also serve as the foundation for our increased focus on many important environmental, social and governance issues, such as environmental stewardship and our efforts to identify and implement practices that reduce our environmental impact while achieving our business goals; our attention to diversity, equity and inclusion, employee development, retention, and health and safety; and our community engagement initiatives, to name a few. We have made significant strides building awareness of the environmental impact of our operations, and challenging ourselves to reduce our impact by reducing our consumption of energy and generation of waste, as well as enhancing our recycling efforts.

Environmental Stewardship

We have made significant strides building awareness of the environmental impact of our operations, and challenging ourselves to reduce our impact by reducing our consumption of energy, including electricity, natural gas and propane; reducing our generation of waste and increasing the percentage of waste recycled; reducing our use of water and reducing our Scope 1 and Scope 2 greenhouse gas emissions.

We are also focused on several initiatives that are intended to promote a more environmentally-friendly car parc. Through our remanufacturing processes, we divert certain types of used automotive products from traditional waste streams and reprocess them for their original purpose. We remanufacture key product categories within our product portfolio, such as air conditioning compressors, diesel injectors and diesel pumps, resulting in the production of premium automotive products within these categories through processes that we believe save energy and reduce waste. We also bring to market emission control system products, which are designed to reduce emissions and improve fuel economy during vehicle operation, and alternative energy products, which utilize cleaner burning fuels or are designed for electric or hybrid electric vehicles.

Human Capital

We believe that our commitment to our employees is critical to our continued success, and has led to high employee satisfaction and low employee turnover. To facilitate talent attraction and retention, we strive to have a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits and health and wellness programs, and by programs that build connections between our employees and their communities. Our employees share our corporate values of integrity, common decency and respect of others, values which have been established since our company was founded.

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As of December 31, 2021, we employed approximately 5,000 people, with 2,000 people in the United States and 3,000 people in Mexico, Canada, Poland, the U.K., Germany, Hungary, China, Hong Kong and Taiwan. Of the 5,000 people employed, approximately 2,700 people are production employees. We operate primarily in non‑union facilities and have binding labor agreements with employees at other unionized facilities. We have approximately 80 production employees in Edwardsville, Kansas who are covered by a contract with The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) that expires in August 2022. We also have approximately 1,500 employees in Mexico who are covered under union agreements negotiated at various intervals. For clarification, the employee numbers described above exclude the employees of our joint venture operations.

Although the COVID-19 pandemic has led to some challenges in finding adequate labor, generally we believe that our facilities are in labor markets with ready access to adequate numbers of skilled and unskilled workers, and we believe our relations with our union and non‑union employees are good.

Diversity, Equity and Inclusion. We believe that a diverse workforce is critical to our success, and we continue to focus on the hiring, retention and advancement of women and underrepresented

      populations.  Our recent efforts have been focused in three areas: inspiring innovation through an inclusive and diverse culture; expanding our efforts to recruit and hire world-class diverse talent; and identifying strategic partners to
      accelerate our inclusion and diversity programs.  Over the last 5 years, approximately 50% of our hires and promotions have been women or racially diverse individuals.  To further our commitment to diversity, in 2021, we established a Diversity,
      Equity and Inclusion steering committee to develop key structures within our organization to promote equality, inclusion and awareness among our employees.

Health, Safety and Wellness. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the

      health, safety and wellness of our employees.  We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that provide protection and security so
      they can have peace of mind concerning events that may require time away from work, or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain their
      health status and encourage engagement in healthy behaviors; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees and which comply with government regulations. These include providing employees with flexible working arrangements, including where appropriate the ability to work from home, and implementing a number of safety policies and practices at all of our facilities.

Compensation and Benefits. We provide competitive compensation and benefits programs that meet the needs of our employees. In addition to wages and salaries, these programs include annual cash

      bonuses, stock awards, a 401\(k\) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, and employee assistance programs.

Talent Development. We invest significant resources to develop the talent of our high potential employees. We deliver numerous training opportunities, provide rotational assignment opportunities, have

      expanded our focus on continuous learning and development, and implemented methodologies to manage performance, provide feedback and develop talent.

Our talent development programs are designed to provide employees with the resources they need to help achieve their career goals, build management skills and lead their organizations. We provide a series of employee workshops that support professional growth and development. Our annual review process encourages manager and employee conversations throughout the year to enhance growth and development.

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Social Engagement and Community Service

We believe that building connections between our employees, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace. Through our SMP Cares® initiative, we sponsor corporate giving and volunteering programs to encourage our employees to connect with our local communities and engage in the local causes that they are passionate about.

Our volunteering efforts include organizing blood drives with the American Red Cross, and fundraising for the March of Dimes, United Way, the Salvation Army, and many others. In 2021, we collaborated with our employees to donate over $50,000 to local community organizations, hospitals, schools, shelters, and universities. We are a lifetime trustee of the University of the Aftermarket Foundation (“UAF”), and we donate $10,000 annually to fund scholarships to support the next generation of technicians and automotive professionals, which we believe is an important way to sustain and give back to our industry. We are also proud to sponsor annual scholarship contests for future automotive technicians, including our Women in Auto Care scholarship that aims to empower women entering the automotive industry. Since our first scholarship contest in 2015, we have awarded $265,000 in scholarships. We have continued to expand our scholarship program, and in 2021, we awarded ten students each with a $5,000 scholarship. We continue to encourage participation in these initiatives as we believe they are essential in the support of our core values.

Governance

Our commitment to ESG is spearheaded by our Board of Directors. Specifically, our Nominating and Corporate Governance Committee established an ESG steering committee among our executive officers including our Chief Executive Officer & President, Chief Legal Officer & Secretary, Chief Human Resources Officer, and Senior Vice President of North American Operations. This ESG steering committee is tasked with developing specific strategies to ensure that our operations adhere to our corporate governance values and advance our ESG objectives. The multidisciplinary approach of our steering committee allows it to leverage our expertise in operations, engineering, supply chain, human capital management, finance, legal and other fields to push our ESG initiatives ahead from all angles.

Available Information

We are a New York corporation founded in 1919. Our principal executive offices are located at 37‑18 Northern Boulevard, Long Island City, New York 11101, and our main telephone number at that location is (718) 392‑0200. Our Internet address is www.smpcorp.com. We provide a link to reports that we have filed with the SEC. However, for those persons that make a request in writing or by e-mail (financial@smpcorp.com), we will provide free of charge our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These reports and other information are also available, free of charge, at www.sec.gov.

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.

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Our three largest individual customers accounted for approximately 57% of our consolidated net sales in 2021. During 2021, O’Reilly, NAPA and AutoZone accounted for 26%, 17% and 14% of our consolidated net sales, respectively. The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them, such as the decision, announced in December 2020, of a large retail customer to pursue a private brand strategy for its engine management product line, 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.

Also, we do not typically enter into long-term agreements with any of our customers. Instead, we enter into a number of purchase order commitments with our customers, based on their current or projected needs. 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 market in which we operate is very competitive, we are under ongoing pressure from our customers to offer lower prices, extend payment terms, increase marketing allowances and other terms more favorable to these customers. 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 domestic and international suppliers of automotive products. In the Engine Management Segment, we compete with: ACDelco, Aptiv Plc, Denso Corporation, Continental AG, Hitachi, Ltd., Motorcraft, Robert Bosch GmbH, Visteon Corporation, NGK Spark Plug Co., LTD., Dorman Products, Inc. and several privately-owned companies primarily importing products from Asia. In the Temperature Control Segment, we compete with: ACDelco, MAHLE GmbH, Denso Corporation, Motorcraft, Sanden International (U.S.A.), Inc., Continental AG, Dorman Products, Inc., and several privately-owned companies. In addition, automobile manufacturers supply many of the replacement parts we sell. Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do. These factors may allow our competitors to:

•	respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive products and services;
•	engage in more extensive research and development;
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•	sell products at a lower price than we do;
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•	undertake more extensive marketing campaigns; and
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•	make more attractive offers to existing and potential customers and strategic partners.
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We cannot assure you that our competitors will not develop products or services that are equal or superior to our products or that achieve greater market acceptance than our products or that in the future other companies involved in the automotive industry will not expand their operations into product lines produced and sold by us. We also cannot assure you that additional entrants will not enter the automotive industry or that companies in the industry will not consolidate. 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.

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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 have to do so again in the future. Price reductions have impacted our sales and profit margins and may do so 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.

In addition to this seasonality, the demand for our Temperature Control products during the second and third quarters of the year may vary significantly with the summer weather and customer inventories. Ordinarily, a warm summer, as we experienced in 2020, would increase the demand for our Temperature Control products, while a somewhat mild summer, as we experienced in 2019, may lessen such demand. While the COVID-19 pandemic caused large shifts in sales demand between quarters in 2020, our business has returned to a more normalized pattern of seasonality and variability in demand of our Temperature Control products in 2021. As such, our working capital requirements peaked near the end of the second quarter, as the inventory build‑up of air conditioning products was converted to sales and payments on the receivables associated with such sales were yet to be received. During this period, our working capital requirements were funded by borrowing from 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.

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 lifetime limited warranty, which generally covers defects in materials or workmanship, failure to meet industry published specifications and/or the result of installation error. In the event that there are material deficiencies or defects in the design and manufacture of our products and/or installation error, the affected products may be subject to warranty returns and/or product recalls. Although we maintain a comprehensive quality control program, we cannot give any assurance that our products will not suffer from defects or other deficiencies or that we will not experience material warranty returns or product recalls in the future.

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We accrue for warranty returns as a percentage of sales, after giving consideration to recent historical returns. While we believe that we make reasonable estimates for warranty returns in accordance with our revenue recognition policies, actual returns may differ from our estimates. We have in the past incurred, and may in the future incur, material losses and significant costs as a result of our customers returning products to us for warranty-related issues in excess of anticipated amounts. 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.

Our profitability may be materially adversely affected as a result of overstock inventory related returns by our customers in excess of anticipated amounts.

We permit overstock returns of inventory that may be either new or non-defective or non-obsolete but that we believe we can re-sell. 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, 2021, 1,554 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2021, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $53.8 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, 2021. Based upon the results of the August 31, 2021 actuarial study, and all other available information to us, we increased our asbestos liability to the low end of the range, and recorded an incremental pre-tax provision of $5.3 million in earnings (loss) from discontinued operations in the accompanying statement of operations. The results of the August 31, 2021 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs and any potential recovery from insurance carriers, ranging from $60.9 million to $100.2 million for the period through 2065. Future legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2021 study, to range from $49.4 million to $99.3 million for the period through 2065.

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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 maintain product liability insurance coverage, but we cannot give any assurance that current or future policy limits will be sufficient to cover all possible liabilities. 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 implemented in 2020, in response to the COVID-19 pandemic, and carried over into 2021, 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 the adoption or modification of domestic and foreign laws, regulations or policies, we may not be able to achieve the level of benefits that we expect to realize in these initiatives, or we may not be able to realize these benefits within the time frames we currently expect. Our ability to achieve any anticipated cost savings could be affected by a number of factors such as changes in the amount, timing and character of charges related to such initiatives, or a substantial delay in the completion of such initiatives. Failure to achieve the benefits of our cost saving initiatives could have a material adverse effect on us. Our cost savings is also predicated upon maintaining our sales levels.

Severe weather, natural disasters and other disruptions could adversely impact our operations at our manufacturing and distribution facilities.

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, Mexico, Poland, Germany and Hungary and at our domestic facilities in Florida, Indiana, Kansas, South Carolina, Texas, Virginia, and Wisconsin. In February 2021, our operations in Texas were disrupted due to a severe winter storm that resulted in power grid failure, blackouts and the tragic loss of life across the State of Texas. 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 serious disruptions at these facilities due to fire, electrical blackouts, power losses, telecommunications failures, terrorist attack 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. We may not be able to effectively shift the manufacture or delivery of products to our customers if one or more of our manufacturing or distribution facilities are significantly disrupted.

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 had an adequate supply of purchased supplier raw materials, finished goods, equipment and component parts, disruptions in the global economy in 2020 and the lingering impacts into 2021 have impeded global supply chains, resulting in longer lead times and delays in procuring component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation. In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including initiating cost savings initiatives and the pass through of higher costs to our customers, which began in the fourth quarter of 2021. We expect these inflationary trends to continue for some time, and while we believe that we will be able to somewhat offset the impact, there can be no assurances that unforeseen future events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have a material adverse effect on our business, financial condition and results of operations.

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, cyber attacks on their information technology systems or other limitations on their business operations, which could be caused by any number of factors, such as labor disruptions, financial distress, severe weather conditions and natural disasters, social unrest, economic and political instability, and public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 pandemic, war, terrorism or other catastrophic events. In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may lead to suppliers refusing to sell products to us at all. Our efforts to protect against and to minimize these risks may not always be effective.

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Our operations could be adversely affected by interruptions or breaches in the security of our computer and information technology systems.

We rely on information technology systems throughout our organization to conduct day-to-day business operations, including the management of our supply chain and our purchasing, receiving and distribution functions. We also routinely use our information technology systems to send, receive, store, access and use sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive materials. Additionally, we rely on our information technology systems to enable many of our employees to work remotely as a result of new policies and practices enacted by us in response to the COVID-19 pandemic.

Our information technology systems have been subject to cyber threats, including attempts to hack into our network and computer viruses. Such hacking attempts and computer viruses have not significantly impacted or interrupted our business operations. While we implement security measures designed to prevent and mitigate the risk of cyber attacks, our information technology systems, and the systems of our customers, suppliers and business partners, may continue to be vulnerable to computer viruses, attacks by hackers, or unauthorized access caused by employee error or malfeasance. The exploitation of any such vulnerability could unexpectedly compromise our information security, or the security of our customers, suppliers and other business partners. Furthermore, because the techniques used to carry out cyber attacks change frequently and in many instances are not recognized until after they are used against a target, we may be unable to anticipate these changes or implement adequate preventative measures. If our information technology systems, or the systems of our customers, suppliers or business partners, are subject to cyber attacks, such as those involving significant or extensive system interruptions, sabotage, computer viruses or unauthorized access, we could experience disruptions to our business operations and incur substantial remediation costs, which could have a material adverse effect on our business, financial condition or results of operations.

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 has brought about certain risks associated with the anticipated transition to a lower-carbon economy, such as regulatory changes affecting vehicle emissions and fuel efficiency requirements, technological changes in vehicle architectures, changes in consumer demand, carbon taxes, greenhouse gas emissions tracking, and regulation of greenhouse gas emissions from certain sources. Any regulatory changes aimed to reduce or eliminate greenhouse gas emissions may require us to incur increased operating costs, such as to purchase and operate emissions control systems or other such technologies to comply with applicable regulations or reporting requirements. These regulations, as well as shifts in consumer demand due to public awareness and concern of climate change, could affect the timing and scope of their proliferation and may also adversely impact our sales of products designed for the internal combustion engines. 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.

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

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 reference rate for the purpose of determining the discount rate on the sale of the underlying trade accounts receivable. If the 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.

Increasing our indebtedness could negatively affect our financial health.

We have a senior secured revolving credit facility of $250 million (with an additional $50 million accordion feature) with JPMorgan Chase Bank, N.A., as agent, and a syndicate of lenders, which we refer to throughout this Report as our revolving credit facility. As of December 31, 2021, our total outstanding indebtedness was $128.4 million, of which amount $125.3 million of outstanding indebtedness and approximately $122.1 million of availability was attributable to this revolving credit facility. The significant increase in our indebtedness could:

•	increase our borrowing costs;
•	limit our ability to obtain additional financing or borrow additional funds;
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•	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<br> 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
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•	increase our vulnerability to general adverse economic and industry conditions.
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Availability under our revolving credit facility is based on a formula of eligible accounts receivable, eligible drafts presented to financial institutions under our supply chain financing arrangements and eligible inventory. The loss of business of one or more of our key customers or, a significant reduction in purchases of our products from any one of them, could adversely impact availability under our revolving credit facility.

In addition, we have granted the lenders under our revolving credit facility a first priority security interest in substantially all of our assets, including accounts receivable, inventory and certain fixed assets, and those of certain of our subsidiaries. We have also pledged shares of stock in our subsidiaries to those lenders. If we default on any of our indebtedness, 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:

•	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
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•	our ability to sell receivables under supply chain financing arrangements.
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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 revolving credit facility, inclusive of the utilization of the $50 million accordion feature in the facility, 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 the COVID-19 pandemic, disruptions in the supply chain that may lead to a further increase in inventories to support our customers, and significant inflationary cost increases in raw materials, labor and transportation, and that there will be no material adverse developments in our business, liquidity or capital requirements. Because borrowings under the revolving credit facility are secured by substantially all of our assets, including accounts receivable, the loss of business of one or more of our key customers or, a significant reduction in purchases of our products from any one of them, could adversely impact availability under our revolving credit facility. 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;
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•	reducing or delaying research and development efforts;
•	selling assets;
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•	deferring or refraining from pursuing certain strategic initiatives and acquisitions;
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•	refinancing our indebtedness; and
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•	seeking additional funding.
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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 revolving credit facility 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 revolving credit facility, our business could be adversely affected.

The proposed phase-out of the London Interbank Offered Rate (LIBOR) could materially impact our borrowing costs under our secured revolving credit facility or the utility of our supply chain financing arrangements.

Our secured revolving credit facility and certain of our supply chain financing arrangements utilize LIBOR for the purpose of determining the interest rate on certain borrowings or the discount rate on the sale of trade accounts receivable, respectively. In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that, after the end of 2021, it would no longer compel contributing banks to make rate submissions to the ICE Benchmark Administration (the “IBA”) for the purposes of setting LIBOR. The cessation date for submission and publication of rates for certain tenors of LIBOR has since been extended by the IBA through June 2023; however, in early 2021, the United States Federal Reserve Board and other regulatory bodies issued guidance encouraging banks and other financial market participants to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and in any event no later than December 31, 2021. As a result, LIBOR will likely cease to be available or cease to be deemed an appropriate reference rate, and we will likely need to amend our credit agreement and supply chain financing arrangements to utilize an alternative reference rate based on the then prevailing market convention at the time. Although we do not believe that the proposed phase-out of LIBOR will materially impact our business, financial condition or results of operations, we can provide no assurances that any such alternative reference rate will be similar to LIBOR, or produce the same value or economic equivalence of LIBOR, or have the same volume or liquidity as LIBOR prior to its discontinuance.

Risks Related to External Factors

Our business, results of operations and financial condition could be materially adversely affected by the effects of widespread public health crises, including the novel coronavirus (COVID-19) pandemic, that are beyond our control.

The global outbreak of the novel coronavirus (COVID-19) pandemic has created significant volatility, uncertainty and economic disruption in many countries in which we operate, including the United States, Mexico, Canada, Poland, Germany, Hungary and China, and could, in the future, have a material adverse effect on our business, results of operations and financial condition. Ultimately, the duration and severity of the pandemic may vary depending on the characteristics of the virus and the public health response; therefore, the nature and extent of its impact on our business and operations may be uncertain and beyond our control. Customer demand for our products and customer preferences regarding product mix and distribution channels could be impacted as a result of the COVID-19 pandemic, and significant uncertainty exists with respect to the potential future impact of the pandemic as well as a deterioration of general economic conditions, including rising inflation, disruptions in the supply chain and a possible national or global recession.

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If customer demand were to decrease in future periods, or if customer preferences regarding product mix and distribution channels were to change, we may be required to adjust and reduce production volumes and implement cost reduction and cash preservation initiatives, including potential reductions in capital expenditures and employee furloughs, which could have a material adverse impact on our business, results of operations and financial condition.

In certain countries in which we operate, national, state and local governments implemented a variety of measures in 2020 in response to the COVID-19 pandemic, including by declaring states of emergency, restricting people from gathering in groups or interacting within a certain physical distance (i.e., social distancing), restricting or limiting the operations of businesses deemed to be non-essential, and imposing travel restrictions on individuals, including restrictions requiring individuals to stay at their place of residence except to perform certain activities deemed to be essential. Many of these restrictions have been eased, however, there can be no guarantee that they will not be implemented in the future. As we were deemed to be an essential business, throughout the pandemic we have been able to continue to perform, with certain modifications, all of the material operations at all of our principal facilities, however, we can provide no assurances that we will be able to continue to perform such operations in the future without disruption, such as temporary closures, as a result of new or modifications to existing governmental measures in response to the pandemic. Any restrictions or limitations on our ability to perform such operations in the future without disruption, such as temporary closures, as a result of governmental measures in response to the pandemic could have a material adverse effect on our business, results of operations and financial condition.

Furthermore, the COVID-19 pandemic could have a material adverse effect on the business, operations and financial condition of our customers, suppliers and other supply chain partners as a result of the governmental measures described above, disruptions to their business and operations for reasons similar to those described above, and their ability to manage and mitigate the adverse effects of these and other risks unique to their business and operations that may arise as a result of the pandemic.

We conduct our manufacturing and distribution operations on a worldwide basis and are subject to risks associated with doing business outside the United States.

We have manufacturing and distribution facilities in many countries, including Canada, Mexico, Poland, Germany and Hungary, as well as a joint-venture in China. Increasing our manufacturing footprint in low cost regions is an important element of our strategy. There are a number of risks associated with doing business internationally, including: (a) exposure to local economic and political conditions; (b) social unrest such as risks of terrorism or other hostilities; (c) currency exchange rate fluctuations and currency controls; (d) the effect of potential changes in U.S. trade policy and international trade agreements; and (e) the potential for shortages of trained labor.

In particular, historically there has been social unrest in Hong Kong and Mexico and any recurrence, or increased violence in or around our facilities in such countries could be disruptive to our business operations at such facilities, or present risks to our employees who may be directly affected by the violence and may result in a decision by them to relocate from the area, or make it difficult for us to recruit or retain talented employees at such facilities.

Furthermore, changes in U.S. trade policy, particularly as it relates to China, have resulted in the assessment of increased tariffs on goods that we import into the United States, and have caused uncertainty about the future of free trade generally. We benefit from free trade agreements, such as the U.S.-Mexico-Canada Agreement (USMCA). The repeal or modification of the USMCA or further increases to tariffs on goods imported into the United States could increase our costs to source materials, component parts and finished goods from other countries. The likelihood of such occurrences and their potential effect on us is unpredictable and may vary from country to country. Any such occurrences could be harmful to our business and our financial results.

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

The nature of our operations exposes us to the risk of claims with respect to such matters, and we can give no assurance that violations of such laws have not occurred or will not occur or that material costs or liabilities will not be incurred in connection with such claims. We are currently monitoring our environmental remediation efforts at one of our facilities and our reserve balance related to the environmental clean-up at this facility is $1.5 million at December 31, 2021. The environmental testing and any remediation costs at such facility may be covered by several insurance policies, although we can give no assurance that our insurance will cover any environmental remediation claims. We also maintain insurance to cover our existing U.S. and Canadian facilities. 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.

Our future performance may be materially adversely affected by changes in technologies and improvements in the quality of new vehicle parts.

If we do not respond appropriately to changes in automotive technologies, such as the adoption of new technologies and systems to make traditional, ICE vehicles more efficient, or the adoption of electric or hybrid electric vehicle architectures, we could experience less demand for our products thereby causing a decline in our results of operations or deterioration in our business and financial condition, and we may have a material adverse effect on our long-term performance.

In addition, the size of the automobile replacement parts market depends, in part, upon the growth in number of vehicles on the road, increase in average vehicle age, change in total miles driven per year, new or modified environmental and vehicle safety regulations, including fuel economy and emissions reduction standards, increase in pricing of new cars and new car quality and related warranties. The automobile replacement parts market has been negatively impacted by the fact that the quality of more recent automotive vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle. Generally, if parts last longer, there will be less demand for our products and the average useful life of automobile parts has been steadily increasing in recent years due to innovations in products and technology. In addition, the introduction by original equipment manufacturers of increased warranty and maintenance initiatives has the potential to decrease the demand for our products. 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.

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ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.

ITEM 2.	PROPERTIES

We maintain our executive offices in Long Island City, New York. The table below describes our principal facilities as of December 31, 2021.

Location	State or<br><br> <br>Country	Principal Business Activity	Approx.<br><br> <br>Square<br><br> <br>Feet	Owned or<br><br> <br>Expiration<br><br> <br>Date<br><br> <br>of Lease
		Engine Management
Ft. Lauderdale	FL	Distribution	23,300	Owned
Ft. Lauderdale	FL	Distribution	30,000	Owned
Mishawaka	IN	Manufacturing	153,100	Owned
Edwardsville	KS	Distribution	363,500	Owned
Independence	KS	Manufacturing	337,400	Owned
Long Island City	NY	Administration	75,800	2023
Greenville	SC	Manufacturing	184,500	Owned
Disputanta	VA	Distribution	411,000	Owned
Reynosa	Mexico	Manufacturing	175,000	2025
Reynosa	Mexico	Manufacturing	153,000	2023
Bialystok	Poland	Manufacturing	142,400	2027
Sheboygan Falls	WI	Manufacturing	22,000	2025
Milwaukee	WI	Manufacturing	84,000	2028
Tijuana	Mexico	Manufacturing	37,500	2023
Kirchheim-Teck	Germany	Distribution	27,500	2031
Pécel	Hungary	Manufacturing	52,400	2031
Wuxi	China	Manufacturing	27,600	2023
		Temperature Control
Lewisville	TX	Administration and Distribution	415,000	2024
St. Thomas	Canada	Manufacturing	40,000	Owned
Reynosa	Mexico	Manufacturing	82,000	2026
Reynosa	Mexico	Manufacturing	117,500	2026
Reynosa	Mexico	Manufacturing	111,800	2024
		Other
Mississauga	Canada	Administration and Distribution	82,400	2023
Irving	TX	Training Center	13,400	2027

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ITEM 3.	LEGAL PROCEEDINGS

The information required by this Item is incorporated herein by reference to the information set forth in Item 8, “Financial Statements and Supplementary Data” of this Report under the captions “Asbestos” and “Other Litigation” appearing in Note 21, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades publicly on the New York Stock Exchange (“NYSE”) under the trading symbol “SMP.” The last reported sale price of our common stock on the NYSE on February 17, 2022 was $47.63 per share. As of February 17, 2022, there were 507 holders of record of our common stock.

Dividends are declared and paid on the common stock at the discretion of our Board of Directors (the “Board”) and depend on our profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by our Board. Our revolving credit facility permits dividends and distributions by us provided specific conditions are met. For information related to our revolving credit facility, see Note 11, “Credit Facilities and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

There have been no unregistered offerings of our common stock during the fourth quarter of 2021.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

For information related to our stock repurchases, see Note 12, “Stockholders’ Equity,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

The following table provides information relating to the Company’s purchases of its common stock for the fourth quarter of 2021:

Period	Total Number of<br><br> <br>Shares Purchased<br><br> <br>(1)		Average<br><br> <br>Price Paid<br><br> <br>Per Share			Maximum Number (or<br><br> <br>Approximate Dollar<br><br> <br>Value) of Shares that<br><br> <br>may yet be Purchased<br><br> <br>Under the Plans or<br><br> <br>Programs (2)
October 1-31, 2021		—	$	—	—	$	—
November 1-30, 2021		6,000		49.04	6,000		29,705,754
December 1-31, 2021		1,000		47.69	1,000		29,656,062
Total		7,000	$	49.13	7,000	$	29,656,062
(1)	All shares were purchased through the publicly announced stock repurchase programs in open-market transactions.
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(2)	In October 2021, our Board of Directors authorized the purchase of up to $30 million of our common stock under a stock repurchase program. Stock will be purchased from time to time, in the open market, or through private transactions,<br> as market conditions warrant. Under this program, during the fourth quarter of 2021, we repurchased 7,000 shares of our common stock at a total cost of $0.3 million. During the year ended December 31, 2021, additional stock repurchases<br> of 615,265 shares were made at a total cost of $26.5 million under prior Board of Directors authorizations, which are now fully completed.
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As of December 31, 2021, there was approximately $29.7 million available for future stock purchases under the October 2021 program. During the period from January 1, 2022 through February 17, 2022, we have repurchased an additional 64,482 shares of our common stock at a total cost of $3.1 million, thereby reducing the availability under the program to $26.6 million.

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Stock Performance Graph

The following graph compares the five year cumulative total return on the Company’s Common Stock to the total returns on the Standard & Poor’s 500 Stock Index and the S&P 1500 Auto Parts & Equipment Index, which is a combination of automotive parts and equipment companies within the S&P 400, the S&P 500 and the S&P 600. The graph shows the change in value of a $100 investment in the Company’s Common Stock and each of the above indices on December 31, 2016 and the reinvestment of all dividends. The comparisons in this table are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of the Company’s Common Stock or the referenced indices.


2016	100	100	100
2017	86	122	132
2018	94	116	90
2019	105	153	121
2020	81	181	148
2021	107	233	182

* Source: S&P Capital IQ

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ITEM 6.	(RESERVED)
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Overview

We are organized into two operating segments. Each segment is focused on different product categories and with providing our customers with full-line coverage of its products, a full suite of complementary services that are tailored to our customers’ business needs, and with driving end-user demand for our products. We sell our products primarily to automotive aftermarket retailers, program distribution groups, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin American countries.

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 three-year period ended December 31, 2021.

	December 31,
(In thousands, except per share data)	2021			2020			2019
Net sales	$	1,298,816		$	1,128,588		$	1,137,913
Gross profit		376,931			336,655			331,800
Gross profit %		29	%		29.8	%		29.2	%
Operating income		128,999			108,895			94,495
Operating income %		9.9	%		9.6	%		8.3	%
Earnings from continuing operations before income taxes		130,465			107,379			91,796
Provision for income taxes		31,044			26,962			22,745
Earnings from continuing operations		99,421			80,417			69,051
Loss from discontinued operations, net of income taxes		(8,467	)		(23,024	)		(11,134	)
Net earnings		90,954			57,393			57,917
Net earnings attributable to<br><br> <br>noncontrolling interest		68			—			—
Net earnings attributable to SMP		90,886			57,393			57,917
Per share data attributable to SMP – Diluted:
Earnings from continuing operations	$	4.39		$	3.52		$	3.03
Discontinued operations		(0.37	)		(1.01	)		(0.49	)
Net earnings per common share	$	4.02		$	2.51		$	2.54

The post COVID-19 sales momentum we experienced in the second half of 2020 carried over into 2021 resulting in record net sales and earnings from continuing operations. We experienced strong demand across all our product categories as well as a more normalized seasonal trend consistent with years prior to 2020.

Net sales for 2021 were $1,298.8 million, an increase of $170.2 million, or 15.1% compared to net sales of $1,128.6 million in 2020, and an increase of $160.9 million, or 14.1%, compared to net sales of $1,137.9 million in 2019.

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The increase in net sales in 2021 reflects the favorable impact of multiple factors including:

•	successful customer initiatives in the marketplace,
•	the phase-in of new business wins,
---	---
•	beneficial summer weather,
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•	continued strong customer demand as evidenced by robust customer POS and fueled by the replenishment of customer inventory levels,
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•	the partial impact of price increases in the fourth quarter of the year, which were implemented to pass through inflationary increases in raw materials, freight and labor costs, and
---	---
•	incremental net sales from our soot sensor, Trombetta and Stabil acquisitions.
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The combination of the above factors more than offset the impact of lost revenue related to the decision of a large retail customer to pursue a private brand strategy in December 2020.

Gross margin as a percentage of net sales in 2021 was 29% as compared to 29.8% in 2020 and 29.2% in 2019. Gross margins in the first half of 2021 were favorably impacted by greater fixed cost absorption due to higher production volumes as we increased inventories to meet the strong customer demand. The strong gross margins achieved in the first half of 2021 were offset by some compression in the second half of 2021 caused by several factors including lower fixed cost absorption due to lower production levels than those achieved in the second half of 2020, inflationary cost increases in certain raw materials, labor and elevated transportation expense, and the higher mix of heavy duty parts sales from our recent acquisitions, which have a different margin profile than our aftermarket business with lower gross margins but comparable operating margin. While we anticipate continued margin pressure resulting from inflationary headwinds, we believe that our annual cost initiatives coupled with our ability to pass through higher prices to our customers should help to offset much of this impact to our margins.

Operating margin as a percentage of net sales in 2021 was 9.9% as compared to 9.6% in 2020 and 8.3% in 2019. Our operating margins in 2021 were favorably impacted by higher net sales. Included in our operating margin were selling, general and administrative expenses (“SG&A”) of $247.5 million, or 19.1% of net sales in 2021, $224.7 million, or 19.9% of net sales in 2020, and $234.7 million, or 20.6% of net sales in 2019. The higher SG&A expenses in 2021 resulted principally from elevated distribution costs associated with higher sales volumes as well as the impact of increased freight costs, higher employee compensation costs, and incremental expenses from our soot sensor, Trombetta and Stabil acquisitions. We anticipate that our future operating margins will be in line with the operating margins achieved in 2021 and 2020.

Overall, our financial results in 2021 were extremely strong. We posting record net sales and earnings from continuing operations and achieving substantial new business wins with existing customers. Our core automotive aftermarket business remains strong and we have made major strides into new complementary markets with upside potential.

Recent Strategic Acquisitions

As part of our strategic plan for diversification and growth beyond our core automotive aftermarket business, and to further expand internationally with a focus on the European market, we completed three acquisitions in 2021. The acquisitions continue to increase our supplier capabilities with a complementary focus on specialized original equipment parts to manufacturers across multiple industries such as medium and heavy duty vehicles, construction and agricultural equipment, power sports, and other sub-segments. In addition to expanding beyond our core automotive aftermarket business, it also provided geographic expansion as we now have meaningful footprints to grow sales in Europe and Asia.

As we integrate these businesses, we will be able to take advantage of shared customer lists, product portfolios, manufacturing and engineering capabilities, and geographic reach. Many of the products in the acquired businesses are either power-train neutral, or are geared toward electric and alternative energy vehicles and, as such, not limited to applications on internal combustion engine (“ICE”), providing potential synergies and future sales growth opportunities in non-internal combustion engine applications. After these acquisitions, we estimate that approximately half of our product offering is power-train neutral, or suitable for electric, hybrid electric and/or alternative energy vehicles. Following is a brief summary of the acquired businesses.

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In March 2021, we acquired certain Soot Sensor product lines from Stoneridge, Inc. for $2.9 million. The product line assets acquired manufacture sensors used in the exhaust and emission systems of diesel engines. The acquisition is an excellent fit for our strategy of expansion into the heavy duty market.

In May 2021, we acquired 100% of the capital stock of Trumpet Holdings, Inc., a Delaware corporation, (more commonly known as “Trombetta”), for $111.7 million. Trombetta has manufacturing facilities in Milwaukee, Wisconsin; Sheboygan Falls, Wisconsin; Tijuana, Mexico, as well as a 70% ownership in a joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”). Trombetta is a worldwide leader in power switching and power management products and has a long history of supplying high-quality products to a broad group of blue-chip customers across multiple commercial vehicle and off-highway channels, including heavy truck, construction, agricultural, electric vehicle and power sports markets. Few of Trombetta’s products are powertrain-related and thus unaffected by the shift from internal combustion engines. We believe that the combination of Trombetta, along with our existing businesses will create a critical mass that can be a powerful force for growth.

In September 2021, we acquired 100% of the capital stock of Stabil Operative Group GmbH, a German company (“Stabil”), for Euros 13.7 million, or $16.3 million, subject to certain post-closing adjustments. Stabil is a manufacturer and distributor of a variety of components, including electronic sensors, control units, and clamping devices to the European market, serving both commercial and light vehicle applications. The acquired Stabil business is headquartered on the outskirts of Stuttgart, Germany with facilities in Germany and Hungary. The acquisition is an excellent fit for our strategy of expansion beyond our core aftermarket business into complementary areas, and gives us exposure to a diversified group of blue chip European commercial and light vehicle customers.

For additional information on our recent acquisitions, see Note 2, “Business Acquisitions and Investments,” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

Impact of the Coronavirus (“COVID-19”)

On an ongoing basis, we continue to monitor the impact, if any, of COVID-19 on the global economy, our industry, business, and the markets that we serve. In response to the COVID-19 pandemic, in 2020, we established a committee, comprised of our executive officers, to oversee the Company’s risk identification, management and mitigation strategies regarding the impact of the pandemic on our business and operations. The committee continues to meet on a regular basis, monitoring events related to the pandemic and any appropriate actions to be taken. Among the issues that are actively being monitored by the committee are the general state of economic conditions, governmental measures in response to the pandemic, the spread of the delta and omicron variants, and the enactment of policies and practices to ensure the health and safety of our employees, contractors and customers, as well as customer demand for our products and any potential disruptions in our supply chain.

As related to the performance of our business, we were declared an essential business under national and regional shelter-in-place orders and, as such, our business operations continued throughout 2020. After a downturn in net sales initially in the second quarter of 2020, customer orders strengthened in the last half of the second quarter and continued throughout 2020, resulting in strong net sales for the year ended December 31, 2020. The net sales momentum continued into 2021, as we experienced strong demand for our products, and a seasonal trend that was more in line with years prior to 2020.

Although our business remains strong and we continue to monitor the impact of the pandemic, any uncertain future effect of the pandemic may have a material adverse effect on our business, financial condition and results of operations.

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Impact of Global Supply Chain Disruption and Inflation

Disruptions in the global economy in 2020 and the lingering impacts into 2021 have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw materials, labor and transportation. In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including implementing cost savings initiatives and the pass through of higher costs to our customers, which began in the fourth quarter of 2021. We believe that we have also benefited from our geographically diversified manufacturing footprint and our strategy to bring more product manufacturing in-house, especially with respect to product availability and fill rates. We expect these inflationary trends to continue for some time, and while we believe that we will be able to somewhat offset the impact, there can be no assurances that unforeseen future events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have a material adverse effect on our business, financial condition and results of operations.

Impact of Changes in U.S. Trade Policy

Changes in U.S. trade policy, particularly as it relates to China, as with much of our industry, have resulted in the assessment of increased tariffs on goods that we, as with much of our industry, import into the United States. Although our operating results in 2021 have been only slightly impacted by the tariff costs associated with Chinese sourced products (due to our diversified manufacturing and distribution footprint), we have taken, and continue to take, several actions to mitigate the impact of the increased tariffs, including but not limited to, price increases to our customers. We do not anticipate that the increased tariffs will have a significant impact on our future operating results. Although we are confident that we will be able to pass along the impact of the increased tariffs to our customers, there can be no assurances that we will be able to pass on the entire increased costs imposed by the tariffs.

Environmental, Social, & Governance (“ESG”)

Additionally, we realize the intricate role our employees play to the overall success of our business. Their health and happiness is important, and we continue to look for ways to address their needs and the needs of their families. For example, in 2021 we conducted several surveys on employee engagement, employee satisfaction, and diversity, equity and inclusion to gain a deeper understanding of our employees’ well-being so as to ensure that the company’s culture remains strong.

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Comparison of Results of Operations For Fiscal Years 2021 and 2020

Sales. Consolidated net sales for 2021 were $1,298.8 million, an increase of $170.2 million, or 15.1%, compared to $1,128.6 million in the

      same period of 2020.  Consolidated net sales increased in both our Engine Management and Temperature Control Segments, with the majority of our net sales to customers located in the United States.

Consolidated net sales in 2020 were adversely impacted in the first half of 2020 by the COVID-19 pandemic, and were followed by strong net sales in the second half of 2020, as our business improved to pre-COVID-19 levels with our customers’ POS sales exceeding their comparable levels in prior periods.

The following table summarizes consolidated net sales by segment and by major product group within each segment for the years ended December 31, 2021 and 2020 (in thousands):

	Year Ended December 31,
	2021		2020
Engine Management:
Ignition, Emission Control, Fuel & Safety Related System Products	$	786,514	$	691,722
Wire and Cable		151,422		143,963
Total Engine Management		937,936		835,685
Temperature Control:
Compressors		206,697		163,071
Other Climate Control Parts		141,726		118,883
Total Temperature Control		348,423		281,954
All Other		12,457		10,949
Total	$	1,298,816	$	1,128,588

Engine Management’s net sales increased $102.3 million, or 12.2%, to $937.9 million for the year ended December 31, 2021. Net sales in ignition, emission control, fuel and safety related system products for the year ended December 31, 2021 were $786.5 million, an increase of $94.8 million, or 13.7%, compared to $691.7 million in the same period of 2020. Net sales in the wire and cable product group for the year ended December 31, 2021 were $151.4 million, an increase of $7.5 million, or 5.2%, compared to $144 million in the same period of 2020. Engine Management’s increase in net sales for the year ended December 31, 2021 compared to the same period in 2020, reflects the impact of successful customer initiatives in the marketplace, the phase-in of new business wins, continued strong customer demand as evidenced by robust customer POS, the partial impact of price increases in the fourth quarter of the year, which were implemented to pass through inflationary increases in raw materials, freight and labor costs, and incremental net sales from our soot sensor, Trombetta and Stabil acquisitions, along with the favorable year-over-year impact of having lower net sales in the first part of 2020 due to the general weakness in the economy caused by the COVID-19 pandemic. The favorable net sales results achieved by Engine Management in 2021 more than offset the impact of the lower net sales from the decision, in December 2020, of a large retail customer to pursue a private brand strategy.

Incremental net sales from our soot sensor, Trombetta and Stabil acquisitions of $54.3 million were included in the net sales of the ignition, emission control, fuel and safety related system product group from the date of acquisition through December 31, 2021. Compared to the year ended December 31, 2020, excluding the incremental net sales from the acquisitions, net sales in the ignition, emission control, fuel and safety related product group increased $40.5 million, or 5.9%, and Engine Management net sales increased $48 million, or 5.7%.

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Temperature Control’s net sales increased $66.5 million, or 23.6%, to $348.4 million for the year ended December 31, 2021. Net sales in the compressors product group for the year ended December 31, 2021 were $206.7 million, an increase of $43.6 million, or 26.7%, compared to $163.1 million in the same period of 2020. Net sales in the other climate control parts group for the year ended December 31, 2021 were $141.7 million, an increase of $22.8 million, or 19.2%, compared to $118.9 million for the year ended December 31, 2020. Temperature Control’s increase in net sales for the year ended December 31, 2021, when compared to the same period in 2020, reflects the impact of continued strong customer demand stemming from the impact of very warm summer weather conditions and the replenishment of customer inventory levels, along with the favorable year-over-year impact of having lower net sales in the first part of 2020 due to the general weakness in the economy caused by the COVID-19 pandemic. Demand for our Temperature Control products may vary significantly with summer weather conditions and customer inventory levels.

Gross Margins. Gross margins, as a percentage of consolidated net sales, decreased to 29% for 2021, compared to 29.8% for 2020. The following table summarizes gross margins by

      segment for the years ended December 31, 2021 and 2020, respectively \(in thousands\):

Year Ended<br><br> <br>December 31,	Engine<br><br> <br>Management			Temperature<br><br> <br>Control			Other			Total
2021
Net sales (a)	$	937,936		$	348,423		$	12,457		$	1,298,816
Gross margins		266,961			95,138			14,832			376,931
Gross margin percentage		28.5	%		27.3	%		—	%		29	%
2020
Net sales (a)	$	835,685		$	281,954		$	10,949		$	1,128,588
Gross margins		251,747			75,161			9,747			336,655
Gross margin percentage		30.1	%		26.7	%		—	%		29.8	%
(a)	Segment net sales include intersegment sales in our Engine Management and Temperature Control segments.
---	---

Compared to 2020, gross margins at Engine Management decreased 1.6 percentage points from 30.1% to 28.5%, while gross margins at Temperature Control increased 0.6 percentage points from 26.7% to 27.3%. The gross margin percentage decrease in Engine Management compared to the prior year reflects the impact of the lower gross margins achieved in the second half of 2021 compared to the second half of 2020, resulting from lower fixed cost absorption due to lower production levels than those achieved in the second half of 2020, inflationary cost increases in raw materials, labor and transportation, which began in the second quarter of 2021, and a higher mix of heavy duty OE sales from recent acquisitions, which has a different margin profile than our aftermarket business with lower gross margins but comparable operating margins. Engine Management gross margins in the first half of 2021 were favorably impacted by higher year-over-year absorption due to higher production volumes to build inventory levels, and the impact of year-over-year production variances carried over from the prior year.

The gross margin percentage increase in Temperature Control compared to the prior year reflects the favorable impact of higher year-over-year absorption due to higher production volumes, as well as overall higher sales volume, which more than offset the unfavorable impact in the second half of 2021 of inflationary cost increases in certain raw materials, labor and transportation. While we anticipate continued margin pressures at both Engine Management and Temperature Control resulting from inflationary cost increases, we believe that our annual cost initiatives, and our ability to pass through higher prices to our customers, will help to offset the impact of the inflationary increases on our margins.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) increased to $247.5 million, or 19.1% of consolidated net sales in 2021, as

      compared to $224.7 million, or 19.9% of consolidated net sales in 2020.  The $22.8 million increase in SG&A expenses as compared to 2020 is principally due to \(1\) higher distribution costs associated with higher sales volumes and the impact
      of an increase in freight costs, \(2\) higher employee compensation costs, and \(3\) the impact of incremental expenses of $7.8 million from our soot sensor, Trombetta and Stabil acquisitions, including amortization of intangible assets acquired. 
      The lower year-over-year SG&A expense percentage of consolidated net sales reflects the impact of discretionary cost reduction measures implemented in 2020 and carried over into 2021, and higher year-over-year sales volumes.

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Intangible Asset Impairment. In December 2020, a large retail customer informed us of its decision to pursue a private brand strategy for its engine management product line. As a

      result of this development, products sold under the BWD trademark were significantly reduced. In connection with the decision, we recorded an impairment charge of $2.6 million in 2020.

Restructuring and Integration Expenses. Restructuring and integration expenses were $0.4 million in 2021 compared to restructuring and integration expenses of $0.5 million in 2020.

      Restructuring and integration expenses incurred in 2021 relate to the relocation in our Engine Management Segment of certain inventory, machinery, and equipment acquired in our March 2021 soot sensor acquisition; while restructuring and
      integration expenses incurred in 2020 relate to \(1\) the increase in environmental cleanup costs for ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long Island City, New York
      location, and \(2\) costs related to the residual relocation activities in our Engine Management segment in connection with our integration of the Pollak business of Stoneridge, Inc., acquired in April 2019.

Operating Income. Operating income was $129 million, or 9.9%, of consolidated net sales in 2021, compared to $108.9 million, or 9.6%, of consolidated net sales in 2020. The

      year-over-year increase in operating income of $20.1 million is the result of the impact of higher consolidated net sales and the impact of the impairment charge in 2020 related to the BWD trademark, which more than offset the impact of lower
      gross margins as a percentage of consolidated net sales and higher SG&A expenses.  Operating income of 9.9% of consolidated net sales achieved in 2021 is in line historical operating margin percentages achieved.

Other Non-Operating Income (Expense), Net. Other non-operating income, net was $3.5 million in 2021, compared to $0.8 million in 2020. The year-over-year increase in other

      non-operating income, net results primarily from the increase in year-over-year equity income from our joint ventures and the favorable impact of changes in foreign currency exchange rates.  During the first quarter of 2020, our joint ventures in
      China experienced temporary shutdowns due to the impact of the COVID-19 pandemic, resulting in significantly lower equity income.  In March 2020, the joint ventures reopened and resumed manufacturing and distribution.

Interest Expense. Interest expense decreased to $2 million in 2021, compared to $2.3 million in 2020. The year-over-year decrease in interest expense reflects the impact of lower

      year-over-year average interest rates on our revolving credit facility, which more than offset the impact of slightly higher average outstanding borrowings in 2021 when compared to 2020.

Income Tax Provision. The income tax provision for 2021 was $31 million at an effective tax rate of 23.8%, compared to $27 million at an

      effective tax rate of 25.1% in 2020.  The lower effective tax rate in 2021 compared to 2020 results primarily from the increased year-over-year income tax benefit from the exercise of restricted stock, and changes in the mix of U.S. and foreign
      income.

Loss From Discontinued Operations. Loss from discontinued operations, net of income tax, reflects information contained in the actuarial studies performed as of August 31, 2021 and

      2020, and in December 2020 to reflect events that occurred in the fourth quarter of 2020, as well as other information available and considered by us, and legal expenses and other costs associated with our asbestos-related liability.  During the
      years ended December 31, 2021 and 2020, we recorded a net loss of $8.5 million and $23 million from discontinued operations, respectively.  The loss from discontinued operations for the year ended December 31, 2021 and 2020 includes a $5.3
      million and $25.7 million pre-tax provision, respectively, to increase our indemnity liability in line with the 2021 and 2020 actuarial studies; and legal expenses and other miscellaneous expenses, before taxes, of $6.1 million and $5.4 million
      for 2021 and 2020, respectively.  As discussed more fully in Note 21 “Commitments and Contingencies” in the notes to our consolidated financial statements, we are responsible for certain future liabilities relating to alleged exposure to asbestos
      containing products.

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Net Earnings Attributable to Noncontrolling Interest. In May 2021, we acquired the Trombetta business for $111.7 million. As part of the acquisition, we acquired a 70% ownership in a

      joint venture in Hong Kong, with operations in Shanghai and Wuxi, China \(“Trombetta Asia, Ltd.”\).  Net earnings attributable to the noncontrolling interest of $68,000 during the year ended December 31, 2021 represents 30% of the net earnings of
      Trombetta Asia, Ltd. from the date of acquisition through December 31, 2021.

Comparison of Results of Operations For Fiscal Years 2020 and 2019

For a detailed discussion on the comparison of fiscal year 2020 to fiscal year 2019, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Restructuring and Integration Programs

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

Liquidity and Capital Resources

Operating Activities. During 2021, cash provided by operating activities was $85.6 million compared to $97.9 million in 2020. The decrease in cash provided by operating activities

      resulted primarily from the increase in inventories compared to the decrease in inventories in the prior year, the smaller year-over-year increase in sundry payables and accrued expenses, and the larger year-over-year increase in prepaid expenses
      and other current assets, partially offset by the increase in net earnings, the decrease in accounts receivable compared to the increase in accounts receivable in the prior year, and the larger year-over-year increase in accounts payable.

Net earnings during 2021 were $91 million compared to $57.4 million in 2020. During 2021 (1) the decrease in accounts receivable was $28.5 million compared to the year-over-year increase in accounts receivable of $71.9 million in 2020; (2) the increase in inventories was $107.6 million compared to the year-over-year decrease in inventories of $18 million in 2020; (3) the increase in accounts payable was $33 million compared to the year-over-year increase in accounts payable of $7.4 million in 2020; (4) the increase in prepaid expenses and other current assets was $0.8 million compared to the year-over-year increase in prepaid expenses and other current assets of $0.4 million in 2020; and (5) the increase in sundry payables and accrued expenses was $13.4 million compared to the year-over-year increase in sundry payables and accrued expenses of $40.7 million in 2020. The decrease in accounts receivable during 2021 reflects the impact of $50 million of receivables presented to financial institutions at December 31, 2020, pursuant to our supply chain financing arrangements, that were collected in 2021; while the increase in inventories during 2021 reflects actions taken to meet continued strong customer demand, to replenish stock levels, which were depleted after record sales in the last half of 2020, and to serve as a hedge against the global disruptions in the supply chain. We continue to actively manage our working capital to maximize our operating cash flow.

Investing Activities. Cash used in investing activities was $151.2 million in 2021 compared to $17.8 million in 2020. Investing activities

      during 2021 consisted of \(1\) the payment of $15.4 million, net of $0.9 million of cash acquired, for our acquisition of 100% of the capital stock of Stabil Operative Group GmbH, a German company, \(“Stabil”\); \(2\) the payment of $107.1 million, net
      of $4.6 million of cash acquired, for our acquisition of 100% of the capital stock of Trumpet Holdings, Inc., a Delaware corporation, \(“Trombetta”\); \(3\) the payment of $2.9 million for our acquisition of certain assets of the soot sensor product
      lines from Stoneridge, Inc.; and \(4\) capital expenditures of $25.9 million.  Investing activities in 2020 consisted of capital expenditures of $17.8 million.

Financing Activities. Cash provided by financing activities was $69 million in 2021 compared to cash used in financing activities of $71.5

      million in 2020.  During 2021, we \(1\) increased our borrowings under our revolving credit facility by $115.3 million; \(2\) increased our borrowings under lease obligations and our Polish overdraft facility by $3 million; \(3\) made cash payments for
      the repurchase of shares of our common stock of $26.8 million; and \(4\) paid dividends of $22.2 million.  Cash provided by operating activities, along with borrowings under our revolving credit agreement, lease obligations and Polish overdraft
      facility were used to fund our investing activities, purchase shares of our common stock and pay dividends.

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Cash used in financing activities was $71.5 million in 2020. During 2020, we (1) reduced our borrowings under our revolving credit facility by $42.5 million; (2) reduced our borrowings under lease obligations and our Polish overdraft facility by $4.2 million; (3) made cash payments for the repurchase of shares of our common stock of $13.5 million; and (4) paid dividends of $11.2 million. Cash provided by operating activities was used to pay down our revolving credit facility, our lease obligations and Polish overdraft facility, and to fund our investing activities, purchase shares of our common stock and pay dividends.

Dividends of $22.2 million and $11.2 million were paid in 2021 and 2020, respectively. In January 2020, our Board of Directors voted to increase our quarterly dividend from $0.23 per share in 2019 to $0.25 per share in 2020. In April 2020, in response to the impact of the COVID-19 pandemic on our business, our Board of Directors approved to temporarily suspend our quarterly cash dividend payments and stock repurchases. In September 2020, our Board of Directors approved to reinstate our stock repurchase program; and in October 2020, our Board of Directors approved the reinstatement of our quarterly cash dividend of $0.25 per share. In February 2021, our Board of Directors voted to maintain our quarterly dividend at $0.25 per share in 2021; and in February 2022, our Board of Directors voted to increase our quarterly dividend from $0.25 per share in 2021 to $0.27 per share in 2022.

Comparison of Liquidity and Capital Resources For Fiscal Years 2020 and 2019

For a detailed discussion of our Liquidity and Capital Resources comparison of fiscal year 2020 to fiscal year 2019, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Liquidity

Our primary cash requirements include working capital, capital expenditures, regular quarterly dividends, stock repurchases, principal and interest payments on indebtedness and acquisitions. Our primary sources of funds are ongoing net cash flows from operating activities and availability under our secured revolving credit facility (as detailed below).

We have entered into an amended credit agreement with JPMorgan Chase Bank, N.A., as agent, and a syndicate of lenders. The amended credit agreement provides for a senior secured revolving credit facility with a line of credit of up to $250 million (with an additional $50 million accordion feature) and extends the maturity date to December 2023. The line of credit under the amended agreement also allows for a $10 million line of credit to Canada as part of the $250 million available for borrowing. Direct borrowings under the amended credit agreement bear interest at LIBOR plus a margin ranging from 1.25% to 1.75% based on our borrowing availability, or floating at the alternate base rate plus a margin ranging from 0.25% to 0.75% based on our borrowing availability, at our option. The amended credit agreement is guaranteed by certain of our subsidiaries and secured by certain of our assets.

Borrowings under the amended credit agreement are secured by substantially all of our assets, including accounts receivable, inventory and certain fixed assets, and those of certain of our subsidiaries. Availability under the amended credit agreement is based on a formula of eligible accounts receivable, eligible drafts presented to the banks under our supply chain financing arrangements and eligible inventory. After taking into account outstanding borrowings under the amended credit agreement, there was an additional $122.1 million available for us to borrow pursuant to the formula at December 31, 2021. The loss of business of one or more of our key customers or, a significant reduction in purchases of our products from any one of them, could adversely impact availability under our revolving credit facility.

Outstanding borrowings under the credit agreement, which are classified as current liabilities, were $125.3 million and $10 million at December 31, 2021 and 2020, respectively; while letters of credit outstanding under the credit agreement were $2.6 million and $2.8 million at December 31, 2021 and 2020, respectively. Borrowings under the credit agreement have been classified as current liabilities based upon accounting rules and certain provisions in the agreement.

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At December 31, 2021, the weighted average interest rate on our amended credit agreement was 1.4%, which consisted of $125 million in direct borrowings at 1.4% and an alternative base rate loan of $0.3 million at 3.5%. At December 31, 2020, the weighted average interest rate on our amended credit agreement was 1.4%, which consisted of $10 million in direct borrowings. Our average daily alternative base rate loan balance was $1.1 million and $1.5 million during 2021 and 2020, respectively.

At any time that our borrowing availability is less than the greater of either (a) $25 million, or 10% of the commitments if fixed assets are not included in the borrowing base, or (b) $31.25 million, or 12.5% of the commitments if fixed assets are included in the borrowing base, the terms of the amended credit agreement provide for, among other provisions, a financial covenant requiring us, on a consolidated basis, to maintain a fixed charge coverage ratio of 1:1 at the end of each fiscal quarter (rolling four quarters). As of December 31, 2021, we were not subject to these covenants. The amended credit agreement permits us to pay cash dividends of $20 million and make stock repurchases of $20 million in any fiscal year subject to a minimum availability of $25 million. Provided specific conditions are met, the amended credit agreement also permits acquisitions, permissible debt financing, capital expenditures, and cash dividend payments and stock repurchases of greater than $20 million.

In February 2022, our Polish subsidiary, SMP Poland sp. z.o.o., amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce, formerly HSBC France (Spolka Akcyjna) Oddzial w Polsce. The amended overdraft facility provides for borrowings of up to Zloty 30 million (approximately $8 million). Availability under the amended facility commences in March 2022 and ends in June 2022, with automatic three-month renewals until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period. Borrowings under the overdraft facility will bear interest at a rate equal to WIBOR + 1.5% and are guaranteed by Standard Motor Products, Inc., the ultimate parent company. At December 31, 2021 and 2020, borrowings under the overdraft facility were Zloty 12.3 million (approximately $3 million) and Zloty 0.4 million (approximately $0.1 million), respectively.

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 being accounted for as a sale.

Pursuant to these agreements, we sold $818.8 million and $695.1 million of receivables for the years ended December 31, 2021 and 2020, respectively, which was reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale. Receivables presented at financial institutions and not yet collected as of December 31, 2021 and December 31, 2020 were approximately $1.3 million and $50 million, respectively, and remained in our accounts receivable balance for those periods. A charge in the amount of $11.5 million, $12.2 million and $22 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, 2021, 2020 and 2019, 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 the LIBOR rate, as it is a component of the discount rate applicable to each arrangement. If the LIBOR 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 March 2020, our Board of Directors authorized the purchase of up to $20 million of our common stock under a stock repurchase program. Stock repurchases under this program, during the years ended December 31, 2021 and 2020, were 150,273 and 323,867 shares of our common stock, respectively, at a total cost of $6.5 million and $13.5 million, respectively, thereby completing the 2020 Board of Directors authorization.

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In February 2021, our Board of Directors authorized the purchase of up to an additional $20 million of our common stock under a stock repurchase program. Stock repurchases under this program, during the year ended December 31, 2021, were 464,992 shares of our common stock at a total cost of $20 million, thereby completing the 2021 Board of Directors authorization.

In October 2021, our Board of Directors authorized the purchase of up to an additional $30 million of our common stock under a stock repurchase program. Stock will be purchased under the programs from time to time, in the open market or through private transactions, as market conditions warrant. Stock repurchases under this program, during the year ended December 31, 2021, were 7,000 shares of our common stock, at a total cost of $0.3 million. As of December 31, 2021, there was approximately $29.7 million available for future stock purchases under the program. During the period from January 1, 2022 through February 17, 2022, we have repurchased an additional 64,482 shares of our common stock at a total cost of $3.1 million, thereby reducing the availability under the program to $26.6 million.

Material Cash Commitments

Material cash commitments as of December 31, 2021 consist of required cash payments to service our outstanding borrowings of $125.3 million under our amended revolving credit agreement with JPMorgan Chase Bank, N.A., as agent, and the future minimum cash requirements of $44.9 million through 2031 under operating leases. All of our other cash commitments as of December 31, 2021 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.

We anticipate that our cash flow from operations, available cash and available borrowings under our revolving credit facility, inclusive of the utilization of the $50 million accordion feature in the facility, 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 the COVID-19 pandemic, disruptions in the supply chain that may lead to a further increase in inventories to support our customers, and significant inflationary cost increases in raw materials, labor and transportation, and that there will be no material adverse developments in our business, liquidity or capital requirements. 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 revolving credit facility 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 revolving credit facility, 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 of the notes to our consolidated financial statements.

You should be aware that preparation of our consolidated annual and quarterly 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 COVID-19 pandemic, 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.

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Valuation of Long‑Lived and Intangible Assets and Goodwill

At acquisition, we estimate and record the fair value of purchased intangible assets, which primarily consist of customer relationships, trademarks and trade names, patents, developed technology and intellectual property, and non-compete agreements. Intangible assets acquired through business combinations are subject to potential adjustments within the measurement period, which is up to one year from the acquisition date. Valuing intangible assets requires the use of significant estimates and assumptions. As related to valuing customer relationships, significant estimates and assumptions used include but are not limited to: (1) forecasted revenues attributable to existing customers; (2) forecasted earnings before interest and taxes (“EBIT”) margins; (3) customer attrition rates; and (4) the discount rate. Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill and certain other intangible assets having indefinite lives are not amortized to earnings, but instead are subject to periodic testing for impairment. Intangible assets determined to have definite lives are amortized over their remaining useful lives. We believe that the fair value of acquired identifiable net assets, including intangible assets, are based upon reasonable estimates and assumptions.

We assess the impairment of long‑lived assets, identifiable intangibles assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. 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 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 goodwill quantitative impairment test. In performing the quantitative test, the fair value of the reporting unit is compared to its carrying amount. A charge for impairment is recognized by the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

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 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 impairment loss 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.

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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: (1) historical data available from publicly available studies; (2) an analysis of our recent claims history to estimate likely filing rates into the future; (3) an analysis of our currently pending claims; (4) an analysis of our settlements and awards of asbestos-related damages to date; and (5) an analysis of closed claims with pay ratios and lag patterns in order to develop average future settlement values. 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, which will reported in earnings (loss) from discontinued operations in the accompanying statement of operations. 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 21, “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.

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ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk, primarily related to foreign currency exchange and interest rates. These exposures are actively monitored by management. Our exposure to foreign exchange rate risk is due to certain costs, revenues and borrowings being denominated in currencies other than one of our subsidiary’s functional currency. Similarly, we are exposed to market risk as the result of changes in interest rates, which may affect the cost of our financing. It is our policy and practice to use derivative financial instruments only to the extent necessary to manage exposures. We do not hold or issue derivative financial instruments for trading or speculative purposes. As of December 31, 2021, we did not have any derivative financial instruments.

Exchange Rate Risk

We have exchange rate exposure, primarily, with respect to the Canadian Dollar, the Euro, the British Pound, the Polish Zloty, the Hungarian Forint, the Mexican Peso, the Taiwan Dollar, the Chinese Yuan Renminbi and the Hong Kong Dollar. As of December 31, 2021, our monetary assets and liabilities which are subject to this exposure are immaterial, therefore, the potential immediate loss to us that would result from a hypothetical 10% change in foreign currency exchange rates would not be expected to have a material impact on our earnings or cash flows. This sensitivity analysis assumes an unfavorable 10% fluctuation in the exchange rates affecting the foreign currencies in which monetary assets and liabilities are denominated and does not take into account the incremental effect of such a change on our foreign currency denominated revenues.

Interest Rate Risk

We manage our exposure to interest rate risk through the proportion of fixed rate debt and variable rate debt in our debt portfolio. To manage a portion of our exposure to interest rate changes, we have in the past entered into interest rate swap agreements. We invest our excess cash in highly liquid short-term investments. Substantially all of our debt is variable rate debt as of December 31, 2021 and 2020. Based upon our current level of borrowings under our revolving credit facility and our Polish overdraft facility, and our excess cash, the effect of a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate would have an immaterial impact on our earnings or cash flows.

In addition, 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. During the year ended December 31, 2021, we sold $818.8 million of receivables. Depending upon the level of sales of receivables pursuant these agreements, the effect of a hypothetical, instantaneous and unfavorable change of 100 basis points in the margin rate may have an approximate $8.2 million negative impact on our earnings or cash flows. The charge related to the sale of receivables is included in selling, general and administrative expenses in our consolidated statements of operations.

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Management’s Report on Internal Control over Financial Reporting	44
Report of Independent Registered Public Accounting Firm—Internal Control Over Financial Reporting	45
Report of Independent Registered Public Accounting Firm—Consolidated Financial Statements	47
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019	50
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019	51
Consolidated Balance Sheets as of December 31, 2021 and 2020	52
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019	53
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019	54
Notes to Consolidated Financial Statements	55

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MANAGEMENT’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

To the Stockholders of

Standard Motor Products, Inc. and Subsidiaries:

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act). Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Because of these inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation, and may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. During 2021, the Company acquired Trumpet Holdings, Inc, (“Trombetta”) and Stabil Operative Group GmbH (“Stabil”), and have

      excluded from our assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Trombetta’s and Stabil’s internal control over financial reporting associated with 13.8% of total assets and
      3.5% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the
      Treadway Commission \(COSO\) in the 2013 Internal Control - Integrated Framework.  Based on our assessment using those criteria, and after consideration of the aforementioned exclusion, we concluded that,
      as of December 31, 2021, our internal control over financial reporting is effective.

Our independent registered public accounting firm, KPMG LLP, has audited our consolidated financial statements as of and for the year ended December 31, 2021 and has also audited the effectiveness of our internal control over financial reporting as of December 31, 2021. KPMG’s report appears on the following pages of this “Item 8. Financial Statements and Supplementary Data.”

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM –

INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Stockholders and Board of Directors

Standard Motor Products, Inc. and Subsidiaries:

Opinion on Internal Control Over Financial Reporting

We have audited Standard Motor Products, Inc.’s and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained,

      in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework \(2013\) issued by the
      Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement Schedule II, Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 23, 2022 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Trumpet Holdings, Inc. (“Trombetta”) and Stabil Operative Group GmbH, (“Stabil”) during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Trombetta and Stabil’s internal control over financial reporting associated with 13.8% of total assets and 3.5% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Trombetta and Stabil.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

New York, New York

February 23, 2022

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM –

CONSOLIDATED FINANCIAL STATEMENTS

To the Stockholders and Board of Directors

Standard Motor Products, Inc. and Subsidiaries:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Standard Motor Products, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2021, and the related notes and financial statement Schedule II, Valuation and Qualifying Accounts (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established

      in Internal Control – Integrated Framework \(2013\) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2022 expressed an unqualified opinion on
      the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Asbestos liability and litigation

As discussed in Notes 1 and 21 to the consolidated financial statements, the Company is involved in asbestos litigation and has a potential asbestos liability. As of December 31, 2021, the accrued asbestos liability was $60.5 million. The Company’s asbestos liability represents the low end of the actuarially determined range of the undiscounted liability for settlement payments and awards of asbestos related damages, excluding legal costs and any potential recovery from insurance carriers.

We identified the assessment of the asbestos liability recorded as a critical audit matter. This required subjective auditor judgment, due to the nature of the estimate and assumptions, including the applicability of those assumptions to the current facts and circumstances, as well as judgments about future events and uncertainties. Specialized skills were needed to evaluate the Company’s key assumptions. The key assumptions included future claim filings, closed with pay ratios, closed with pay lag patterns, settlement values, large claims, and ratios of allocated loss adjustment exposure (ALAE) to indemnity. Minor changes to these key assumptions could have had a significant effect on the Company’s assessment of the accrual for the asbestos liability.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the asbestos liability estimation process. This included controls related to the key assumptions and the claims data utilized in the process, and the potential need for an updated actuarial valuation. We evaluated the asbestos related legal cases settled during the year and the number of open cases as of year-end by reading letters received directly from the Company’s external and internal legal counsel. We tested a selection of claims data used in the actuarial model by comparing the selection items to underlying claims documentation. We involved an actuarial professional with specialized skills and knowledge, who assisted in evaluating (1) the future claim filings assumption by developing an independent expectation and comparing it against the Company’s future claim filing assumption, and (2) the closed with pay ratios, closed with pay lag patterns, settlement values, large claims, and ratios of ALAE to indemnity by comparing them to the Company’s historical experience.

Fair value of acquisition date intangible assets

As discussed in Note 2 in the consolidated financial statements, in May 2021, the Company acquired Trumpet Holdings, Inc., (“Trombetta) for a purchase price of $111.7 million. As a result of the transaction, the Company acquired certain intangible assets, including customer relationship intangible assets with an acquisition date fair value of $39.4 million.

We identified the evaluation of the fair value of the acquisition date customer relationship intangible assets acquired in the Trombetta transaction as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the key assumptions used to determine the acquisition-date fair value of the acquired customer relationship assets. The key assumptions developed by the Company included the following for which there was limited observable market information, and the calculated fair value of such assets was sensitive to possible changes to these key assumptions:

•	forecasted revenues attributable to existing customers
•	forecasted earnings before interest and taxes (EBIT) margins
---	---
•	customer attrition rate
---	---
•	discount rate.
---	---

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The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date valuation process, including the controls over the development of the key assumptions listed above. We evaluated the Company’s forecasted revenues attributable to existing customers and EBIT margins by comparing these forecasted assumptions to historical information of Trombetta. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating (1) the estimated annual attrition rate by comparing it to historical data of the Company, and (2) the Company’s discount rate by comparing the rate against a discount rate range that was independently developed using publicly available market data for comparable companies.

/s/ KPMG LLP

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

New York, New York

February 23, 2022

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


			2020			2019

Net sales	1,298,816		$	1,128,588		$	1,137,913
Cost of sales	921,885			791,933			806,113
Gross profit	376,931			336,655			331,800
Selling, general and administrative expenses	247,547			224,670			234,715
Intangible asset impairment	—			2,600			—
Restructuring and integration expenses	392			464			2,585
Other income (expense), net	7			(26	)		(5	)
Operating income	128,999			108,895			94,495
Other non-operating income, net	3,494			812			2,587
Interest expense	2,028			2,328			5,286
Earnings from continuing operations before income taxes	130,465			107,379			91,796
Provision for income taxes	31,044			26,962			22,745
Earnings from continuing operations	99,421			80,417			69,051
Loss from discontinued operations, net of income tax benefit of 2,975, 8,089 and 3,912	(8,467	)		(23,024	)		(11,134	)
Net earnings	90,954			57,393			57,917
Net earnings attributable to noncontrolling interest	68			—			—
Net earnings attributable to SMP (a)	90,886		$	57,393		$	57,917
Net earnings attributable to SMP
Earnings from continuing operations	99,353		$	80,417		$	69,051
Discontinued operations	(8,467	)		(23,024	)		(11,134	)
Total	90,886		$	57,393		$	57,917
Per share data attributable to SMP
Net earnings per common share – Basic:
Earnings from continuing operations	4.49		$	3.59		$	3.09
Discontinued operations	(0.39	)		(1.02	)		(0.50	)
Net earnings per common share – Basic	4.10		$	2.57		$	2.59
Net earnings per common share – Diluted:
Earnings from continuing operations	4.39		$	3.52		$	3.03
Discontinued operations	(0.37	)		(1.01	)		(0.49	)
Net earnings per common share – Diluted	4.02		$	2.51		$	2.54
Dividend declared per share	1.00		$	0.50		$	0.92
Average number of common shares	22,147,479			22,374,123			22,378,414
Average number of common shares and dilutive common shares	22,616,456			22,825,885			22,818,451

All values are in US Dollars.

(a) Throughout this Form 10-K, “SMP” refers to Standard Motor Products, Inc. and subsidiaries.

See accompanying notes to consolidated financial statements.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year Ended December 31,
	2021			2020			2019
	(In thousands)
Net earnings	$	90,954		$	57,393		$	57,917
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(2,462	)		2,929			1,024
Pension and postretirement plans		(16	)		(16	)		(19	)
Total other comprehensive income (loss), net of tax		(2,478	)		2,913			1,005
Total comprehensive income		88,476			60,306			58,922
Comprehensive income (loss) attributable to noncontrolling interest, net of tax:
Net earnings		68			—			—
Foreign currency translation adjustments		15			—			—
Comprehensive income (loss) attributable to noncontrolling interest, net of tax		83			—			—
Comprehensive income attributable to SMP	$	88,393		$	60,306		$	58,922

See accompanying notes to consolidated financial statements.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


			2020

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	21,755		$	19,488
Accounts receivable, less allowances for discounts and expected credit losses of 6,170 and 5,822 in 2021 and 2020, respectively	180,604			198,039
Inventories	468,755			345,502
Unreturned customer inventories	22,268			19,632
Prepaid expenses and other current assets	17,823			15,875
Total current assets	711,205			598,536
Property, plant and equipment, net	102,786			89,105
Operating lease right-of-use assets	40,469			29,958
Goodwill	131,652			77,837
Other intangibles, net	106,234			54,004
Deferred incomes taxes	36,126			44,770
Investments in unconsolidated affiliates	44,087			40,507
Other assets	25,402			21,823
Total assets	1,197,961		$	956,540
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Notes payable	125,298		$	10,000
Current portion of other debt	3,117			135
Accounts payable	137,167			100,018
Sundry payables and accrued expenses	57,182			47,078
Accrued customer returns	42,412			40,982
Accrued core liability	23,663			22,014
Accrued rebates	42,472			46,437
Payroll and commissions	45,058			35,938
Total current liabilities	476,369			302,602
Long-term debt	21			97
Noncurrent operating lease liabilities	31,206			22,450
Other accrued liabilities	25,040			25,929
Accrued asbestos liabilities	52,698			55,226
Total liabilities	585,334			406,304
Commitments and contingencies
Stockholders’ equity:
Common Stock - par value 2.00<br> per share:
Authorized 30,000,000<br> shares, issued 23,936,036 shares	47,872			47,872
Capital in excess of par value	105,377			105,084
Retained earnings	532,319			463,612
Accumulated other comprehensive income	(8,169	)		(5,676	)
Treasury stock - at cost (1,911,792<br> shares and 1,586,923 shares in 2021<br> and 2020, respectively)	(75,819	)		(60,656	)
Total SMP stockholders’ equity	601,580			550,236
Noncontrolling interest	11,047			—
Total stockholders’ equity	612,627			550,236
Total liabilities and stockholders’ equity	1,197,961		$	956,540

All values are in US Dollars.

See accompanying notes to consolidated financial statements.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2021			2020			2019
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	90,954		$	57,393		$	57,917
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		27,243			26,323			25,809
Amortization of deferred financing cost		228			228			225
Increase (decrease) to allowance for expected credit losses		451			396			(295	)
Increase (decrease) to inventory reserves		(585	)		5,962			4,858
Intangible asset impairment		—			2,600			—
Equity (income) from joint ventures		(3,295	)		(820	)		(2,865	)
Employee Stock Ownership Plan allocation		2,513			2,301			2,519
Stock-based compensation		9,479			8,101			6,917
(Increase) decrease in deferred income taxes		(1,801	)		(8,334	)		4,736
Increase in tax valuation allowance		466			864			358
Loss on discontinued operations, net of tax		8,467			23,024			11,134
Change in assets and liabilities:
(Increase) decrease in accounts receivable		28,464			(71,933	)		2,789
(Increase) decrease in inventories		(107,609	)		17,984			(17,901	)
Increase in prepaid expenses and other current assets		(843	)		(370	)		(8,296	)
Increase (decrease) in accounts payable		33,046			7,428			(1,950	)
Increase (decrease) in sundry payables and accrued expenses		13,430			40,651			(2,957	)
Net changes in other assets and liabilities		(15,044	)		(13,902	)		(6,070	)
Net cash provided by operating activities		85,564			97,896			76,928
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of and investments in businesses, net of cash acquired		(125,419	)		—			(43,490	)
Net proceeds from sale of Grapevine, Texas facility		—			—			4,801
Capital expenditures		(25,875	)		(17,820	)		(16,185	)
Other investing activities		45			21			62
Net cash used in investing activities		(151,249	)		(17,799	)		(54,812	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit agreements		115,298			(42,460	)		8,771
Net borrowings (repayments) of other debt and lease obligations		3,048			(4,248	)		(911	)
Purchase of treasury stock		(26,862	)		(13,482	)		(10,738	)
Dividends paid		(22,179	)		(11,218	)		(20,593	)
Increase (decrease) in overdraft balances		247			(108	)		93
Dividends paid to noncontrolling interest		(540	)		—			—
Net cash provided by (used in) financing activities		69,012			(71,516	)		(23,378	)
Effect of exchange rate changes on cash		(1,060	)		535			496
Net increase (decrease) in cash and cash equivalents		2,267			9,116			(766	)
CASH AND CASH EQUIVALENTS at beginning of year		19,488			10,372			11,138
CASH AND CASH EQUIVALENTS at end of year	$	21,755		$	19,488		$	10,372
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	1,721		$	2,187		$	5,030
Income taxes	$	26,323		$	24,640		$	22,267

See accompanying notes to consolidated financial statements.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

  EQUITY

Years Ended December 31, 2021, 2020 and 2019

		Capital in<br><br> <br>Excess of<br><br> <br>Par Value			Retained<br><br> <br>Earnings			Accumulated<br><br> <br>Other<br><br> <br>Comprehensive<br><br> <br>Income (Loss)			Treasury<br><br> <br>Stock			Total<br><br> <br>SMP			Non-<br><br> <br>controlling<br><br> <br>Interest			Total
(In thousands)
BALANCE AT DECEMBER 31, 2018	47,872	$	102,470		$	380,113		$	(9,594	)	$	(53,660	)	$	467,201		$	—		$	467,201
Net earnings	—		—			57,917			—			—			57,917			—			57,917
Other comprehensive loss, net of tax	—		—			—			1,005			—			1,005			—			1,005
Cash dividends paid (0.92<br> per share)	—		—			(20,593	)		—			—			(20,593	)		—			(20,593	)
Purchase of treasury stock	—		—			—			—			(10,738	)		(10,738	)		—			(10,738	)
Stock-based compensation	—		(473	)		—			—			7,390			6,917			—			6,917
Employee Stock Ownership Plan	—		745			—			—			1,774			2,519			—			2,519
BALANCE AT DECEMBER 31, 2019	47,872		102,742			417,437			(8,589	)		(55,234	)		504,228			—			504,228
Net earnings	—		—			57,393			—			—			57,393			—			57,393
Other comprehensive income, net of tax	—		—			—			2,913			—			2,913			—			2,913
Cash dividends paid (0.50<br> per share)	—		—			(11,218	)		—			—			(11,218	)		—			(11,218	)
Purchase of treasury stock	—		—			—			—			(13,482	)		(13,482	)		—			(13,482	)
Stock-based compensation	—		1,712			—			—			6,389			8,101			—			8,101
Employee Stock Ownership Plan	—		630			—			—			1,671			2,301			—			2,301
BALANCE AT DECEMBER 31, 2020	47,872		105,084			463,612			(5,676	)		(60,656	)		550,236			—			550,236
Noncontrolling interest in business acquired	—		—			—			—			—			—			11,504			11,504
Net earnings	—		—			90,886			—			—			90,886			68			90,954
Other comprehensive loss, net of tax	—		—			—			(2,493	)		—			(2,493	)		15			(2,478	)
Cash dividends paid (1.00<br> per share)	—		—			(22,179	)		—			—			(22,179	)		—			(22,179	)
Purchase of treasury stock	—		—			—			—			(26,862	)		(26,862	)		—			(26,862	)
Dividends paid to noncontrolling interest	—		—			—			—			—			—			(540	)		(540	)
Stock-based compensation	—		159			—			—			9,320			9,479			—			9,479
Employee Stock Ownership Plan	—		134			—			—			2,379			2,513			—			2,513
BALANCE AT DECEMBER 31, 2021	47,872	$	105,377		$	532,319		$	(8,169	)	$	(75,819	)	$	601,580		$	11,047		$	612,627

All values are in US Dollars.

See accompanying notes to consolidated financial statements.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

Principles of Consolidation

Standard Motor Products, Inc. and subsidiaries (referred to hereinafter in these notes to the consolidated financial statements as “we,” “us,” “our,” “SMP,” or the “Company”) is a leading automotive parts manufacturer and distributor of engine management and temperature control systems of motor vehicles in the automotive aftermarket industry with a complementary focus on the heavy duty, industrial equipment and original equipment service markets.

The consolidated financial statements include our accounts and all domestic and international companies in which we have more than a 50% equity ownership, except in instances where the minority shareholder maintains substantive participating rights, in which case we follow the equity method of accounting. In instances where we have more than a 50% equity ownership and the minority shareholder does not maintain substantive participating rights, our consolidated financial statements include the accounts of the company on a consolidated basis with its net income and equity reported at amounts attributable to both our equity position and that of the noncontrolling interest. Investments in unconsolidated affiliates are accounted for on the equity method, as we do not have a controlling financial interest but have the ability to exercise significant influence. All significant inter-company items have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. We have made a number of estimates and assumptions in the preparation of these consolidated financial statements. 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 COVID-19 pandemic, and other unforeseen changes in the industry, or business, could materially impact the estimates, and may have a material adverse effect on our business, financial condition and results of operations. Some of the more significant estimates include allowances for doubtful accounts, cash discounts, valuation of inventory, valuation of long-lived assets, goodwill and other intangible assets, depreciation and amortization of long-lived assets, product liability exposures, asbestos, environmental and litigation matters, valuation of deferred tax assets, share based compensation and sales returns and other allowances.

Reclassification

Certain prior period amounts in the accompanying consolidated financial statements and related notes have been reclassified to conform to the 2021 presentation.

Cash and Cash Equivalents

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

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Allowance for Expected Credit Losses and Cash Discounts

We do not generally require collateral for our trade accounts receivable. Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future. These allowances are established based on a combination of write-off history, supportable forecasts, aging analysis, and specific account evaluations. When a receivable balance is known to be uncollectible, it is written off against the allowance for expected credit losses. Cash discounts are provided based on an overall average experience rate applied to qualifying accounts receivable balances.

Inventories

Inventories are valued at the lower of cost and net realizable value. Cost is determined on the first-in first-out basis. Where appropriate, standard cost systems are utilized for purposes of determining cost; the standards are adjusted as necessary to ensure they approximate actual costs. Estimates of lower of cost and net realizable value of inventory are determined by comparing the actual cost of the product to the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation of the inventory.

We also evaluate inventories on a regular basis to identify inventory on hand that may be obsolete or in excess of current and future projected market demand. For inventory deemed to be obsolete, we provide a reserve on the full value of the inventory. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates our estimate of future demand. Future projected demand requires management judgment and is based upon (a) our review of historical trends and (b) our estimate of projected customer specific buying patterns and trends in the industry and markets in which we do business. Using rolling twelve month historical information, we estimate future demand on a continuous basis. The historical volatility of such estimates has been minimal. We maintain provisions for inventory reserves of $46.2 million and $49.4 million as of December 31, 2021 and 2020, respectively.

We utilize cores (used parts) in our remanufacturing processes for air conditioning compressors, diesel injectors, and diesel pumps. The production of air conditioning compressors, diesel injectors, and diesel pumps involves the rebuilding of used cores, which we acquire either in outright purchases from used parts brokers, or from returns pursuant to an exchange program with customers. Under such exchange programs, at the time of sale of air conditioning compressors, diesel injectors, and diesel pumps, we estimate the core expected to be returned from the customer and record the estimated return as unreturned customer inventory.

In addition, many of our customers can return inventory to us based upon customer warranty and overstock arrangements within customer specific limits. At the time products are sold, we accrue a liability for product warranties and overstock returns and record as unreturned customer inventory our estimate of anticipated customer returns. Estimates are based upon historical information on the nature, frequency and probability of the customer return. Unreturned core, warranty and overstock customer inventory is recorded at standard cost. Revision to these estimates is made when necessary, based upon changes in these factors. We regularly study trends of such claims.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost and are depreciated using the straight-line method of depreciation over the estimated useful lives as follows:

	Estimated Life
Buildings	25 to 33-1/2 years
Building improvements	10 to 25 years
Machinery and equipment	5 to 12 years
Tools, dies and auxiliary equipment	3 to 8 years
Furniture and fixtures	3 to 12 years

Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the lease. Costs related to maintenance and repairs which do not prolong the assets useful lives are expensed as incurred. We assess our property, plant and equipment to be held and used for impairment when indicators are present that the carrying value may not be recoverable.

Leases

We determine if an arrangement is a lease at inception. For operating leases, we include and report operating lease right-of-use (“ROU”) assets, sundry payables and accrued expenses, and noncurrent operating lease liabilities on our consolidated balance sheet for leases with a term longer than twelve months. Finance leases are reported on our consolidated balance sheets in property, plant and equipment, current portion of other debt, and long-term debt.

Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments over the lease term. Our ROU assets represent the right to use an underlying leased asset over the existing lease term, and the corresponding lease liabilities represent our obligation to make lease payments arising from the lease agreement. As most of our leases do not provide for an implicit rate, we use our secured incremental borrowing rate based on the information available when determining the present value of our lease payments. Our lease terms may include options to terminate, or extend, our lease when it is reasonably certain that we will execute the option. Lease agreements may contain lease and non-lease components, which are generally accounted for separately. Operating lease expense is recognized on a straight-line basis over the lease term.

Valuation of Long-Lived and Intangible Assets and Goodwill

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 impairment loss is recognized equal to the difference between the assets fair value and their carrying value.

Foreign Currency Translation

Assets and liabilities of our foreign operations are translated into U.S. dollars at year-end exchange rates. Income statement accounts are translated using the average exchange rates prevailing during the year. The resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) and remains there until the underlying foreign operation is liquidated or substantially disposed of. Foreign currency transaction gains or losses are recorded in the statement of operations under the caption “other non-operating income (expense), net.”

Revenue Recognition

We derive our revenue primarily from sales of replacement parts for motor vehicles from both our Engine Management and Temperature Control Segments. We recognize revenues when our performance obligation has been satisfied and the control of products has been transferred to a customer which typically occurs upon shipment. Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of goods or providing services. The amount of consideration we receive and revenue we recognize depends on the marketing incentives, product warranty and overstock returns we offer to our customers. For certain of our sales of remanufactured products, we also charge our customers a deposit for the return of a used core component which we can use in our future remanufacturing activities. Such deposit is not recognized as revenue at the time of the sale but rather carried as a core liability. At the same time, we estimate the core expected to be returned from the customer and record the estimated return as unreturned customer inventory. The liability is extinguished when a core is actually returned to us, or at period end when we estimate and recognize revenue for the core deposits not expected to be returned. We estimate and record provisions for cash discounts, quantity rebates, sales returns and warranties in the period the sale is recorded, based upon our prior experience and current trends. Significant management judgments and estimates must be made and used in estimating sales returns and allowances relating to revenue recognized in any accounting period.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Product Warranty and Overstock Returns

Many of our products carry a warranty ranging from a 90-day limited warranty to a lifetime limited warranty, which generally covers defects in materials or workmanship and failure to meet industry published specifications and/or the result of installation error. In addition to warranty returns, we also permit our customers to return new, undamaged products to us within customer-specific limits (which are generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories. At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency and average cost of the claim and the probability of the customer return. At the same time, we record an estimate of anticipated customer returns as unreturned customer inventory. Significant judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. Revision to these estimates is made when necessary, based upon changes in these factors. We regularly study trends of such claims.

New Customer Acquisition Costs

New customer acquisition costs refer to arrangements pursuant to which we incur change-over costs to induce a new customer to switch from a competitor’s brand. In addition, change-over costs include the costs related to removing the new customer’s inventory and replacing it with our inventory commonly referred to as a stock lift. New customer acquisition costs are recorded as a reduction to revenue when incurred.

Selling, General and Administration Expenses

Selling, general and administration expenses include shipping costs and advertising, which are expensed as incurred. Shipping and handling charges, as well as freight to customers, are included in distribution expenses as part of selling, general and administration expenses.

Deferred Financing Costs

Deferred financing costs represent costs incurred in conjunction with our debt financing activities. Deferred financing costs related to our revolving credit facility are capitalized and amortized over the life of the related financing arrangement. If the debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired and are recorded in the statement of operations under the caption other non-operating income (expense), net.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accounting for Income Taxes

Income taxes are calculated using the asset and liability method. Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, as measured by the current enacted tax rates.

We maintain valuation allowances when it is more likely than not that all or a portion of a deferred asset will not be realized. In determining whether a valuation allowance is warranted, we consider all positive and negative evidence and all sources of taxable income such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies to estimate if sufficient future taxable income will be generated to realize the deferred tax asset. The assessment of the adequacy of our valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates, or we adjust these estimates in future periods for current trends or expected changes in our estimating assumptions, we may need to modify the level of valuation allowance which could materially impact our business, financial condition and results of operations.

The valuation allowance of $2.1 million as of December 31, 2021 is intended to provide for the uncertainty regarding the ultimate realization of our U.S. foreign tax credit carryovers and foreign net operating loss carryovers. Based on these considerations, we believe it is more likely than not that we will realize the benefit of the net deferred tax asset of $36.1 million as of December 31, 2021, which is net of the remaining valuation allowance.

Tax benefits are recognized for an uncertain tax position when, in management’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances and when new information becomes available. Such adjustments are recognized entirely in the period in which they are identified. During the years ended December 31, 2021, 2020 and 2019, we did not establish a liability for uncertain tax positions.

Environmental Reserves

We are subject to various U.S. Federal and state and local environmental laws and regulations and are involved in certain environmental remediation efforts. We estimate and accrue our liabilities resulting from such matters based upon a variety of factors including the assessments of environmental engineers and consultants who provide estimates of potential liabilities and remediation costs. Such estimates are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years. Potential recoveries from insurers or other third parties of environmental remediation liabilities are recognized independently from the recorded liability, and any asset related to the recovery will be recognized only when the realization of the claim for recovery is deemed probable.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Asbestos Litigation

Loss Contingencies

We have loss contingencies, for such matters as legal claims and legal proceedings. Establishing loss reserves for these matters requires estimates, judgment of risk exposure and ultimate liability. We record provisions when the liability is considered probable and reasonably estimable. Significant judgment is required for both the determination of probability and the determination as to whether an exposure can be reasonably estimated. We maintain an ongoing monitoring and identification process to assess how the activities are progressing against the accrued estimated costs. As additional information becomes available, we reassess our potential liability related to these matters. Adjustments to the liabilities are recorded in the statement of operations in the period when additional information becomes available. Such revisions of the potential liabilities could have a material adverse effect on our business, financial condition or results of operations.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments and accounts receivable. We place our cash investments with high quality financial institutions and limit the amount of credit exposure to any one institution. Although we are directly affected by developments in the vehicle parts industry, management does not believe significant credit risk exists.

With respect to accounts receivable, such receivables are primarily from warehouse distributors and major retailers in the automotive aftermarket industry located in the U.S. We perform ongoing credit evaluations of our customers’ financial conditions. A significant portion of our net sales are concentrated from our three largest individual customers. 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.

For further information on net sales to our three largest customers and our concentration our customer risk, see Note 19, “Industry Segment and Geographic Data.”

Foreign Cash Balances

Substantially all of the cash and cash equivalents, including foreign cash balances, at December 31, 2021 and 2020 were uninsured. Foreign cash balances at December 31, 2021 and 2020 were $16.8 million and $16.4 million, respectively.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Recently Issued Accounting Pronouncements

Standards that were adopted

Standard	Description	Date of<br><br> <br>adoption	Effects on the financial<br><br> <br>statements or other<br><br> <br>significant matters
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	This standard is intended to simplify the accounting for income taxes by removing certain ASC Topic 740 exceptions in performing intra-period tax allocations among<br> income statement components, in calculating certain deferred tax liabilities related to outside basis differences, and in calculating income taxes in interim periods with year-to-date losses. In addition, this standard is also intended to<br> improve consistency and add simplification by clarifying and amending the reporting of franchise taxes and other taxes partially based on income, the recognition of deferred income taxes related to the step-up in tax basis goodwill, and the<br> reporting in interim periods of the recognition of the enactment of tax laws or rate changes.	January 1, 2021	The adoption of the technical clarifications in the standard did not materially impact our accounting for income taxes, our consolidated financial statements and<br> related disclosures.

Standards that are not yet adopted as of December 31, 2021

The following table provides a brief description of recently issued accounting pronouncements that have not yet been adopted as of December 31, 2021, and that could have an impact on our financial statements:

Standard	Description	Date of<br><br> <br>adoption /<br><br> <br>Effective<br><br> <br>date	Effects on the financial<br><br> <br>statements or other<br><br> <br>significant matters
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	This standard is intended to provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference<br> rate reform on financial reporting. The new standard is applicable to contracts that reference LIBOR, or another reference rate, expected to be discontinued due to reference rate reform.	Effective March 12, 2020 through December 31, 2022	The new standard may be applied as of the beginning of an interim period that includes March 12, 2020<br> through December 31, 2022. As certain of our contracts reference LIBOR, including our revolving credit facility and supply chain financing arrangements, we are currently<br> reviewing the optional guidance in the standard to determine its impact upon the discontinuance of LIBOR. At this time, we do not believe that the new guidance, nor the discontinuance of LIBOR, will have a material impact on our<br> consolidated financial statements and related disclosures.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Business Acquisitions and Investments

2021 Business Acquisitions

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

In September 2021, we acquired 100% of the capital stock of Stabil Operative Group GmbH, a German company (“Stabil”), for Euros 13.7 million, or $16.3 million, subject to certain post-closing adjustments. Stabil is a manufacturer and distributor of a variety of components, including electronic sensors, control units, and clamping devices to the European Original Equipment (“OE”) market, serving both commercial and light vehicle applications. The acquired Stabil business was paid for with cash funded by borrowings under our revolving credit facility with JPMorgan Chase Bank, N.A., as agent, and is headquartered on the outskirts of Stuttgart, Germany with facilities in Germany and Hungary. The acquisition, to be reported as part of our Engine Management Segment, aligns with our strategy of expansion beyond our core aftermarket business into complementary areas, and gives us exposure to a diversified group of blue chip European commercial and light vehicle OE customers.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values, subject to final agreement of post-closing adjustments, which we do anticipate will be significant (in thousands):

Purchase price				$	16,290
Assets acquired and liabilities assumed:
Receivables	$	2,852
Inventory		5,126
Other current assets (1)		1,628
Property, plant and equipment, net		1,810
Operating lease right-of-use assets		4,971
Intangible assets		5,471
Goodwill		4,827
Current liabilities		(4,190	)
Noncurrent operating lease liabilities		(4,454	)
Deferred income taxes		(1,751	)
Net assets acquired				$	16,290
(1)	The other current assets balance includes $0.9 million of cash acquired.
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Intangible assets acquired of $5.5 million consist of customer relationships that will be amortized on a straight-line basis over the estimated useful life of 20 years. Goodwill of $4.8 million was allocated to the Engine Management Segment. The goodwill reflects relationships, business specific knowledge and the replacement cost of an assembled workforce associated with personal reputations. The intangible assets and goodwill are not deductible for tax purposes.

Revenues from the acquired business included in our consolidated statement of operations from the acquisition date through December 31, 2021 were $7.2 million.

Acquisition of Capital Stock of Trumpet Holdings, Inc. (“Trombetta”)

In May 2021, we acquired 100% of the capital stock of Trumpet Holdings, Inc., a Delaware corporation, (more commonly known as “Trombetta”), for $111.7 million, subject to certain post-closing adjustments. In December 2021, the post-closing adjustments were finalized at approximately $30,000, thereby reducing the purchase price. Trombetta is a leading provider of power switching and power management products to Original Equipment (“OE”) customers in various markets. The acquired Trombetta business was paid for in cash funded by borrowings under our revolving credit facility with JPMorgan Chase Bank, N.A., as agent, and has manufacturing facilities in Milwaukee, Wisconsin; Sheboygan Falls, Wisconsin; Tijuana, Mexico, as well as a 70% ownership in a joint venture in Hong Kong, with operations in Shanghai and Wuxi, China (“Trombetta Asia, Ltd.”). The acquisition, to be reported as part of our Engine Management Segment, aligns with our strategy of expansion into the OE heavy duty market.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values, subject to finalization of amounts related to deferred income taxes, which we do not anticipate will be significant (in thousands):

Purchase price				$	111,711
Assets acquired and liabilities assumed:
Receivables	$	9,173
Inventory		12,460
Other current assets (1)		5,193
Property, plant and equipment, net		4,939
Operating lease right-of-use assets		3,847
Intangible assets		54,700
Goodwill		49,250
Current liabilities		(5,072	)
Noncurrent operating lease liabilities		(3,065	)
Deferred income taxes		(8,210	)
Subtotal					123,215
Fair value of acquired noncontrolling interest					(11,504	)
Net assets acquired				$	111,711
(1)	The other current assets balance includes $4.6 million of cash acquired.
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Intangible assets acquired of $54.7 million consist of customer relationships of $39.4 million that will be amortized on a straight-line basis over the estimated useful life of 20 years; developed technology of $13.4 million that will be amortized on a straight-line basis over the estimated useful life of 15 years; and a trade name of $1.9 million that will be amortized on a straight-line basis over the estimated useful life of 10 years. Goodwill of $49.3 million was allocated to the Engine Management Segment. The goodwill reflects relationships, business specific knowledge and the replacement cost of an assembled workforce associated with personal reputations. The intangible assets and goodwill are not deductible for tax purposes.

Revenues from the acquired business included in our consolidated statement of operations from the acquisition date through December 31, 2021 were $37.8 million.

Acquisition of Particulate Matter Sensor Business of Stoneridge, Inc. (“Soot Sensor”)

In March 2021, we agreed to acquire certain Soot Sensor product lines from Stoneridge, Inc. The product lines to be acquired manufacture sensors used in the exhaust and emission systems of diesel engines. The product lines acquired were located in Stoneridge’s facilities in Lexington, Ohio and Tallinn, Estonia. We are not acquiring these facilities, nor any of Stoneridge’s employees, and will be relocating the production lines to our engine management plants in Independence, Kansas and Bialystok, Poland, respectively. The acquisition, to be reported as part of our Engine Management Segment, aligns with our strategy of expansion into the OE heavy duty market. Customer relationships to be acquired include Volvo, CNHi and Hino.

The product lines located in Stoneridge’s facility in Lexington, Ohio were acquired in March 2021 for $2.1 million, while the product lines located in Stoneridge’s facility in Tallinn, Estonia were acquired in November 2021 for $0.8 million. The acquired product lines were paid for with cash funded by borrowings under our revolving credit facility with JPMorgan Chase Bank, N.A. The assets acquired include inventory, machinery & equipment and certain intangible assets.

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

Purchase Price			$	2,924
Assets acquired and liabilities assumed:
Inventory	$	1,032
Machinery and equipment, net		1,137
Intangible assets		755
Net assets acquired			$	2,924

Intangible assets acquired of approximately $0.8 million consist of customer relationships that will be amortized on a straight-line basis over the estimated useful life of 10 years.

Revenues from the acquired business included in our consolidated statement of operations from the acquisition date through December 31, 2021 were $9.3 million.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restructuring and Integration Expense

The aggregated liabilities included in “sundry payables and accrued expenses” and “other accrued liabilities” in the consolidated balance sheet relating to the restructuring and integration activities as of and for the years ended December 31, 2021 and 2020, consisted of the following (in thousands):

	Workforce<br><br> <br>Reduction			Other Exit<br><br> <br>Costs			Total
Exit activity<br> liability at December 31, 2019	$	336		$	—		$	336
Restructuring and<br> integration costs:
Amounts provided<br> for during 2020 (1)		—			464			464
Cash payments		(157	)		(214	)		(371	)
Reclassification<br> of environmental liability (1)		—			(250	)		(250	)
Exit activity<br> liability at December 31, 2020	$	179		$	—		$	179
Restructuring and<br> integration costs:
Amounts provided<br> for during 2021		—			392			392
Cash payments		(100	)		(392	)		(492	)
Exit activity<br> liability at December 31, 2021	$	79		$	—		$	79
(1)	Included in restructuring and integration costs in 2020 is a $0.3 million increase in environmental cleanup costs related to ongoing monitoring and remediation in connection with the prior closure of our manufacturing operations at our Long<br> Island City, New York location. The environmental liability has been reclassed to accrued liabilities as of December 31, 2020.
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Integration Costs

Particulate Matter Sensor (“Soot Sensor”) Product Line Relocation

In connection with our acquisitions in March 2021 and November 2021 of certain soot sensor product lines from Stoneridge, Inc., we incurred certain integration expenses in connection with the relocation of certain inventory, machinery, and equipment from Stoneridge’s facilities in Lexington, Ohio and Tallinn, Estonia to our existing facilities in Independence, Kansas and Bialystok, Poland, respectively. Integration expenses recognized and cash payments made of $392,000, during the year ended December 31, 2021, related to these relocation activities in our Engine Management segment. Total relocation expenses of approximately $600,000 are expected to be incurred related to the relocations. We anticipate that the soot sensor product line relocation will be completed by the end of the second quarter of 2022.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Pollak Relocation

In connection with our April 2019 acquisition of certain assets and liabilities of the Pollak business of Stoneridge, Inc., we incurred certain integration expenses in connection with the relocation of certain inventory, machinery, and equipment from Pollak’s distribution and manufacturing facilities in El Paso, Texas, Canton, Massachusetts, and Juarez, Mexico, to our existing facilities in Disputanta, Virginia, Reynosa, Mexico and Independence, Kansas.

The Pollak Relocation has been completed. Integration expense recognized and cash payments made of $214,000 during the year ended December 31, 2020 related to residual relocation activities in our Engine Management segment. There is no remaining aggregate liability related to the Pollak Relocation as of December 31, 2020.

Restructuring Costs

Plant Rationalization Programs

The 2016 Plant Rationalization Program, which included the shutdown and sale of our Grapevine, Texas facility, and the 2017 Orlando Rationalization Program, which included the shutdown of our Orlando, Florida facility, have been substantially completed. Cash payments made of $100,000 and $157,000 during the years ended December 31, 2021 and 2020, respectively, and the remaining aggregate liability related to the programs as of December 31, 2021 of $79,000 consists of severance payments to former employees terminated in connection with these programs.

Sale of Receivables

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 being accounted for as a sale.

Pursuant to these agreements, we sold $818.8 million and $695.1 million of receivables for the years ended December 31, 2021 and 2020, respectively. Receivables presented at financial institutions and not yet collected as of December 31, 2021 and December 31, 2020 were approximately $1.3 million and $50 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 $11.5 million, $12.2 million and $22 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, 2021, 2020 and 2019, respectively.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Inventories

	December 31,<br><br> <br>2021		December 31,<br><br> <br>2020
	(In thousands)
Finished goods	$	296,739	$	225,523
Work-in-process		16,010		10,711
Raw materials		156,006		109,268
Subtotal		468,755		345,502
Unreturned customer inventories		22,268		19,632
Total inventories	$	491,023	$	365,134

Property, Plant and Equipment

	December 31,
	2021		2020
	(In thousands)
Land, buildings and improvements	$	40,882	$	38,833
Machinery and equipment		159,967		148,578
Tools, dies and auxiliary equipment		63,944		60,102
Furniture and fixtures		30,688		30,347
Leasehold improvements		14,081		11,948
Construction-in-progress		21,012		13,691
Total property, plant and equipment		330,574		303,499
Less accumulated depreciation		227,788		214,394
Total property, plant and equipment, net	$	102,786	$	89,105

Depreciation expense was $18.2 million in 2021, $17.8 million in 2020 and $17.4 million in 2019.

Leases

Quantitative Lease Disclosures

We have operating and finance leases for our manufacturing facilities, warehouses, office space, automobiles, and certain equipment. Our leases have remaining lease terms of up to ten years, some of which may include one or more five-year renewal options. We have included the five-year renewal option for one of our leases in our operating lease payments as we concluded that it is reasonably certain that we will exercise the option. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over the lease term. Finance leases are not material.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following tables provide quantitative disclosures related to our operating leases and includes all operating leases acquired in the Stabil and Trombetta acquisitions from the date of the acquisition (in thousands):

	December 31,
Balance Sheet Information	2021			2020
Assets
Operating lease right-of-use assets	$	40,469		$	29,958
Liabilities
Sundry payables and accrued expenses	$	10,544		$	8,719
Noncurrent operating lease liabilities		31,206			22,450
Total operating lease liabilities	$	41,750		$	31,169
Weighted Average Remaining Lease Term
Operating leases	5.3 Years			5 Years
Weighted Average Discount Rate
Operating leases		3	%		3.6	%

	Year Ended, December 31,
Expense and Cash Flow Information	2021		2020
Lease Expense
Operating lease expense (a)	$	10,051	$	9,203
Supplemental Cash Flow Information
Cash Paid for the amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,985	$	9,087
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases (b)	$	20,975	$	3,180
(a)	Excludes expenses of approximately $2 million and $2.5 million for the years ended December 31,<br> 2021 and 2020, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less, which is not material.
---	---
(b)	Includes $8.8 million of<br> right-of-use assets obtained in business acquisitions during the year ended December 31, 2021.
---	---

Minimum Lease Payments

At December 31, 2021, we are obligated to make minimum lease payments through 2031, under operating leases, which are as follows (in thousands):

2022	$	10,707
2023		9,537
2024		7,165
2025		5,860
2026		5,109
Thereafter		6,562
Total lease payments	$	44,940
Less: Interest		(3,190	)
Present value of lease liabilities	$	41,750

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill and Other Intangible Assets

Goodwill

We assess the impairment of long‑lived and identifiable intangibles assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. With respect to goodwill, 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 of a reporting unit is below its carrying amount. We completed our annual impairment test of goodwill as of December 31, 2021.

As of December 31, 2021, we performed a qualitative assessment of the likelihood of a goodwill impairment for both the Engine Management and Temperature Control reporting units. Based upon our qualitative assessment, we determined that it was not more likely than not that the fair value of the each of the Engine Management and Temperature Control reporting units was less than their respective carrying amounts. As such, we concluded that the quantitative impairment test would not be required, and that there would be no required goodwill impairment charge as of December 31, 2021 at each of the Engine Management and Temperature Control reporting units. While we concluded that we did not have a goodwill impairment charge as of December 31, 2021, and we do not believe that future impairments are probable, we will need to maintain the current ongoing performance levels at each of the Engine Management and Temperature Control reporting units in future periods to sustain their goodwill carrying values.

Changes in the carrying values of goodwill by operating segment during the years ended December 31, 2021 and 2020 are as follows (in thousands):

	Engine<br><br> <br>Management			Temperature<br><br> <br>Control		Total
Balance as of December 31,<br> 2019:
Goodwill	$	102,020		$	14,270	$	116,290
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	63,532		$	14,270	$	77,802
Activity in 2020
Foreign currency exchange rate change		35			—		35
Balance as of December 31,<br> 2020:
Goodwill		102,055			14,270		116,325
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	63,567		$	14,270	$	77,837
Activity in 2021
Acquisition of Trombetta		49,250			—		49,250
Acquisition of Stabil		4,827			—		4,827
Foreign currency exchange rate change		(262	)		—		(262	)
Balance as of December 31,<br> 2021:
Goodwill		155,870			14,270		170,140
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	117,382		$	14,270	$	131,652

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Acquired Intangible Assets

Acquired identifiable intangible assets as of December 31, 2021 and 2020 consist of:

	December 31,
	2021			2020
	(In thousands)
Customer relationships	$	157,020		$	111,701
Patents, developed technology and intellectual property		14,123			723
Trademarks and trade names		8,880			6,980
Non-compete agreements		3,280			3,272
Supply agreements		800			800
Leaseholds		160			160
Total acquired intangible assets		184,263			123,636
Less accumulated amortization (1)		(78,932	)		(70,221	)
Net acquired intangible assets	$	105,331		$	53,415
(1)	Applies to all intangible assets, except for a<br> related trademark/trade name totaling $2.6 million, which has an indefinite useful life and, as such, is not being amortized.
---	---

In December 2020, a large retail customer informed us of its decision to pursue a private brand strategy for its engine management product line. As a result of this development, revenues sold under the BWD trademark were significantly reduced. In connection with the decision, in 2020, we recorded an impairment charge of $2.6 million to write-off the BWD intangible asset trademark.

Total amortization expense for acquired intangible assets was $8.7 million for the year ended December 31, 2021, $8.2 million for the year ended December 31, 2020, and $8 million for the year ended December 31, 2019. Based on the current estimated useful lives assigned to our intangible assets, amortization expense is estimated to be $8.5 million for 2022, $8.4 million in 2023, $8.2 million in 2024, $8.2 million in 2025 and $69.4 million in the aggregate for the years 2026 through 2041.

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

Other Intangible Assets

Other intangible assets include computer software. Computer software as of December 31, 2021 and 2020 totaled $17.4 million and $17 million, respectively. Total accumulated computer software amortization as of December 31, 2021 and 2020 was $16.5 million and $16.4 million, respectively. Computer software is amortized over its estimated useful life of 3 to 10 years. Amortization expense for computer software was $0.3 million, $0.3 million and $0.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. Fully amortized computer software, no longer in use, of $0.2 million was written-off during each of the years ended December 31, 2021 and 2020.

Investments in Unconsolidated Affiliates

	December 31,
	2021		2020
	(In thousands)
Foshan GWOYNG SMP Vehicle Climate Control & Cooling Products Co. Ltd.	$	20,692	$	18,869
Foshan FGD SMP Automotive Compressor Co. Ltd		16,676		15,036
Foshan Che Yijia New Energy Technology Co., Ltd.		3,990		4,174
Orange Electronic Co. Ltd		2,729		2,428
Total	$	44,087	$	40,507

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

In August 2019, we acquired an approximate 29% minority interest in Foshan Che Yijia New Energy Technology Co., Ltd. (“CYJ”) for approximately $5.1 million. CYJ is a manufacturer of automotive electric air conditioning compressors and is located in China. Our minority interest in CYJ is accounted for using the equity method of accounting.

In December 2021, Standard Motor Products (Hong Kong), Ltd., (“SMP HK”), a subsidiary of Standard Motor Products, Inc., entered into an unsecured loan agreement with CYJ. Under the terms of the loan agreement, CYJ shall have the right to borrow from SMP HK, as lender, up to an aggregate principal amount of $4 million, with interest calculated on the basis of simple interest of five percent (5%) per annum and a maturity date of November 30, 2023, subject to extension by SMP HK at its sole discretion. At December 31, 2021, there was no outstanding borrowings under the loan agreement. During the years ended December 31, 2021 and 2020, purchases we made from CYJ were not material.

Investment in Foshan FGD SMP Automotive Compressor Co. Ltd.

In November 2017, we formed Foshan FGD SMP Automotive Compressor Co., Ltd., a 50/50 joint venture with Foshan Guangdong Automotive Air Conditioning Co., Ltd. (“FGD”), a China-based manufacturer of automotive belt driven air conditioning compressors. We acquired our 50% interest in the joint venture for approximately $12.5 million. We determined that due to a lack of a voting majority, and other qualitative factors, we do not control the operations of the joint venture and accordingly, our investment in the joint venture is accounted for under the equity method of accounting. During the years ended December 31, 2021 and 2020, we made purchases from the joint venture of approximately $32.2 million and $17.4 million, respectively.

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

In April 2014, we formed Foshan GWOYNG SMP Vehicle Climate Control & Cooling Products Co. Ltd., a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd. (“Gwo Yng”), a China-based manufacturer of automotive air conditioner accumulators, filter driers, hose assemblies and switches. We acquired our 50% interest in the joint venture for $14 million. We determined, at that time, that due to a lack of a voting majority and other qualitative factors, we do not control the operations of the joint venture and accordingly, our investment in the joint venture was accounted for under the equity method of accounting.

In March 2018, we acquired an additional 15% equity interest in the joint venture for approximately $4.2 million, thereby increasing our equity interest in the joint venture to 65%. Although we increased our equity interest in the joint venture to 65%, the minority shareholder maintained participating rights that allowed it to participate in certain significant financial and operating decisions that occur in the ordinary course of business. As a result of the existence of these substantive participating rights of the minority shareholder, we continued to account for our investment in the joint venture under the equity method of accounting. During the years ended December 31, 2021 and 2020, we made purchases from the joint venture of approximately $15.9 million and $12.4 million, respectively.

Investment in Orange Electronic Co. Ltd.

In January 2013, we acquired an approximate 25% minority interest in Orange Electronic Co., Ltd. (“Orange”) for $6.3 million. Orange is a manufacturer of tire pressure monitoring system sensors and is located in Taiwan. As of December 31, 2021, our minority interest in Orange of 19.4% is accounted for using the equity method of accounting as we have the ability to exercise significant influence. During the years ended December 31, 2021 and 2020, we made purchases from Orange of approximately $7.8 million and $4.4 million, respectively.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other Assets

	December 31,
	2021		2020
	(In thousands)
Deferred compensation	$	23,623	$	20,775
Deferred financing costs, net		206		431
Other		1,573		617
Total other assets, net	$	25,402	$	21,823

Deferred compensation consists of assets held in a nonqualified defined contribution pension plan as of December 31, 2021 and 2020, respectively.

Credit Facilities and Long-Term Debt

Total debt outstanding is summarized as follows:

	December 31,
	2021		2020
	(In thousands)
Revolving credit facilities	$	125,298	$	10,000
Other (1)		3,138		232
Total debt	$	128,436	$	10,232
Current maturities of debt	$	128,415	$	10,135
Long-term debt		21		97
Total debt	$	128,436	$	10,232
(1)	Other includes borrowings under our Polish overdraft<br> facility of Zloty 12.3 million (approximately $3 million) and Zloty 0.4 million (approximately $0.1 million) as of December 31, 2021 and 2020, respectively.
---	---

Maturities of long-term debt are not material for the year ended December 31, 2021 and beyond.

Revolving Credit Facility

We have entered into an amended credit Agreement with JPMorgan Chase Bank, N.A., as agent, and a syndicate of lenders. The amended credit agreement provides for a senior secured revolving credit facility with a line of credit of up to $250 million (with an additional $50 million accordion feature) and extends the maturity date to December 2023. The line of credit under the amended credit agreement also allows for a $10 million line of credit to Canada as part of the $250 million available for borrowing. Direct borrowings under the amended credit agreement bear interest at LIBOR plus a margin ranging from 1.25% to 1.75% based on our borrowing availability, or floating at the alternate base rate plus a margin ranging from 0.25% to 0.75% based on our borrowing availability, at our option. The amended credit agreement is guaranteed by certain of our subsidiaries and secured by certain of our assets.

    chain financing arrangements and eligible inventory.  After taking into account outstanding borrowings under the amended credit agreement, there was an additional $122.1 million available for us to borrow pursuant to the formula at December 31, 2020.  The loss of business of
    one or more of our key customers or, a significant reduction in purchases of our products from any one of them, could adversely impact availability under our revolving credit facility.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Polish Overdraft Facility

In February 2022, our Polish subsidiary, SMP Poland sp. z.o.o., amended its an overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce, formerly HSBC France (Spolka Akcyjna) Oddzial w Polsce. The amended overdraft facility provides for borrowings of up to Zloty 30 million (approximately $8 million). Availability under the amended facility commences in March 2022 and ends in June 2022, with automatic three-month renewals until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period. Borrowings under the overdraft facility will bear interest at a rate equal to WIBOR + 1.5% and are guaranteed by Standard Motor Products, Inc., the ultimate parent company. At December 31, 2021 and 2020, borrowings under the overdraft facility were Zloty 12.3 million (approximately $3 million) and Zloty 0.4 million (approximately $0.1 million), respectively.

Deferred Financing Costs

We have deferred financing costs of approximately $0.4 million and $0.7 million as of December 31, 2021 and 2020, respectively. Deferred financing costs as of December 31, 2021 are related to our revolving credit facility. Scheduled amortization for future years, assuming no prepayments of principal is as follows:

(In thousands)
2022		225
2023		206
Total amortization	$	431

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stockholders’ Equity

We have authority to issue 500,000 shares of preferred stock, $20 par value, and our Board of Directors is vested with the authority to establish and designate any series of preferred, to fix the number of shares therein and the variations in relative rights as between each series. In December 1995, our Board of Directors established a new series of preferred shares designated as Series A Participating Preferred Stock. The number of shares constituting the Series A Preferred Stock is 30,000. The Series A Preferred Stock is designed to participate in dividends, ranks senior to our common stock as to dividends and liquidation rights and has voting rights. Each share of the Series A Preferred Stock shall entitle the holder to one thousand votes on all matters submitted to a vote of the stockholders of the Company. No such shares were outstanding at December 31, 2021 and 2020.

In October 2021, our Board of Directors authorized the purchase of up to an additional $30 million of our common stock under a stock repurchase program. Stock will be purchased under the program from time to time, in the open market or through private transactions, as market conditions warrant. Stock repurchases under this program, during the year ended December 31, 2021, were 7,000 shares of our common stock, at a total cost of $0.3 million. As of December 31, 2021, there was approximately $29.7 million available for future stock purchases under the program. During the period from January 1, 2022 through February 17, 2022, we have repurchased an additional 64,482 shares of our common stock at a total cost of $3.1 million, thereby reducing the availability under the program to $26.6 million.

Stock-Based Compensation Plans

Our stock-based compensation program is a broad-based program designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. In addition, members of our Board of Directors participate in our stock-based compensation program in connection with their service on our board. In May 2016, our Board of Directors and Shareholders approved the 2016 Omnibus Incentive Plan. The 2016 Omnibus Incentive Plan supersedes the 2006 Omnibus Incentive Plan, which terminated in May 2016. The 2016 Omnibus Incentive Plan is the only remaining plan available to provide stock-based incentive compensation to our employees, directors and other eligible persons.

In May 2021, our Board of Directors and Shareholders approved an amendment and restatement to the 2016 Omnibus Incentive Plan (the “Plan”). Under the Plan, which terminates in May 2026, we are authorized to issue, among other things, shares of restricted and performance-based stock to eligible employees and restricted stock to directors of up to 2,050,000 shares; and shares of restricted and performance-based stock to nonemployee directors of up to 350,000 shares. Shares issued under the Plan that are cancelled, forfeited or expire by their terms are eligible to be granted again under the Plan. Awards previously granted under the 2006 Omnibus Incentive Plan are not affected by the plan’s termination, while shares not yet granted under the plan are not available for future issuance.

We account for our stock-based compensation plans in accordance with the provisions of ASC 718, Stock Compensation, which requires that a company measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The service period is the period of

  time that the grantee must provide services to us before the stock-based compensation is fully vested.  The grant-date fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in our consolidated
  statements of operations.  Forfeitures are estimated at the time of grant based on historical trends in order to estimate the amount of share-based awards that will ultimately vest.  We monitor actual forfeitures for any subsequent adjustment to
  forfeiture rates.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restricted Stock and Performance Share Grants

We currently grant shares of restricted stock to eligible employees and our independent directors and performance-based stock to eligible employees. We grant eligible employees two types of restricted stock (standard restricted shares and long-term retention restricted shares). Standard restricted shares granted to employees become fully vested no earlier than three years after the date of grant. Long-term retention restricted shares granted to selected executives vest at a 25% rate on or within approximately two months of an executive reaching the ages of 60 and 63, and become fully vested on or within approximately two months of an executive reaching the age of 65. Restricted shares granted to directors become fully vested upon the first anniversary of the date of grant.

Performance-based shares issued to eligible employees are subject to a three-year measuring period and the achievement of performance targets and, depending upon the achievement of such performance targets, they may become vested no earlier than three years after the date of grant. Each period we evaluate the probability of achieving the applicable targets, and we adjust our accrual accordingly. Restricted shares (other than long-term retention restricted shares) and performance shares issued to certain key executives and directors are subject to a one or two year holding period upon the lapse of the vesting period. Forfeitures on stock grants are estimated at 5% for employees and 0% for executives and directors based upon our evaluation of historical and expected future turnover.

Prior to the time a restricted share becomes fully vested or a performance share is issued, the awardees cannot transfer, pledge, hypothecate or encumber such shares. Prior to the time a restricted share is fully vested, the awardees have all other rights of a stockholder, including the right to vote (but do not receive dividends during the vesting period). Prior to the time a performance share is issued, the awardees shall have no rights as a stockholder. All shares and rights are subject to forfeiture if certain employment conditions are not met.

Under the amended and restated 2016 Omnibus Incentive Plan, 2,050,000 shares are authorized to be issued. At December 31, 2021, under the plan, there were an aggregate of (a) 1,121,445 shares of restricted and performance-based stock grants issued, net of forfeitures, and (b) 928,555 shares of common stock available for future grants. For the year ended December 31, 2021, 211,815 restricted and performance-based shares were granted (159,565 restricted shares and 52,250 performance-based shares).

In determining the grant date fair value, the stock price on the date of grant, as quoted on the New York Stock Exchange, was reduced by the present value of dividends expected to be paid on the shares issued and outstanding during the requisite service period, discounted at a risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the restriction or vesting period at the grant date. In addition, a further discount for the lack of marketability reduced the fair value of grants issued to certain key executives and directors subject to the one or two year post vesting holding period. Assumptions used in calculating the discount for the lack of marketability include an estimate of stock volatility, risk-free interest rate, and a dividend yield.

As related to restricted and performance stock shares, we recorded compensation expense of $9.1 million ($6.9 million, net of tax), $7.8 million ($5.8 million, net of tax) and $6.5 million ($4.9 million, net of tax), for the years ended December 31, 2021, 2020 and 2019, respectively. The unamortized compensation expense related to our restricted and performance-based shares was $16.6 million and $15.2 million at December 31, 2021 and 2020, respectively and is expected to be recognized over a weighted average period of 4.7 years and 0.4 years for employees and directors, respectively, as of December 31, 2021 and over a weighted average period of 4.6 years and 0.3 years for employees and directors, respectively, as of December 31, 2020.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our restricted and performance-based share activity was as follows for the years ended December 31, 2021 and 2020:

	Shares			Weighted Average<br><br> <br>Grant Date Fair<br><br> <br>Value per Share
Balance at December 31,<br> 2019		852,540		$	35.26
Granted		208,200			38.21
Vested		(161,054	)		39.23
Forfeited (1)		(60,000	)		42.25
Balance at December 31,<br> 2020		839,686		$	34.77
Granted		211,815			38.51
Vested		(227,682	)		36.10
Forfeited		(16,800	)		39.39
Balance at December 31,<br> 2021		807,019		$	34.92
(1)	Due to the lack of achievement of performance targets, performance-based shares forfeited in the year ended December 31, 2020 were 50,250 shares.
---	---

The weighted-average grant date fair value of restricted and performance-based shares outstanding as of December 31, 2021, 2020 and 2019 was $28.2 million (or $34.92 per share), $29.2 million (or $34.77 per share), and $30.1 million (or $35.26 per share), respectively.

Employee Benefits

Defined Contribution Plans

We maintain various defined contribution plans, which include profit sharing, and provide retirement benefits for substantially all of our employees. Matching obligations, in connection with the plans which are funded in cash and typically contributed to the plans in March of the following year, are as follows (in thousands):

	U.S. Defined<br><br> <br>Contribution
Year ended December 31,
2021	$	9,763
2020		9,457
2019		9,080

We maintain a defined contribution Supplemental Executive Retirement Plan for key employees. Under the plan, these employees may elect to defer a portion of their compensation and, in addition, we may at our discretion make contributions to the plan on behalf of the employees. In March 2021 and 2020, contributions of $0.5 million and $0.3 million were made related to calendar year 2020 and 2019, respectively. As of December 31, 2021, we have recorded an obligation of $0.8 million for 2021.

We also have an Employee Stock Ownership Plan and Trust (“ESOP”) for employees who are not covered by a collective bargaining agreement. In connection therewith, we maintain an employee benefits trust to which we contribute shares of treasury stock. We are authorized to instruct the trustees to distribute such shares toward the satisfaction of our future obligations under the plan. The shares held in trust are not considered outstanding for purposes of calculating earnings per share until they are committed to be released. The trustees will vote the shares in accordance with its fiduciary duties. During 2021, we contributed to the trust an additional 61,800 shares from our treasury and released 61,800 shares from the trust leaving 200 shares remaining in the trust as of December 31, 2021. The provision for expense in connection with the ESOP was approximately $2.5 million in 2021, $2.3 million in 2020 and $2.5 million in 2019.

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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Defined Benefit Pension Plan

We maintain a defined benefit unfunded Supplemental Executive Retirement Plan (“SERP”). The SERP, as amended, is a defined benefit plan pursuant to which we will pay supplemental pension benefits to certain key employees upon the attainment of a contractual participant’s payment date based upon the employees’ years of service and compensation. As there are no current participants in the SERP, there was no benefit obligation outstanding related to the plan as of December 31, 2021 and 2020 and we recorded no expense related to the plan during the years ended December 31, 2021, 2020 and 2019.

Postretirement Medical Benefits

We provide certain medical and dental care benefits to 14 former U.S. union employees. The postretirement medical and dental benefit obligation for the former union employees as of December 31, 2021, and the net periodic benefit cost for our postretirement benefit plans for the years ended December 31, 2021, 2020 and 2019 were not material.

Other Non-Operating Income (Expense), Net

The components of other non-operating income (expense), net are as follows:

	Year Ended December 31,
	2021			2020			2019
	(In thousands)
Interest and dividend income	$	49		$	109		$	97
Equity income from joint ventures		3,295			820			2,865
Loss on foreign exchange		(257	)		(350	)		(502	)
Other non-operating income, net		407			233			127
Total other non-operating income, net	$	3,494		$	812		$	2,587

Fair Value Measurements

The carrying value of our financial instruments consisting of cash and cash equivalents, deferred compensation, and short term borrowings approximate their fair value. In each instance, fair value is determined after considering Level 1 inputs under the three-level fair value hierarchy. For fair value purposes, the carrying value of cash and cash equivalents approximates fair value due to the short maturity of those investments. The fair value of the assets held by the deferred compensation plan are based on the quoted market prices of the underlying funds which are held in registered investment companies. The carrying value of our revolving credit facilities, classified as short term borrowings, equals fair market value because the interest rate reflects current market rates.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Income Taxes

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

	Year Ended December 31,
	2021			2020			2019
Current:
Domestic	$	26,528		$	30,368		$	14,632
Foreign		5,851			4,064			3,019
Total current		32,379			34,432			17,651
Deferred:
Domestic		(1,161	)		(7,418	)		4,677
Foreign		(174	)		(52	)		417
Total deferred		(1,335	)		(7,470	)		5,094
Total income tax provision	$	31,044		$	26,962		$	22,745

Reconciliations between taxes at the U.S. Federal income tax rate and taxes at our effective income tax rate on earnings from continuing operations before income taxes are as follows (in thousands):

	Year Ended December 31,
	2021			2020			2019
U.S. Federal income tax rate of 21%	$	27,398		$	22,550		$	19,277
Increase (decrease) in tax rate resulting from:
State and local income taxes, net of federal income tax benefit		4,579			3,781			3,328
Income tax (tax benefit) attributable to foreign income		(122	)		330			191
Other non-deductible items, net		(1,277	)		(563	)		(409	)
Change in valuation allowance		466			864			358
Provision for income taxes	$	31,044		$	26,962		$	22,745

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

	December 31,
	2021			2020
Deferred tax assets:
Inventories	$	12,181		$	12,773
Allowance for customer returns		14,185			13,804
Postretirement benefits		33			42
Allowance for expected credit losses		1,450			1,412
Accrued salaries and benefits		15,585			12,984
Tax credit and NOL carryforwards		5,702			1,451
Accrued asbestos liabilities		15,463			15,372
Other		190			170
		64,789			58,008
Valuation allowance		(2,087	)		(1,621	)
Total deferred tax assets		62,702			56,387
Deferred tax liabilities:
Intangible assets acquired, net of amortization		13,450			—
Depreciation		7,589			7,710
Other		5,537			3,907
Total deferred tax liabilities		26,576			11,617
Net deferred tax assets	$	36,126		$	44,770

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In assessing the realizability of the deferred tax assets, we consider whether it is more likely than not that some portion or the entire deferred tax asset will be realized. Ultimately, the realization of the deferred tax asset is dependent upon the generation of sufficient taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized. We consider the level of historical taxable income, scheduled reversal of temporary differences, carryback and carryforward periods, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted. We also consider cumulative losses in recent years as well as the impact of one-time events in assessing our pre-tax earnings. Assumptions regarding future taxable income require significant judgment. Our assumptions are consistent with estimates and plans used to manage our business.

The valuation allowance of $2.1 million as of December 31,

  2021 is intended to provide for uncertainty regarding the ultimate realization of our U.S. foreign tax credit carryovers and foreign net operating loss carryovers.  Based on these considerations, we believe it is more likely than not that we would
  realize the benefit of the net deferred tax asset of $36.1 million as of December 31, 2021, which is net of the remaining valuation
  allowance. At December 31, 2021, we have foreign tax credit carryforwards of approximately $1.9 million that will expire in varying amounts
  by 2030.

As related to the taxation of our foreign subsidiaries, we aggregate our foreign earnings and profits, and utilize allowable deductions and available foreign tax credits in computing our U.S. tax. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most or all of these earnings indefinitely outside of the U.S., and do not expect to incur any significant additional taxes related to such amounts.

In accordance with generally accepted accounting practices, we recognize in our financial statements only those tax positions that meet the more-likely-than-not recognition threshold. We establish tax reserves for uncertain tax positions that do not meet this threshold. During the years ended December 31, 2021, 2020 and 2019, we did not establish a liability for uncertain tax positions.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We are subject to taxation in the U.S. and various state, local and foreign jurisdictions. As of December 31, 2021, the Company is no longer subject to U.S. Federal tax examinations for years before 2018. We remain subject to examination by state and local tax authorities for tax years 2017 through 2020. Foreign jurisdictions have statutes of limitations generally ranging from 2 to 6 years. Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2017 onward), Hong Kong (2016 onward), China (2017 onward) Mexico (2017 onward), Poland (2016 onward), and Hungary (2015 onward). We do not presently anticipate that our unrecognized tax benefits will significantly increase or decrease over the next 12 months; however, actual developments in this area could differ from those currently expected.

Earnings Per Share

We present two calculations of earnings per common share. “Basic” earnings per common share equals net earnings attributable to SMP divided by weighted average common shares outstanding during the period. “Diluted” earnings per common share equals net earnings attributable to SMP divided by the sum of weighted average common shares outstanding during the period plus potentially dilutive common shares. Potentially dilutive common shares that are anti-dilutive are excluded from net earnings per common share.

The following are reconciliations of the net earnings attributable to SMP and the shares used in calculating basic and dilutive net earnings per common share attributable to SMP (in thousands, except per share data):

	Year Ended December 31,
	2021			2020			2019
Net Earnings Attributable to SMP -
Earnings from continuing operations	$	99,353		$	80,417		$	69,051
Loss from discontinued operations		(8,467	)		(23,024	)		(11,134	)
Net earnings attributable to SMP	$	90,886		$	57,393		$	57,917
Basic Net Earnings Per Common Share Attributable to SMP -
Earnings from continuing operations per common share	$	4.49		$	3.59		$	3.09
Loss from discontinued operations per common share		(0.39	)		(1.02	)		(0.50	)
Net earnings per common share attributable to SMP	$	4.10		$	2.57		$	2.59
Weighted average common shares outstanding		22,147			22,374			22,378
Diluted Net Earnings Per Common Share Attributable to SMP -
Earnings from continuing operations per common share	$	4.39		$	3.52		$	3.03
Loss from discontinued operations per common share		(0.37	)		(1.01	)		(0.49	)
Net earnings per common share attributable to SMP	$	4.02		$	2.51		$	2.54
Weighted average common shares outstanding		22,147			22,374			22,378
Plus incremental shares from assumed conversions:
Dilutive effect of restricted stock and performance-based stock		469			452			440
Weighted average common shares outstanding – Diluted		22,616			22,826			22,818

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The shares listed below were not included in the computation of diluted net earnings per common share attributable to SMP because to do so would have been anti-dilutive for the periods presented or because they were excluded under the treasury method (in thousands):

	2021		2020		2019
Restricted and performance shares		269		268		255

Industry Segment and Geographic Data

We have two major reportable operating segments, each of which focuses on a specific line of automotive parts in the automotive aftermarket with a complementary focus on the heavy duty, industrial equipment and original equipment service markets. Our Engine Management Segment manufactures and remanufactures ignition and emission parts, ignition wires, battery cables, fuel system parts and sensors for vehicle systems. Our Temperature Control Segment manufactures and remanufactures air conditioning compressors, air conditioning and heating parts, engine cooling system parts, power window accessories and windshield washer system parts.

The accounting policies of each segment are the same as those described in the summary of significant accounting policies (see Note 1). The following tables contain financial information for each reportable segment (in thousands):

	Year Ended December 31,
	2021			2020			2019
Net sales (a):
Engine Management	$	937,936		$	835,685		$	849,161
Temperature Control		348,423			281,954			278,355
Other		12,457			10,949			10,397
Total net sales	$	1,298,816		$	1,128,588		$	1,137,913
Intersegment sales (a):
Engine Management	$	23,599		$	15,952		$	19,569
Temperature Control		9,024			6,162			6,545
Other		(32,623	)		(22,114	)		(26,114	)
Total intersegment sales	$	—		$	—		$	—
Depreciation and Amortization:
Engine Management	$	21,881		$	20,417		$	19,463
Temperature Control		3,626			4,035			4,568
Other		1,736			1,871			1,778
Total depreciation and amortization	$	27,243		$	26,323		$	25,809
Operating income (loss):
Engine Management	$	117,367		$	111,217		$	103,808
Temperature Control		36,997			21,296			13,667
Other		(25,365	)		(23,618	)		(22,980	)
Total operating income	$	128,999		$	108,895		$	94,495
Investment in unconsolidated affiliates:
Engine Management	$	2,729		$	2,428		$	2,243
Temperature Control		41,358			38,079			36,615
Other		—			—			—
Total investment in unconsolidated affiliates	$	44,087		$	40,507		$	38,858
Capital expenditures:
Engine Management	$	21,922		$	13,496		$	12,593
Temperature Control		2,586			1,988			2,273
Other		1,367			2,336			1,319
Total capital expenditures	$	25,875		$	17,820		$	16,185
Total assets:
Engine Management	$	845,767		$	618,210		$	594,953
Temperature Control		257,114			230,111			216,591
Other		95,080			108,219			92,310
Total assets	$	1,197,961		$	956,540		$	903,854
(a)	Segment net sales include<br> intersegment sales in our Engine Management and Temperature Control segments.
---	---

Other consists of the elimination of intersegment sales from our Engine Management and Temperature Control segments, as well as items pertaining to our Canadian business unit that does not meet the criteria of a reportable operating segment and our corporate headquarters function.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Reconciliation of segment operating income to net earnings:

	Year Ended December 31,
	2021			2020			2019
	(In thousands)
Operating income	$	128,999		$	108,895		$	94,495
Other non-operating income, net		3,494			812			2,587
Interest expense		2,028			2,328			5,286
Earnings from continuing operations before income taxes		130,465			107,379			91,796
Provision for income taxes		31,044			26,962			22,745
Earnings from continuing operations		99,421			80,417			69,051
Discontinued operations, net of tax		(8,467	)		(23,024	)		(11,134	)
Net earnings	$	90,954		$	57,393		$	57,917
	December 31,
---	---	---	---	---	---	---
	2021		2020		2019
Long-lived assets (a):	(In thousands)
United States	$	315,983	$	241,053	$	253,384
Asia		80,175		40,621		38,942
Europe		37,892		16,504		17,004
Mexico		12,119		10,586		12,036
Canada		4,461		4,470		4,659
Total long-lived assets	$	450,630	$	313,234	$	326,025
(a)	Long-lived assets are attributed to countries based<br> upon the location of the assets.
---	---

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our three largest individual customers accounted for approximately 57% of our consolidated net sales in 2021. During 2021, O’Reilly, NAPA and AutoZone accounted for 26%, 17% and 14% of our consolidated net sales, respectively. Net sales from each of the customers were reported in both our Engine Management and Temperature Control Segments. The loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them, such as the decision, announced in December 2020, of a large retail customer to pursue a private brand strategy for its engine management product line, 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.

For the disaggregation of our net sales from customers by geographic area, major product group and major sales channels for each of our segments, see Note 20, “Net Sales.”

Net Sales

Disaggregation of Net Sales

We disaggregate our net sales from customers by geographic area, major product group, and major sales channels for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our net sales are affected by economic factors.

The following tables provide disaggregation of net sales information for the years ended December 31, 2021, 2020 and 2019 (in thousands):

Year Ended December 31, 2021 (a)	Engine<br><br> <br>Management		Temperature<br><br> <br>Control		Other (b)			Total
Geographic Area:
United States	$	804,398	$	329,980	$	—		$	1,134,378
Canada		33,590		16,513		12,457			62,560
Asia		40,668		348		—			41,016
Mexico		25,288		358		—			25,646
Europe		27,293		390		—			27,683
Other foreign		6,699		834		—			7,533
Total	$	937,936	$	348,423	$	12,457		$	1,298,816
Major Product Group:
Ignition, emission control, fuel and safety related system products	$	786,514	$	—	$	8,956		$	795,470
Wire and cable		151,422		—		(275	)		151,147
Compressors		—		206,697		1,434			208,131
Other climate control parts		—		141,726		2,342			144,068
Total	$	937,936	$	348,423	$	12,457		$	1,298,816
Major Sales Channel:
Aftermarket	$	692,895	$	317,427	$	12,457		$	1,022,779
OE/OES		218,338		28,922		—			247,260
Export		26,703		2,074		—			28,777
Total	$	937,936	$	348,423	$	12,457		$	1,298,816

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Year Ended December 31, 2020 (a)	Engine<br><br> <br>Management		Temperature<br><br> <br>Control		Other (b)		Total
Geographic Area:
United States	$	738,521	$	268,680	$	—	$	1,007,201
Canada		25,842		11,679		10,949		48,470
Asia		35,079		165		—		35,244
Mexico		19,336		271		—		19,607
Europe		12,255		351		—		12,606
Other foreign		4,652		808		—		5,460
Total	$	835,685	$	281,954	$	10,949	$	1,128,588
Major Product Group:
Ignition, emission control, fuel and safety related system products	$	691,722	$	—	$	8,172	$	699,894
Wire and cable		143,963		—		159		144,122
Compressors		—		163,071		812		163,883
Other climate control parts		—		118,883		1,806		120,689
Total	$	835,685	$	281,954	$	10,949	$	1,128,588
Major Sales Channel:
Aftermarket	$	674,744	$	255,716	$	10,949	$	941,409
OE/OES		142,072		25,070		—		167,142
Export		18,869		1,168		—		20,037
Total	$	835,685	$	281,954	$	10,949	$	1,128,588
Year Ended December 31, 2019 (a)	Engine<br><br> <br>Management		Temperature<br><br> <br>Control		Other (b)		Total
---	---	---	---	---	---	---	---	---
Geographic Area:
United States	$	760,134	$	263,769	$	—	$	1,023,903
Canada		27,439		12,322		10,397		50,158
Asia		24,838		130		—		24,968
Mexico		19,330		705		—		20,035
Europe		13,341		534		—		13,875
Other foreign		4,079		895		—		4,974
Total	$	849,161	$	278,355	$	10,397	$	1,137,913
Major Product Group:
Ignition, emission control, fuel and safety related system products	$	705,994	$	—	$	6,381	$	712,375
Wire and cable		143,167		—		477		143,644
Compressors		—		160,485		1,338		161,823
Other climate control parts		—		117,870		2,201		120,071
Total	$	849,161	$	278,355	$	10,397	$	1,137,913
Major Sales Channel:
Aftermarket	$	697,722	$	248,420	$	10,397	$	956,539
OE/OES		129,815		27,915		—		157,730
Export		21,624		2,020		—		23,644
Total	$	849,161	$	278,355	$	10,397	$	1,137,913
(a)	Segment net sales<br> include intersegment sales in our Engine Management and Temperature Control segments.
---	---
(b)	Other consists of the elimination of intersegment sales from our Engine<br> Management and Temperature Control segments as well as sales from our Canadian business unit that does not meet the criteria of a reportable operating segment. Intersegment wire and cable sales for the year ended December 31, 2021 exceeded<br> third party sales from our Canadian business unit.
---	---

Geographic Area

We sell our line of products primarily in the United States, with additional sales in Canada, Mexico, Europe, Asia and Latin America. Sales are attributed to countries based upon the location of the customer. Our sales are substantially denominated in U.S. dollars.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Major Product Group

The Engine Management segment of the Company principally generates revenue from the sale of automotive engine parts in the automotive aftermarket including ignition, emission control, fuel and safety related system products, and wire and cable parts. The Temperature Control segment of the Company principally generates revenue from the sale of automotive temperature control systems parts in the automotive aftermarket including air conditioning compressors and other climate control parts.

Major Sales Channel

In the aftermarket channel, we sell our products to warehouse distributors and retailers. Our customers buy directly from us and sell directly to jobber stores, professional technicians and to “do-it-yourselfers” who perform automotive repairs on their personal vehicles. In the Original Equipment (“OE”) and Original Equipment Service (“OES”) channel, we sell our products to original equipment manufacturers who redistribute our products within their distribution network, independent dealerships and service dealer technicians. Lastly, in the Export channel, our domestic entities sell to customers outside the United States.

Commitments and Contingencies

Total rent expense for the three years ended December 31, 2021 was as follows (in thousands):

	Total		Real Estate		Other
2021 (1)	$	12,065	$	9,500	$	2,565
2020 (1)		11,669		8,290		3,379
2019		11,382		7,909		3,473
(1)	Includes expenses of approximately $2 million and $2.5 million<br> for the years ended December 31, 2021 and 2020, respectively, related to non-lease components such as maintenance, property taxes, etc., and operating lease expense for leases with an initial term of 12 months or less, which is not<br> material.
---	---

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

Warranties

We generally warrant our products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product. As of December 31, 2021 and 2020, we have accrued $17.5 million and $17.7 million, respectively, for estimated product warranty claims included in accrued customer returns. The accrued product warranty costs are based primarily on historical experience of actual warranty claims. Warranty expense for each of the years 2021, 2020 and 2019 were $91.9 million, $87.1 million and $99.3 million, respectively.

The following table provides the changes in our product warranties:

	December 31,
	2021			2020
	(In thousands)
Balance, beginning of period	$	17,663		$	17,175
Liabilities accrued for current year sales		91,908			87,116
Settlements of warranty claims		(92,108	)		(86,628	)
Balance, end of period	$	17,463		$	17,663

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Letters of Credit

At December 31, 2021, we had outstanding letters of credit with certain vendors aggregating approximately $2.6 million. These letters of credit are being maintained as security for reimbursements to insurance companies and as security to the landlord of our administrative offices in Long Island City, New York. The contract amount of the letters of credit is a reasonable estimate of their value as the value for each is fixed over the life of the commitment.

Change of Control Arrangements

We have a change in control arrangement with one key officer. In the event of a change of control (as defined in the agreement), the executive will receive severance payments and certain other benefits as provided in his agreement.

Asbestos

In 1986, we acquired a brake business, which we subsequently sold in March 1998 and which is accounted for as a discontinued operation in the accompanying statement of operations. 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 on or 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. At December 31, 2021, 1,554 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2021, the amounts paid for settled claims and awards of asbestos-related damages, including interest, were approximately $53.8 million. We do not have insurance coverage for the indemnity and defense costs associated with the claims we face.

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, 2021. The results of the August 31, 2021 study included an estimate of our undiscounted liability for settlement payments and awards of asbestos-related damages, excluding legal costs and any potential recovery from insurance carriers, ranging from $60.9 million to $100.2 million for the period through 2065. The change from the updated prior year study, which was in December of 2020, was a $2.1 million decrease for the low end of the range and a $1.1 million increase for the high end of the range. The change in the estimated undiscounted liability from the updated prior year study at both the low end and high end of the range reflects our actual experience, our historical data and certain assumptions with respect to events that may occur in the future.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Based upon the results of the August 31, 2021 actuarial study, in September 2021 we increased our asbestos liability to $60.9 million, the low end of the range, and recorded an incremental pre-tax provision of $5.3 million in earnings (loss) from discontinued operations in the accompanying statement of operations. Future legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2021 study, to range from $49.4 million to $99.3 million for the period through 2065. Total operating cash outflows related to discontinued operations, which include settlements, awards of asbestos-related damages and legal costs, net of taxes, were $8.8 million, $16.4 million and $7.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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

Other Litigation

We are currently involved in various other legal claims and legal proceedings (some of which may involve substantial amounts), including claims related to commercial disputes, product liability, employment, and environmental. Although these legal claims and legal proceedings are subject to inherent uncertainties, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the ultimate outcome of these matters will not, either individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations. We may at any time determine that settling any of these matters is in our best interests, which settlement may include substantial payments. Although we cannot currently predict the specific amount of any liability that may ultimately arise with respect to any of these matters, we will record provisions when the liability is considered probable and reasonably estimable. Significant judgment is required in both the determination of probability and the determination as to whether an exposure can be reasonably estimated. As additional information becomes available, we reassess our potential liability related to these matters. Such revisions of the potential liabilities could have a material adverse effect on our business, financial condition or results of operations.

Index

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.	CONTROLS AND PROCEDURES
(a)	Evaluation of Disclosure Controls and Procedures.
---	---

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act, as of the end of the period covered by this Report. This evaluation also included consideration of our internal controls and procedures for the preparation of our financial statements as required under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

(b)	Management’s Report on Internal Control Over Financial Reporting.

Pursuant to Section 404 of the Sarbanes-Oxley Act, as part of this Report we have furnished a report regarding our internal control over financial reporting as of December 31, 2021. During 2021, we acquired Trumpet Holdings, Inc, (“Trombetta”) and Stabil Operative Group GmbH (“Stabil”), and have excluded from our assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Trombetta’s and Stabil’s internal control over financial reporting associated with 13.8% of total assets and 3.5% of total revenues included in the consolidated financial statements of the Company as of and for year ended December 31, 2021. The report is under the caption “Management’s Report on Internal Control Over Financial Reporting” in “Item 8. Financial Statements and Supplementary Data,” which report in included herein.

(c)	Attestation Report of Independent Registered Public Accounting Firm.

KPMG LLP, our independent registered public accounting firm, has issued an opinion as to the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. The opinion is under the caption “Report of Independent Registered Public Accounting Firm−Internal Control Over Financial Reporting” in “Item 8. Financial Statements and Supplementary Data” for this attestation report, which is included herein.

(d)	Changes in Internal Control Over Financial Reporting.

During the quarter ended December 31, 2021 and subsequent to that date, we have not made changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Index

ITEM 9A.	CONTROLS AND PROCEDURES (Continued)

We review, document and test our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013 Internal Control–Integrated Framework. We may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business. These efforts may lead to various changes in our internal control over financial reporting.

ITEM 9B.	OTHER INFORMATION

None.

ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference to the information in our Definitive Proxy Statement to be filed with the SEC in connection with our 2022 Annual Meeting of Stockholders (the “2022 Proxy Statement”) set forth under the captions “Proposal No. 1 - Election of Directors,” “Management Information,” and “Corporate Governance.”

The Board of Directors of the Company has adopted a Code of Ethics that applies to all employees, officers and directors of the Company. The Company’s Code of Ethics is available at ir.smpcorp.com

      under “Governance Documents.”  The Company intends to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Company’s Code of Ethics that applies to its principal executive
      officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by disclosing such information on the Company’s website, at the address specified above.

ITEM 11.	EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the information in our 2022 Proxy Statement set forth under captions “Corporate Governance,” “Compensation Discussion & Analysis,” “Executive Compensation and Related Information” and “Report of the Compensation and Management Development Committee.”

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference to the information in our 2022 Proxy Statement set forth under the captions “Executive Compensation and Related Information” and “Security Ownership of Certain Beneficial Owners and Management.”

Index

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by reference to the information in our 2022 Proxy Statement set forth under the captions “Corporate Governance” and “Executive Compensation and Related Information.

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company’s independent registered public accounting firm is KMPG LLP, New York, New York (PCAOB ID 185). All other information

      required by this Item is incorporated herein by reference to the information in our 2022 Proxy Statement set forth under the captions “Audit and Non-Audit Fees.”

PART IV

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)	(1)	The Index to Consolidated Financial Statements of the Registrant under Item 8 of this Report is incorporated herein by reference as the list of Financial Statements required as part of this<br> Report.
---	---	---
(2)	The following financial schedule and related report for the years 2021, 2020 and 2019 is submitted herewith:
---	---

Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted because they are not required, not applicable or the information is included in the financial statements or notes thereto.

(3)	Exhibits.

The exhibit list in the Exhibit Index is incorporated by reference as the list of exhibits required as part of this Report.

ITEM 16.	FORM 10-K SUMMARY

None.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit<br><br> <br>Number
3.1	Restated By-Laws, dated as of April 8, 2020 (incorporated by reference to the Company’s Current Report on Form 8-K filed as of April 9, 2020).
3.2	Restated Certificate of Incorporation, filed as of August 1, 1990 (incorporated by reference to the Company’s Annual Report on Form 10-K for the year<br> ended December 31, 2021).
3.3	Certificate of Amendment of the Certificate of Incorporation, filed as of February 27, 1996 (incorporated by reference to the Company’s Annual Report<br> on Form 10-K for the year ended December 31, 2021).
10.1	Amended and Restated Employee Stock Ownership Plan and Trust of Standard Motor Products, Inc., dated as of<br> December 21, 2018.
10.2	2006 Omnibus Incentive Plan of Standard Motor Products, Inc., as amended (incorporated by reference to the Company’s Registration Statement on Form<br> S-8 (Registration No. 333-174330), filed as of May 19, 2011).
10.3	Supplemental Compensation Plan, effective as of October 1, 2001 (incorporated by reference to the Company’s Annual Report on Form 10-K for the year<br> ended December 31, 2001).
10.4	Severance Compensation Agreement, dated as of December 12, 2001, between Standard Motor Products, Inc. and James Burke (incorporated by reference<br> to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001).
10.5	Amendment to the Standard Motor Products, Inc. Supplemental Compensation Plan, effective as of December 1, 2006 (incorporated by reference to the<br> Company’s Annual Report on Form 10-K for the year ended December 31, 2006).
10.6	Purchase and Sale Agreement, dated as of December 21, 2007, between Standard Motors Products, Inc. and EXII Northern Boulevard Acquisition LLC<br> (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007).
10.7	Lease Agreement, dated as of March 12, 2008, between Standard Motors Products, Inc. and 37-18 Northern Boulevard LLC (incorporated by reference to<br> the Company’s Annual Report on Form 10-K for the year ended December 31, 2007).
10.8	Amendment to Severance Compensation Agreement, dated as of December 15, 2008, between Standard Motor Products, Inc. and James Burke (incorporated by<br> reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009).

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit<br><br> <br>Number
10.9	Amended and Restated Supplemental Executive Retirement Plan, dated as of December 31, 2010 (incorporated by reference to the Company’s<br> Annual Report on Form 10-K for the year ended December 31, 2010).
10.10	Amendment to Severance Compensation Agreement, dated as of March 8, 2011, between Standard Motor Products, Inc. and James Burke<br> (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
10.11	Credit Agreement, dated as of October 28, 2015, among Standard Motor Products, Inc., as borrower and the other loan parties thereto, and JPMorgan<br> Chase Bank, N.A., as agent and lender, J.P. Morgan Securities LLC, as sole bookrunner and joint lead arranger, Bank of America, N.A. and Wells Fargo Bank, National Association, as co-syndication agents and joint lead arrangers, and the<br> other lenders thereto (incorporated by reference to the Company’s Current Report on Form 8-K filed as of October 30, 2015).
10.12	Standard Motor Products, Inc. Amended and Restated 2016 Omnibus Incentive Plan and forms of related award agreements (incorporated by<br> reference to the Company’s Registration Statement on Form S-8 (Registration No. 333-256362) filed as of May 21, 2021).
10.13	First Amendment to Credit Agreement, dated as of December 10, 2018, among Standard Motor Products, Inc. and SMP Motor Products Ltd., as borrowers,<br> JPMorgan Chase Bank, N.A., as agent and lender, and the other lenders thereto (incorporated by reference to the Company’s Current Report on Form 8-K filed as of December 13, 2018).
10.14	Amended and Restated Consulting Agreement, dated as of February 23, 2021, between Standard Motor Products, Inc. and John P. Gethin<br> (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020).
21	List of Subsidiaries of Standard Motor Products, Inc.
23	Consent of KPMG LLP, Independent Registered Public Accounting Firm.
24	Power of Attorney (see signature page to Annual Report on Form 10-K).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of<br> 2002.
32.2	Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of<br> 2002.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

101.INS**	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH**	Inline XBRL Taxonomy Extension Schema Document.
101.CAL**	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF**	Inline XBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

** In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to the Original Filing shall be deemed to be “furnished” and not “filed.”

Index

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

STANDARD MOTOR PRODUCTS, INC.
(Registrant)
---
	/s/ Eric P. Sills
---	---
	Eric P. Sills
	Chief Executive Officer and President
	/s/ Nathan R. Iles
	Nathan R. Iles
	Chief Financial Officer
New York, New York
February 23, 2022

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eric P. Sills and Nathan R. Iles, jointly and severally, as his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

February 23, 2022	/s/ Eric P. Sills
	Eric P. Sills
	Chief Executive Officer and President
	(Principal Executive Officer)
February 23, 2022	/s/ Nathan R. Iles
	Nathan R. Iles
	Chief Financial Officer
	(Principal Financial and Accounting Officer)
February 23, 2022	/s/ Lawrence I. Sills
	Lawrence I. Sills, Director
February 23, 2022	/s/ John P. Gethin
	John P. Gethin, Director
February 23, 2022	/s/ Pamela Forbes Lieberman
	Pamela Forbes Lieberman, Director

Index

February 23, 2022	/s/ Patrick S. McClymont
	Patrick S. McClymont, Director
February 23, 2022	/s/ Joseph W. McDonnell
	Joseph W. McDonnell, Director
February 23, 2022	/s/ Alisa C. Norris
	Alisa C. Norris, Director
February 23, 2022	/s/ Pamela S. Puryear, Ph.D.
	Pamela S. Puryear, Director
February 23, 2022	/s/ William H. Turner
	William H. Turner, Director
February 23, 2022	/s/ Richard S. Ward
	Richard S. Ward, Director

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Schedule II ‑ Valuation and Qualifying Accounts

Years ended December 31, 2021, 2020 and 2019

			Additions
Description	Balance at<br><br> <br>beginning<br><br> <br>of year		Charged to<br><br> <br>costs and<br><br> <br>expenses			Other		Deductions			Balance at<br><br> <br>end of year
Year ended December 31, 2021:
Allowance for expected credit losses	$	4,406,000	$	450,000		$	—	$	41,000		$	4,815,000
Allowance for discounts		1,416,000		13,827,000			—		13,888,000			1,355,000
	$	5,822,000	$	14,277,000		$	—	$	13,929,000		$	6,170,000
Allowance for sales returns	$	40,982,000	$	129,964,000		$	—	$	128,534,000		$	42,412,000
Year ended December 31, 2020:
Allowance for expected credit losses	$	4,244,000	$	392,000		$	—	$	230,000		$	4,406,000
Allowance for discounts		968,000		11,488,000			—		11,040,000			1,416,000
	$	5,212,000	$	11,880,000		$	—	$	11,270,000		$	5,822,000
Allowance for sales returns	$	35,240,000	$	135,448,000		$	—	$	129,706,000		$	40,982,000
Year ended December 31, 2019:
Allowance for expected credit losses	$	4,488,000	$	(295,000	)	$	—	$	(51,000	)	$	4,244,000
Allowance for discounts		1,199,000		10,660,000			—		10,891,000			968,000
	$	5,687,000	$	10,365,000		$	—	$	10,840,000		$	5,212,000
Allowance for sales returns	$	33,417,000	$	136,777,000		$	—	$	134,954,000		$	35,240,000

Exhibit 10.1

EMPLOYEE STOCK

OWNERSHIP PLAN AND TRUST OF

STANDARD MOTOR PRODUCTS, INC.

Amended and Restated

Effective December 21, 2018

TABLE OF CONTENTS

		Page
ARTICLE ONE	DEFINITIONS	1
ARTICLE TWO	PURPOSE	12
ARTICLE THREE	PARTICIPANTS	13
ARTICLE FOUR	COMPANY CONTRIBUTIONS	14
ARTICLE FIVE	EMPLOYEE CONTRIBUTIONS	15
ARTICLE SIX	ALLOCATION OF CONTRIBUTIONS AND FORFEITURES	16
ARTICLE SEVEN	TERMINATION OF EMPLOYMENT	24
ARTICLE EIGHT	MANNER OF PAYMENT	28
ARTICLE NINE	ADMINISTRATION	41
ARTICLE TEN	CLAIM PROCEDURES	45
ARTICLE ELEVEN	TRUSTEES’ POWERS AND DUTIES	47
ARTICLE TWELVE	TOP HEAVY RULES	56
ARTICLE THIRTEEN	MISCELLANEOUS	64
ARTICLE FOURTEEN	AMENDMENT AND TERMINATION	66
ARTICLE FIFTEEN	REPURCHASE OF COMPANY SECURITIES	68
APPENDIX I	EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST OF STANDARD MOTOR PRODUCTS, INC.	1
---	---	---

-i-

WHEREAS, the Standard Motor Products, Inc. (the “Company”) has established and maintained the Employee Stock Ownership Plan and Trust of Standard Motor Products, Inc. (the “Plan”); and

WHEREAS, the Company intends that the Plan meet the requirements of an employee stock ownership plan under Section 4975 of the Internal Revenue Code of 1986, as amended (“Code”) for its eligible employees; and

WHEREAS, Section 14.1 of the Plan permits the Employer to amend the Plan; and

WHEREAS, the Plan was most recently amended and restated effective January 1, 2015; and

WHEREAS, the Employer wishes to amend and restate the Plan, effective December 21, 2018.

NOW, THEREFORE, the Plan is hereby amended and restated effective December 21, 2018 except where otherwise specifically stated in the document.

ARTICLE ONE

Definitions

For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless a different meaning is plainly required by the context:

1.1 “Account” means the separate account which the Trustees shall maintain for a Participant under the Plan pursuant to Section 6.1 of the Plan.

1.2 “Accounting Date” means the last day of the Plan Year or such other interim valuation date as may be set by the Trustees.

1.3 “Beneficiary” means a person designated by a Participant, or otherwise, who is or may become entitled to a benefit under the Plan.

1.4 “Break in Service” means an eligibility or vesting computation period, as the case may be, during which a Participant has not completed more than 500 Hours of Service. Solely for purposes of determining whether the Employee incurs a Break in Service under any provision of this Plan, the Trustees shall credit Hours of Service during an Employee’ s unpaid absence period due to maternity or paternity leave. The Trustees shall consider an Employee on maternity or paternity leave if the Employee’s absence is due to the Employee’s pregnancy, the birth of the Employee’s child, the place with the Employee of an adopted child, or the care of the Employee’s child following the child’s birth or placement. The Trustees shall credit Hours of Service under this paragraph on the basis of the number of Hours of Service the Employee would receive, on the basis of 8 hours per day during the absence period. The Trustees shall credit only the number of Hours of Service (up to 501 Hours of Service) necessary to prevent an Employee’s Break in Service. The Trustees shall credit all Hours of Service described in this paragraph to the computation period in which the absence period begins or, if the Employee does not need these Hours of Service to prevent a Break in Service in the computation period in which his absence period begins, the Trustee shall credit these Hours of Service to the immediately following computation period.

1.5 “Code” means the Internal Revenue Code of 1986, as amended.

1.6 “Company” means Standard Motor Products, Inc., a New York corporation and any successor thereto.

1.7 “Company Securities” means shares of stock which constitute employer securities with respect to the Company as defined in Section 409(l) of the Code. Code Section 409(l) defines employer securities as common stock issued by the Employer (or by an ERISA Affiliate) which is readily tradable on an established market. If there is no common stock that meets these requirements, the term “employer securities” means common stock issued by the Employer (or by an ERISA Affiliate) having a combination of voting power and dividend rights equal to or in excess of –

(a) that class of common stock of the Employer (or of any other such corporation) having the greatest voting power, and

(b) that class of common stock of the Employer (or of any other such corporation) having the greatest dividend rights.

1.8 “Compensation” means wages as defined in Code Section 3401(a) (for purposes of income tax withholding at the source) plus amounts that would be included in wages but for an election under Code Section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b) and all other payments of compensation to an Employee by the Employer (in the course of the Employer’s trade or business) for services to the Employer while employed as an Employee for which the Employer is required to furnish the Employee a written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). Compensation shall not include reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation, welfare benefits or unused leave (as defined below). Compensation also excludes any severance pay received prior to termination of employment and any Severance Amounts (as defined below).

(a) “Severance Amounts” means any amounts paid after severance from employment, except the following:

(i) a payment of regular compensation for services during the Employee’s regular working hours, or compensation for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments to the extent such payment would have been made prior to a severance from employment if the Employee had continued in employment with the Employer, provided such amounts are paid within the period beginning on the Employee’s severance from employment and ending on the later of (i) 2-1/2 months thereafter or (ii) the last day of the limitation year that includes the date of the Employee’s severance from employment (the “Post-Severance Period”);

(ii) payments for “unused leave” (i.e., accrued bona fide sick, vacation, or other leave, but only if the Employee would have been able to use such leave if employment had continued) that are paid within the Post-Severance Period;

(iii) payments received by a Participant within the Post-Severance Period pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid to the Participant at the same time if the Participant had not severed employment and only to the extent that the payment is includible in the Participant’s gross income; and

(iv) Compensation paid to an Employee by the Employer with regard to military service meeting the definition of differential wage payment found in Code Section 3401(h)(2) (“Differential Wages”).

Notwithstanding the foregoing, if for a Plan Year the average of the ratios of the Compensation for each Participant (as limited by the final paragraph of this Section) who is not a Highly Compensated Employee to his Compensation as determined under Section 6.3 for such year is less than the corresponding average ratios during such Plan Year for Participants who are Highly Compensated Employees, then for all purposes under the Plan, the Compensation of each Employee who is not a Highly Compensated Employee shall be his Compensation as determined for purposes of Section 6.4 for such year.

For the purposes of Section 6.4 and Article Twelve, Compensation shall mean 415 Compensation. “415 Compensation” is Compensation, subject to the following:

(i) “415 Compensation” does not exclude deferred compensation, Unused Leave, Differential Wages, amounts paid during the Post-Service Period that comprise regular pay; amounts paid by a 415 Employer (as defined below) who is not a participating Employer; imputed income; car usage; or relocation or moving expenses paid or reimbursed by the Employer unless it is reasonable to believe such moving expenses are deductible by the Employee.

(ii) “415 Compensation” shall be based on compensation for all services to the “415 Employer.” “415 Employer” means the Employer and any other employers which constitute a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)) or which constitute trades or businesses (whether or not incorporated) which are under common control (as defined in Code Section 414(c) as modified by Code Section 415(h)) or which constitute an affiliated service group (as defined in Code Section 414(m)) and any other entity required to be aggregated with the Employer pursuant to regulations issued under Code Section 414(o).

(iii) “415 Compensation” shall be based on the amount actually paid or made available to the Participant (or, if earlier, includible in the gross income of the Participant) during the limitation year.

(iv) An Employee’s severance from employment shall be applied using the modification to the employer aggregation rules prescribed in Code Section 415(h).

(v) “415 Compensation” may include amounts earned, but not paid during the limitation year solely because of the timing of pay periods and pay dates, provided

a.	such amounts are paid during the first few weeks of the next limitation year;
b.	such amounts are included on a uniform and consistent basis with respect to all similarly situated Participants; and
---	---
c.	no such amounts are included in more than one limitation year.
---	---

The annual Compensation of each Participant taken into account in determining allocations for any Plan Year shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with section 401(a)(17)(B) of the Code (the limit for the 2018 Plan Year is $275,000). Annual Compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year.

1.9 “Disability” means that a Participant, because of a physical or mental disability, is unable to perform the duties of his customary position of employment for an indefinite period which the Trustee considers will be of long and continued duration.

1.10 “Disqualified Person” shall have the meaning ascribed to that term under Section 4975(e)(2).

1.11 “Eligible Spouse” shall mean a Participant’s spouse if the Participant and such spouse had been legally married throughout the 1-year period ending on the date of the Participant’s death. To the extent provided in any qualified domestic relations order, “Eligible Spouse” shall also mean a former spouse of the Participant, if such former spouse and Participant had been married for at least 1 year.

1.12 “Employee” means any individual employed by an Employer.

1.13 “Employer” means the Company, or any ERISA Affiliate that, with the consent of the Company, hereafter adopts the Plan, as provided in Section 13.4.

1.14 “ERISA” means the Employee Retirement Income Act of 1974, as amended.

1.15 “ERISA Affiliate” means any organization (whether or not incorporated) which, together with the Employer, is a member of a controlled group of corporations (as modified by Section 409(l)(4) of the Code), is under “common control” or is a member of an “affiliated service group” within the meaning of Sections 414(b), 414(c) and 414(m) of the Code, respectively.

1.16 “Exempt Loan” means a loan (including an extension of credit) used by the Trust to finance the acquisition of Company Securities, which loan may be made or guaranteed by a Disqualified Person, provided the loan satisfies the requirements of Treasury Regulation 54.4975-7(b).

1.17 “Fair Market Value” means the fair market value as set by procedures established by the Trustee that comply with Section 3(18) of ERISA and Section 4975 of the Code.

1.18 “Highly Compensated Employee” means an Employee who (i) was a 5% owner during the current or preceding Plan Year; or (ii) earned more than $80,000 (or larger amount, as indexed) for the preceding Plan Year. The dollar amount referred to in the prior sentence shall be adjusted in accordance with regulations issued by the Secretary of the Treasury or his delegate pursuant to Section 415(d) of the Code, such adjustment to be effective for the Plan Year beginning in the calendar year for which such adjustment is announced; for 2018 and 2019, such amount is $120,000 and $125,000 respectively.

For this purpose, a former employee shall be treated as a highly compensated employee if

A) such former employee was a highly compensated employee when he terminated his employment, or

B) such former employee was a highly compensated employee at any time after attaining age 55.

1.19 “Hour of Service” means:

(a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Employer. These hours shall be credited to the Employee for the computation period or periods in which duties are performed;

(b) Each hour for which an Employee is paid, or entitled to payment, by an Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. For purposes of this paragraph (b), a payment shall be deemed to be made by or due from an Employer regardless of whether such payment is made by or due from an Employer directly, or indirectly through, among others, a trust fund or insurer to which an Employer contributes or pays premiums, and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate. In the case of a family and medical leave of absence a Participant shall be credited, to the extent required by the Family and Medical Leave Act of 1993, for purposes of eligibility for participation and vesting, with the total number of Hours of Service he or she would have worked has he or she not been on a family and medical leave of absence;

(c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Employer. The same Hours of Service shall not be credited under both paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period or periods in which the award, agreement or payment is made. Crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in paragraph (b) above shall be subject to the limitations set forth in that paragraph;

(d) No more than 501 Hours of Service shall be credited under paragraphs (b) and (c) for the nonperformance of duties for any single continuous period (whether or not such period occurs in a single computation period). Hours of Service hereunder shall be calculated and credited pursuant to Section 2530.200b-2(b) and (c) of the Department of Labor regulations which are incorporated herein by reference. In crediting Hours of Service hereunder, each Employee for whom the Employer does not maintain hourly work records and who completes at least one Hour of Service (pursuant to paragraphs (a), (b) or (c) above) during any week shall be credited with 45 Hours of Service for such week. For each other Employee, Hours of Service shall be credited based on the number of hours actually worked. For purposes of this Section 1.19, the term Employee shall include all persons employed by an Employer including employees covered by a collective bargaining agreement and the term Employer shall include all ER1SA Affiliates whether or not they have adopted the Plan;

(e) Notwithstanding any provision of the Plan to the contrary, in case of an absence from employment because of qualified military service, an Employee shall be credited, to the extent required by the Uniform Services Employment and Reemployment Rights Act of 1994 and Code Section 414(u), for purposes of eligibility and vesting, with the total number of Hours of Service he would have worked had he not been on a leave of absence due to military service.

1.20 “Normal Retirement Date” means the date on which a Participant attains 65 years of age.

1.21 “Participant” means any present or former Employee who is qualified to participate and does participate in the Plan and for whom there remains an account balance.

1.22 “Plan” means the tax-qualified stock bonus plan established by the Company hereunder, designed to invest primarily in Company Securities and known as the Employee Stock Ownership Plan and Trust of Standard Motor Products, Inc.

1.23 “Plan Administrator” shall be the person designated by the Company from time to time to have full responsibility for compliance with the reporting and disclosure rules under the Act with respect to the Plan, and such other duties as may be consistent therewith. lf no such person or committee is designated, the Company shall be the Plan Administrator.

1.24 “Plan Year” means the 12 consecutive month period beginning on January 1 and ending on December 31.

1.25 “Rollover Account” means the amount maintained by the Trustees for a Participant who has elected to make a rollover contribution as provided in Section 5.2 of the Plan.

1.26 “Trust” means the entity created under the provisions of this Plan.

1.27 “Trustees” means the party or parties, individual or corporate, who are signatories to this Plan as Trustees, and any duly appointed additional or successor Trustee or Trustees acting hereunder. The Trustees shall be the “named fiduciaries” referred to in Section 402(a) of ERISA with respect to the control management and disposition of the assets of the Trust.

1.28 “Trust Fund” means the total of the contributions made by the Employers to the Trust pursuant to the Plan, increased by profits, gains, income and recoveries received, and decreased by losses, depreciation, benefits paid and expenses incurred in the administration of the Trust. Trust Funds includes all assets acquired by investment and reinvestment which are held in the Trust by the Trustees.

1.29 “Year of Service” means a Plan Year during which an Employee is credited with at least 1,000 Hours of Service; provided that “Year of Service” shall also include the 12 month period beginning on the day on which an Employee commences employment with an Employer and is first credited with one Hour of Service by such Employer if, during such 12 month period, the Employee is credited with at least 1,000 Hours of Service.

A Year of Service is used to determine Plan eligibility for Employees who normally work fewer than 1,000 Hours of Service in a Plan Year and requires that such Employees complete one Year of Service in order to be eligible to participate in the Plan; for purposes of determining such an Employee’s eligibility to participate in the Plan, the ‘Months of Employment Equivalency’ method described in the last sentence of this Section 1.29 shall not apply. Once such Employee has completed one Year of Service, the Employee will remain eligible to participate in the Plan regardless of the Employee’s Hours of Service during any subsequent Plan Year, as long as he continues to be employed by an Employer. In the case of an Employee who incurs a Break in Service at a time when he is nonvested in any portion of his benefit, and whose Break in Service exceeds the greater of (i) 5, or (ii) his years of eligibility service prior to such Break in Service, his eligibility service prior to such Break in Service shall be disregarded for eligibility purposes and for the initial 12 consecutive month period for determining his eligibility for participation following such Breaks in Service.

Except as provided above in connection with determining Plan eligibility for Employees who normally work fewer than 1,000 Hours of Service in a Plan Year, in determining Hours and Years of Service under the Plan, the Employer intends to use the “Months of Employment Equivalency” method as defined under Department of Labor Regulations for Employees; pursuant to this method, Employees shall be deemed to have worked one hundred ninety (190) Hours in each month in which the Employee works at least one (1) Hour of Service.

1.30 “Year of Vesting Service” means any Plan Year, including Plan Years beginning prior to January 1, 1997, during which an Employee is credited with at least 1,000 Hours of Service. In determining Hours of Service and Years of Vesting Service for vesting purposes under the Plan, the Employer intends to use the “Months of Employment Equivalency” method as defined under Department of Labor Regulations for determining Years of Vesting Service for all Employees; pursuant to this method, an Employee shall be deemed to have worked one hundred ninety (190) Hours in each month in which the Employee works at least one (1) Hour of Service.

ARTICLE TWO

Purpose

2.1 The Plan is established to provide for the participation of Employees in the growth of the Company by enabling them to acquire stock ownership interests in the Company, The Plan is intended as a stock bonus plan qualified under Section 401(a) of the Code and as an Employee Stock Ownership Plan under Section 4975(e)(7) of the Code and Section 407(d)(6) of ERISA.

2.2 The Trust hereunder is designed to invest primarily in Company Securities and is created for the exclusive benefit of Participants and their Beneficiaries and shall be interpreted and administered at all times in a manner consistent with the requirements of the Code and the Regulations thereunder relating to qualified stock bonus plans and trusts and employee stock ownership plans. Except as provided in Section 4.4 or Section 9.3(b), the principal or income of this Trust shall not be paid to or revert to the Company or be used for any purpose whatsoever other than the exclusive benefit of the Participants or their Beneficiaries.

ARTICLE THREE

Participants

3.1 Each Employee who is a Participant in this Plan as of December 20, 2018 shall continue to participant in this Plan on December 21, 2018.

For all other Employees, the following eligibility rules shall apply:

(a) Effective March 30, 1998, all former Cooper Industries, Inc. employees who join the Company shall be eligible to participate in the Plan immediately.

(b) Any Employee who completes 30 days of service with the Company shall become a Participant on the first day of the following calendar quarter. Thirty days of service shall mean the 30 day period beginning with the Employee’s date of hire. In addition to the foregoing, for Employees who normally work fewer than 1,000 Hours of Service in a Plan Year, such Employees must meet the Year of Service requirement under Section 1.29 of this Plan to participate in the Plan.

(c) Effective July 1, 2003, all former employees of Dana Corporation who join the Company shall be eligible to participate in the Plan immediately.

3.2 If a former Employee who has incurred a termination of employment again becomes an Employee, then, unless his prior Years of Service are disregarded for eligibility purposes in accordance with Section 1.29, his prior service shall be recognized for eligibility purposes in accordance with Section 3.1 above had he not incurred a termination of employment.

3.3 Notwithstanding the foregoing, an Employee shall not be eligible to participate in the Plan if he is covered by a collective bargaining agreement between Employee representatives and an Employer if retirement benefits were the subject of good faith bargaining. Further, Employees who are nonresident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code) shall not be eligible to participate in the Plan.

ARTICLE FOUR

Company Contributions

4.1 Each Employer, or the Company acting on behalf of such Employer, shall contribute to the Trust under the Plan for each Plan Year it is in effect such an amount or amounts as it shall determine to be advisable.

4.2 The Trustees shall not be under any duty to inquire into the correctness of the amount contributed and paid over to the Trustees nor shall they have any duty to enforce payment of any contributions to be made hereunder. Employer contributions may be made in whole or in part in cash or in the form of Company Securities.

4.3 If more than one Employer maintains the Plan, the Trustees shall account separately for each Employer’s contribution(s) for a Plan Year to the Accounts of those Participants actually employed by that Employer during the Plan Year. For purposes of Section 6.2, Compensation shall include compensation paid or accrued during the Plan Year by an Employer during that Plan Year. For purposes of Section 6.2, Compensation shall only include compensation paid or accrued for the period that the Employee is a Participant in the Plan during the Plan Year.

4.4 The establishment of the Plan and Trust by the Company is contingent upon obtaining the approval of the Internal Revenue Service. In the event that the Internal Revenue Service fails to approve the Plan and Trust, the Trustees shall proceed to liquidate the Trust by paying all expenses and returning all remaining assets to the Employers to which they are attributable as promptly as practical, but in no event later than 1 year after the date of the resolution of any appeals before the Internal Revenue Service or the courts. The Trust shall thereupon terminate. In the event an Employer contribution is made under a mistake of fact, such contribution shall be returned to the Employer within 1 year after the payment of the contribution, and if a deduction under Section 404 of the Code for a contribution is disallowed, such contribution shall be returned to the Employer (to the extent disallowed) within 1 year after the disallowance of the deduction. The Trustees may require an Employer to furnish whatever evidence the Trustees deem necessary to enable the Trustees to confirm that the amount an Employer has requested be returned is properly returnable under ERISA.

4.5 Employer contributions may be paid in cash in such amounts and at such times as may be needed to provide the Trustees with cash sufficient to pay any currently maturing exempt loan obligations, provided, however, that to the extent provided in Section 11.12, such loan obligations (principal and interest) may be paid from cash dividends on Company Securities held by the Plan.

ARTICLE FIVE

Employee Contributions

5.1 The Plan does not require or permit contributions by Employees or Participants.

5.2 (a) Subject to such objective and reasonable terms and conditions as the Trustees may establish from time to time, an Employee may at any time make a rollover contribution to this Plan, which shall be held by the Trustees in a Rollover Account established on behalf of such Employee. Such Employee shall submit a written certification by the sponsor, administrator or other party maintaining the plan from which the rollover contribution is to be received, satisfactory to the Trustees, that the contributions qualifies as a rollover contribution. The Trustees shall be entitled to rely upon such certification.

(b) A contribution shall qualify as a rollover contribution if it satisfies the requirements of a rollover amount with respect to this Plan as an Eligible Retirement Plan as defined in Section 402(a) of the Code.

(c) A Participant’s Rollover Account shall be distributed at the same time, to the same party and in the same manner as the Participant’s Account pursuant to Article Eight.

ARTICLE SIX

Allocation of Contributions and Forfeitures

6.1 The Trustees shall establish and maintain an Account in the name of each Participant and shall determine the accrual of benefits on the basis of the Plan Year.

6.2 (a) 70% of the contributions for a Plan Year made by an Employer shall be allocated to the Accounts of those Participants (i) who are Employees or on maternity or paternity leave as of January 1 of the current year, or (ii) who retire on or after their Normal Retirement Date, die or incur a Disability during the Plan Year for which the contribution is made, in the ratio which the Compensation of each such Participant for the Plan Year for which the contribution is made bears to the total Compensation of all such Participants for such Plan Year.

(b) 30% of the contributions made by an Employer for a Plan Year shall be allocated to the Accounts of those Participants who (i) have completed at least 5 Years of Vesting Service by the last day of the Plan Year for which the contribution is made, and (II) who are Employees or on maternity or paternity leave as of January 1 of the current Plan Year, or who retire on or after their Normal Retirement Date, die or incur a Disability during the Plan Year for which the contribution is made, in the ratio of which the Compensation of each such Participant for the Plan Year for which the contribution is made bears to the total Compensation of such Participants for such Plan Year.

6.3 For purposes of this Article:

(a) Annual Addition shall mean the sum of the following amounts allocated on behalf of a Participant for a Plan Year: (i) all Employer contributions allocated to such Accounts, (ii) all forfeitures (including income allocable thereto) and (iii) the amount of all nondeductible Participant contributions. Notwithstanding the foregoing, any Company contributions applied by the Trustees for any Plan Year to pay interest on an Exempt Loan and any shares of Company Securities acquired by the Plan with the proceeds of an Exempt Loan which are allocated as forfeitures pursuant to Section 6.2(b) for any Plan Year shall not be included as Annual Additions, provided that not more than 1/3 of the Company contributions applied to pay principal and interest on an Exempt Loan for such Plan Year are allocated to Participants who are Highly Compensated Employees. The Trustees may reallocate such Company contributions in order to satisfy this special limitation.

Annual Additions shall also include amounts allocated to an individual medical account (as defined in Section 415(l) of the Code) included as part of a defined benefit plan maintained by the Company. Furthermore, Annual Additions include contributions paid or accrued attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code Section 419A(d)(3)) under a welfare benefit fund maintained by the Company.

(b) Except to the extent permitted under Section 414(v) of the Code, the annual addition that may be contributed or allocated to a participant’s account under the Plan for any limitation year shall not exceed the lesser of: (i) $40,000, as adjusted by increases in the cost-of-living under Section 415(d) of the Code (the limit for the 2018 and 2019 Plan Years is $55,000 and $56,000 respectively), or (ii) 100 percent of the Participant’s compensation, within the meaning of Section 415(c)(3) of the Code, for the limitation year. The compensation limit referred to in (ii) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) and Section 419A(f)(2) of the Code) which is otherwise treated as an annual addition.

(c) Company shall mean all members of a group which constitute a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), or which constitutes a trade or business (whether or not incorporated) which are under common control (as defined in Code Section 414(c) as modified by Code Section 415(h)), or which constitutes an affiliated service group as defined by Code Section 414(m).

(d) The Trustees shall treat all defined contribution plans (whether or not terminated) maintained by the Company or any ERISA Affiliate as a single plan.

6.4 Final Section 415 Regulations. (a) Effective date. The provisions of this Section 6.4 (subject to Section 1.8) shall apply to limitation years beginning on and after January 1, 2008.

(b) 415 Compensation paid after severance from employment. 415 Compensation (defined as the compensation that shall be considered for Section 415 of the Code purposes only and not for any other purposes under the Plan, including for purposes of Article IV) shall be adjusted, as set forth herein, for the following types of compensation paid after a Participant’s severance from employment with the Employer maintaining the Plan (or any other entity that is treated as the Employer pursuant to Section 414(b), (c), (m) or (o)) of the Code. However, amounts described in subsections (i) and (ii) below may only be included in 415 Compensation to the extent such amounts are paid by the later of 2 1/2 months after severance from employment or by the end of the limitation year that includes the date of such severance from employment. Any other payment of compensation paid after severance of employment that is not described in the following types of compensation is not considered 415 Compensation within the meaning of Section 415(c)(3) of the Code, even if payment is made within the time period specified above.

(i) Regular pay. 415 Compensation shall include regular pay after severance of employment if:

(1) The payment is regular compensation for services during the participant’s regular working hours, or compensation for services outside the participant’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(2) The payment would have been paid to the participant prior to a severance from employment if the participant had continued in employment with the Employer.

(ii) Leave cashouts and deferred compensation. Leave cashouts shall be included in 415 Compensation if those amounts would have been included in the definition of 415 Compensation if they were paid prior to the participant’s severance from employment, and the amounts are payment for unused accrued bona fide sick, vacation, or other leave, but only if the participant would have been able to use the leave if employment had continued. In addition, deferred compensation shall be included in 415 Compensation if the compensation would have been included in the definition of 415 Compensation if it had been paid prior to the participant’s severance from employment and the compensation is received pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid at the same time if the participant had continued in employment with the Employer and only to the extent that the payment is includible in the participant’s gross income.

(iii) Salary continuation payments for military service participants. 415 Compensation does not include payments to an individual who does not currently perform services for the Employer by reason of qualified military service (as that term is used in Section 414(u)(1) of the Code) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.

(c) Administrative delay (“the first few weeks”) rule. 415 Compensation for a limitation year shall not include amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates. 415 Compensation for a limitation year may include amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next limitation year, the amounts are included on a uniform and consistent basis with respect to all similarly situated participants, and no compensation is included in more than one limitation year.

(d) Definition of annual additions. The Plan’s definition of “annual additions” is modified as follows:

(i) Restorative payments. Annual additions for purposes of Section 415 of the Code shall not include restorative payments. A restorative payment is a payment made to restore losses to a Plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under ERISA or under other applicable federal or state law, where participants who are similarly situated are treated similarly with respect to the payments. Generally, payments are restorative payments only if the payments are made in order to restore some or all of the plan’s losses due to an action (or a failure to act) that creates a reasonable risk of liability for such a breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). This includes payments to a plan made pursuant to a Department of Labor order, the Department of Labor’s Voluntary Fiduciary Correction Program, or a court approved settlement, to restore losses to a qualified defined contribution plan on account of the breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). Payments made to the Plan to make up for losses due merely to market fluctuations and other payments that are not made on account of a reasonable risk of liability for breach of a fiduciary duty under ERISA are not restorative payments and generally constitute contributions that are considered annual additions.

(ii) Other Amounts. Annual additions for purposes of Section 415 of the Code shall not include: (1) The direct transfer of a benefit or employee contributions from a qualified plan to this Plan; or (2) Rollover contributions (as described in Sections 401(a)(31), 402(c)(1), 403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16) of the Code).

(e) Change of limitation year. The limitation year may only be changed by a Plan amendment. Furthermore, if the Plan is terminated effective as of a date other than the last day of the Plan’s limitation year, then the Plan is treated as if the Plan had been amended to change its limitation year.

(f) Excess Annual Additions. Notwithstanding any provision of the Plan to the contrary, if the annual additions (within the meaning of Section 415 of the Code) are exceeded for any participant, then the Plan may correct such excess in accordance with relevant IRS guidance, including, but not limited to, the preamble of the final Section 415 regulations.

(g) Aggregation and Disaggregation of Plans.

(i) For purposes of applying the limitations of Section 415 of the Code, all defined contribution plans (without regard to whether a plan has been terminated) ever maintained by the Employer (or a “predecessor employer”) under which the participant receives annual additions are treated as one defined contribution plan. The “Employer” means the Employer that adopts this Plan and all members of a controlled group or an affiliated service group that includes the Employer (within the meaning of Section 414(b), (c), (m) or (o) of the Code), except that for purposes of this Section, the determination shall be made by applying Section 415(h) of the Code, and shall take into account tax exempt organizations under regulation Section 1.414(c)-5, as modified by regulation Section 1.415(a)-1(f)(1). For purposes of this Section:

(1) A former Employer is a “predecessor employer” with respect to a participant in a plan maintained by an Employer if the Employer maintains a plan under which the participant had accrued a benefit while performing services for the former Employer, but only if that benefit is provided under the plan maintained by the Employer. For this purpose, the formerly affiliated plan rules in regulation Section 1.415(f)-1(b)(2) apply as if the Employer and predecessor Employer constituted a single employer under the rules described in regulation Section 1.415(a)-1(f)(1) and (2) immediately prior to the cessation of affiliation (and as if they constituted two, unrelated employers under the rules described in regulation Section 1.415(a)-1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the predecessor employer relationship, such as a transfer of benefits or plan sponsorship.

(2) With respect to an Employer of a participant, a former entity that antedates the Employer is a “predecessor employer” with respect to the participant if, under the facts and circumstances, the employer constitutes a continuation of all or a portion of the trade or business of the former entity.

(ii) Break up of an affiliate employer or an affiliated service group. For purposes of aggregating plans for Section 415 of the Code, a “formerly affiliated plan” of an employer is taken into account for purposes of applying the Section 415 of the Code limitations to the employer, but the formerly affiliated plan is treated as if it had terminated immediately prior to the “cessation of affiliation.” For purposes of this paragraph, a “formerly affiliated plan” of an employer is a plan that, immediately prior to the cessation of affiliation, was actually maintained by one or more of the entities that constitute the employer (as determined under the employer affiliation rules described in regulation Section 1.415(a)-1(f)(1) and (2)), and immediately after the cessation of affiliation, is not actually maintained by any of the entities that constitute the employer (as determined under the employer affiliation rules described in regulation Section 1.415(a)-1(f)(1) and (2)). For purposes of this paragraph, a “cessation of affiliation” means the event that causes an entity to no longer be aggregated with one or more other entities as a single employer under the employer affiliation rules described in Regulation Section 1.415(a)-1(f)(1) and (2) (such as the sale of a subsidiary outside a controlled group), or that causes a plan to not actually be maintained by any of the entities that constitute the employer under the employer affiliation rules of regulation Section 1.415(a)-1(f)(1) and (2) (such as a transfer of plan sponsorship outside of a controlled group).

(iii) Midyear Aggregation. Two or more defined contribution plans that are not required to be aggregated pursuant to Section 415(f) of the Code and the regulations thereunder as of the first day of a limitation year do not fail to satisfy the requirements of Section 415 of the Code with respect to a participant for the limitation year merely because they are aggregated later in that limitation year, provided that no annual additions are credited to the participant’s account after the date on which the plans are required to be aggregated.

6.5 Effective January 1, 2009, military differential wage payments, as described in Section 3401(h) of the Code, are considered compensation for purposes of Section 415(c)(3) of the Code, but are not considered compensation for any other purpose under the Plan.

ARTICLE SEVEN

Termination of Employment

7.1 All payments made by the Trustees pursuant to this Article shall be made in the manner provided in Article Eight.

7.2 A Participant’s Account shall be 100% non-forfeitable upon his attainment of his Normal Retirement Date (A) while employed by the Company or any ERISA Affiliate or (B) while on maternity or paternity leave. The Account of a Participant who remains in the employ of an Employer after attaining his Normal Retirement Date shall continue to share in Employer contributions.

7.3 When a Participant terminates employment prior to attaining his Normal Retirement Date for any reason (including death) or incurs a Disability, the Trustees shall commence payment of the Participant’s non-forfeitable Account balance as determined under Section 7.6 to him (or to his Beneficiary if the Participant is deceased), in accordance with the applicable provisions of Article Eight.

7.4 In no event shall the Trustees commence payment under Section 7.3 later than the time prescribed by the applicable provisions of Article Eight.

7.5 The non-vested portion of a Participant’s Account shall be forfeited at the time the Participant incurs 5 consecutive one-year Breaks in Service or, if earlier, at the time the Participant receives the entire non-forfeitable portion of his Account in one or more distributions following his termination of employment. For the purposes of this Section 7.5, if a Participant terminates employment without having any non-forfeitable interest in his Account, he shall be deemed to have received an immediate distribution of the non-forfeitable portion of such Account and thus the non-vested portion of the Account shall at that time be forfeited.

In making a forfeiture, to the extent possible, Company Securities held in an Account that have been acquired pursuant to an Exempt Loan shall be forfeited last. If a Participant’s Account reflects an interest in more than one class of Company Securities, the Trustees shall treat a Participant who incurs a forfeiture as forfeiting the same proportion of each such class.

Forfeitures arising under this Section 7.5 shall first be applied to the restoration of previously forfeited amounts to the extent required by Section 7.6. All or any portion of the remaining forfeitures shall be allocated among the Accounts of Participants in the same manner as provided in Section 6.2.

7.6 In the event that a former Participant (i) was not 100% vested in his Account, (ii) received one or more distributions comprising the entire non-forfeitable portion of his Account following his termination of employment but prior to the time he incurred 5 consecutive one-year Breaks in Service, (iii) who forfeited a portion of his Account in connection with such distributions, and (iv) is re-employed by the Company or an ERISA Affiliate prior to the time he incurs 5 consecutive one-year Breaks in Service, such Participant may elect on a form prescribed by the Trustees to repay the full amount of such distributions to the Plan in cash, at any time prior to the earlier of (A) 5 years from his date of re-employment or (B) his incurring 5 consecutive one-year Breaks in Service, and the full amount distributed to him following his prior termination of employment plus the amount forfeited will be restored and credited to his Account as of such Accounting Date. Any forfeited amount shall be derived, to the extent necessary, from:

(a) The amount, if any, of Participant forfeitures that would otherwise be allocated under Section 7.6;

(b) The amount, if any, of the Trust Fund net income or gain for the Plan Year, and

(c) The amount, if any, of Employer contributions under Section 4.1 for the Plan Year, as the Trustees, in their discretion, direct. To the extent possible, such restoration of forfeitures shall be made in the form of Company Securities.

7.7 (a) A Participant’s Account balance shall be 100% non-forfeitable upon his death or Disability (A) while employed by the Company or an ERISA Affiliate or (B) while on maternity or paternity leave. Effective January 1, 2007, a Participant’s Account balance shall be 100% non-forfeitable upon his death while performing qualifying military service as provided in Section 414(u) of the Code.

(b) A Participant shall receive for each Year of Vesting Service a non-forfeitable right to such Account balance according to the following schedule:

Years of Vesting Service	% of Non-forfeitable Account
Less than 2	0%
2	20%
3	40%
4	60%
5	80%
6	100%

(c) Effective March 30, 1998 all former employees of Cooper Industries, Inc. shall have their prior service with their former organization count in determining their Years of Vesting Service.

(d) Effective July 1, 2003, all former employees of Dana Corporation who join the Company shall have their prior service with their former organization count in determining their Years of Vesting Service.

(e) With respect to cash dividends paid on Company Securities held under the Plan, a Participant shall vest in such dividends at the same time vesting occurs with respect to the underlying Company Securities on which the dividends are paid.

7.8 The following rules shall apply to the determination of Years of Vesting Service:

(a) Years of Vesting Service before any Break in Service shall be disregarded if a Participant terminates employment without any non-forfeitable interest in his Account and the number of consecutive one-year Breaks in Service equals or exceeds the greater of:

(i) the aggregate number of Years of Vesting Service prior to such consecutive Breaks in Service; or

(ii) 5.

(b) Years of Vesting Service after any 5 consecutive one-year Breaks in Service shall not increase the non-forfeitable percentage of the Participant’s Account which accrued before such Break in Service.

7.9 Effective January 1, 2007, notwithstanding any provision of the Plan to the contrary, in the case of a Participant who dies while performing qualifying military service as provided in Section 414(u) of the Code, the survivors of the Participant are entitled to any additional benefits that would have been provided under the Plan (other than benefit accruals) had the Participant resumed employment and terminated employment on account of death pursuant to Section 401(a)(37) of the Code.

ARTICLE EIGHT

Manner of Payment

8.1 Except as otherwise provided herein, the Trustees shall direct that the distribution of the benefits payable to a Participant or, in the case of the Participant’s death, his Beneficiary be made (a) in accordance with the Participant’s election following the Participant’s termination of employment (including due to the Participant’s retirement on or after his Normal Retirement Date) or incurrence of a Disability and (b) in accordance with his Beneficiary’s election following the Participant’s death. The balance in such Participant’s Account shall be for this purpose determined as of the Accounting Date coincident with or immediately preceding such distribution.

8.2 Notwithstanding anything in Section 8.1 to the contrary, if a Participant dies or incurs a termination of employment (including due to the Participant’s retirement on or after his Normal Retirement Date) or a Disability at a time when the value of his benefits does not exceed $1,000 (or $5,000 in the case of a Participant who terminates employment on or after the later of age 62 or his Normal Retirement Date), then his benefits shall be distributed to the Participant or his Beneficiary, as applicable, in a single lump sum as soon as is practicable based upon the Accounting Date coincident with or immediately prior to such distribution. If a Participant dies or incurs a termination of employment or Disability prior to attaining the later of age 62 or his Normal Retirement Date, the value of his benefits at such time exceeds $1,000 but does not exceed $5,000, and the Participant does not elect to have such benefits paid to an eligible retirement plan specified by the Participant in a direct rollover or to receive such benefits directly in a lump sum payment, then the Plan Administrator shall pay such benefits in a direct rollover to an individual retirement plan designated by the Plan Administrator as soon as is practicable following the Participant’s death, termination of employment or Disability.

8.3 Form of Distributions; Distributions after Death.

(a) Subject to Sections 8.2, 8.5 and 8.6., all benefits payable on account of a Participant’s termination of employment (including due to the Participant’s retirement on or after his Normal Retirement Date), Disability or death shall be paid in the form of a single lump sum distribution, unless the Participant or his Beneficiary elects to have his or her account balance distributed in two or more partial distributions at such times as the Participant or his Beneficiary elects.

(b) Except as otherwise provided in Sections 8.2 or 8.6, all benefits payable on account of a Participant’s death shall be made in accordance with the Beneficiary’s election on or before the applicable date specified in Section 8.6(b)(ii).

8.4 All benefits payable under the Plan shall be paid or provided for solely by the Trust Fund. Neither the Company nor any other Employer assumes any liability or responsibility therefor. Notwithstanding any provision hereof, and unless the Participant otherwise elects, in no event shall the payment of benefits commence later than 60 days after the close of the Plan Year in which occurs the latest of:

(i) the Participant reaching his Normal Retirement Date;

(ii) the 10th anniversary of the year in which the Participant commenced participation in the Plan; or

(iii) the Participant’s termination of employment.

Notwithstanding the forgoing, and except as provided in Sections 8.2, 8.5 or 8.6, a Participant must file a claim for benefits with the Company before payment of benefits will commence hereunder.

8.5 A Participant, other than a 5% owner, shall have his benefits commence no later than April 1 of the calendar year following the later of (i) the calendar year in which he attains age 70-1/2, or (ii) the earlier of (A) the calendar year with or within which ends the Plan Year in which he becomes a “5% owner” or (B) the calendar year in which he retires.

8.6 Minimum Distribution Requirements.

(a) General Rules

(i) Effective Date. The provisions of this Section 8.6 will apply for purposes of determining required minimum distributions. The requirements of this Section 8.6 will take precedence over any inconsistent provisions of the Plan.

(ii) Requirements of Treasury Regulations Incorporated. All distributions required under this article will be determined and made in accordance with the Treasury regulations under Section 401(a)(9) of the Internal Revenue Code.

(iii) TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this article, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (“TEFRA”) and the provisions of the plan that relate to section 242(b)(2) of TEFRA.

(b) Time and Manner of Distribution.

(i) Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s required beginning date.

(ii) Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(1) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, then distributions to the surviving spouse will begin (i) absent an alternative election by the surviving spouse, by December 31 of the calendar year immediately following the calendar year in which the Participant died or, if later, by December 31 of the calendar year in which the Participant would have attained age 70½, or (ii) if so elected by the surviving spouse, in one or more installments at any time or times on or before December 31 of the fifth year after the year of the Participant’s death.

(2) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, then distributions to the designated Beneficiary will begin (i) absent an alternative election by the Beneficiary, by December 31 of the calendar year immediately following the calendar year in which the Participant died or (ii) if so elected by the Beneficiary, in one or more installments at any time or times on or before December 31 of the fifth year after the year of the Participant’s death.

(3) If there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(4) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this subsection (b)(ii), other than subsection (b)(ii)(1), will apply as if the surviving spouse were the participant.

For purposes of this subsection (b)(ii) and subsection (d), unless subsection (b)(ii)(4) applies, distributions are considered to begin on the Participant’s required beginning date. If section (b)(ii)(4) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under subsection (b)(ii)(1).

(iii) Forms of Distribution. Unless the Participant’s interest is distributed in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with subsections (c) and (d) of this article.

(i) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(1) the quotient obtained by dividing the Participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

(2) if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

(ii) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this subsection (c) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

(d) Required Minimum Distributions After Participant’s Death.

(i) Death On or After Date Distributions Begin.

(1) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated Beneficiary, determined as follows:

(A) The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(B) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(C) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(2) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(ii) Death Before Date Distributions Begin.

(1) Participant Survived by Designated Beneficiary. Unless the Beneficiary has elected otherwise, if the Participant dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the remaining life expectancy of the Participant’s designated Beneficiary, determined as provided in subsection (d)(1).

(2) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(3) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under subsection (b)(ii)(1), this subsection (d)(ii) will apply as if the surviving spouse were the participant.

(e) Definitions.

(i) Designated Beneficiary. The individual who is designated as the Beneficiary under section 1.3 of the Plan and is the designated Beneficiary under section 401(a)(9) of the Internal Revenue Code and section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.

(ii) Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under subsection (b). The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s required beginning date occurs, will be made on or before December 31 of that distribution calendar year.

(iii) Life expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury regulations.

(iv) Participant’s account balance. The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

(v) Required beginning date. The Required Beginning Date of a Participant who is not a 5% owner is the April 1st of the calendar year immediately following the calendar year in which the occurs the later of retirement or attainment of age 70½. The Required Beginning Date of a Participant who is a 5% owner, is the April 1st immediately following the calendar year in which the Participant reaches age 70½.

(f) 2009 Required Minimum Distributions

(i) To the extent the Plan was required to make required minimum distributions for 2009, such distributions, if any, were made without regard to the temporary required minimum distribution suspension and rollover rules provided under the Worker, Retiree, and Employer Recovery Act of 2009.

8.7 Each Participant may designate one or more Beneficiaries and contingent Beneficiaries by delivering a written designation thereof to the Trustees. Upon the death of a Participant, his Beneficiaries shall be entitled to payment of benefits in an amount and in the manner provided in the Plan. A Participant may change his Beneficiary designation at any time by delivering a new written designation to the Trustees. The most recent designation received by the Trustees shall supersede all prior designations. A designation of Beneficiary shall be effective only if the designated Beneficiary survives the Participant.

Notwithstanding the foregoing, if a Participant has an Eligible Spouse on the date of his death, such Eligible Spouse shall be his sole primary Beneficiary, unless the spouse delivers a written consent to the Trustees waiving her right to be the sole primary Beneficiary. Such consent shall be irrevocable and in favor of a specific alternate beneficiary who may not be changed without the further consent of such spouse; provided, however, that an Eligible Spouse may execute an irrevocable general consent which shall expressly permit the Participant to select any alternate Beneficiary at any time without the need for any additional consent by such spouse. An Eligible Spouse’s consent shall contain an acknowledgment by the Eligible Spouse of the effect thereof, and shall be witnessed by a representative of the Plan or by a notary public. Such consent of an Eligible Spouse shall not be required if it is established to the satisfaction of the Trustees that the required consent cannot be obtained because there is no Eligible Spouse, or an Eligible Spouse cannot be located, or in other circumstances that may be prescribed by Treasury regulations.

8.8 If a Participant fails to designate a Beneficiary, in accordance with Section 8.7, or if no designated Beneficiary survives the Participant, the Participant’s spouse, if he is married at the date of his death, shall be deemed to be his designated Beneficiary. If, under such circumstances, the Participant is not married at the date of his death, his designated Beneficiary shall be deemed to be his estate.

8.9 Whenever the rights of a Participant are stated or limited in the Plan, his Beneficiary or Beneficiaries shall be bound thereby.

8.10 The Plan does not require the Trustees to search for, or ascertain the whereabouts of, any Participant or Beneficiary. The Employer, by certified or registered mail addressed to his last known address of record with the Trustees, shall notify any Participant or Beneficiary that he is entitled to a distribution under the Plan. If the Participant or Beneficiary fails to claim his Accounts or make his whereabouts known in writing to the Trustees within 12 months of the date of mailing of the notice, or before the termination or discontinuance of the Plan, whichever should first occur, the Trustees shall treat the Participant’s or Beneficiary’s unclaimed Accounts as forfeited and shall reduce Employer contributions, made pursuant to Section 4.1, by the amount forfeited for the Plan Year in which such forfeiture occurs. If a Participant or Beneficiary who has incurred a forfeiture of his Accounts under the provisions of this Section 8.10 makes a claim, at any time, for its forfeited Accounts, the Trustees shall direct the Employer to restore the Participant’s or Beneficiary’s forfeited Accounts to the same dollar amount of the Accounts so forfeited, unadjusted for gains and losses occurring subsequent to the date of forfeiture. The Employer shall make the restoration within 60 days after the close of the Plan Year in which the Participant or Beneficiary makes such claim. In lieu of the foregoing, the Employer or Trustee shall also be permitted to handle a missing Participant’s or Beneficiary’s account in any other manner permitted under relevant law.

8.11 Notwithstanding any provisions to the contrary that would otherwise limit a distributee’s election under this Section, a distributee may elect, at any time and in the manner prescribed by the plan administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

(a) Definitions

(i) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal period payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and dividends paid on Company Securities as described in Code Section 404(k).

(ii) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity described in Section 403(a) of the Code, a qualified trust described in Section 401(a) of the Code, or an annuity contract described in Section 403(b) of the Code and an eligible retirement plan under Section 457(b) which is maintained by a state, political subdivision of a state, or agency or instrumentality of a state or political subdivision of a state and which separately account for amounts transferred into such plan from this Plan that accepts the distributee’s eligible rollover distribution. The definition of eligible retirement plan shall also apply in case of a distribution to a surviving spouse, or to a spouse or former spouse who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. Participants may rollover an eligible rollover distribution, as defined in Section 402(c)(4) of the Code, to a Roth IRA, as defined in Section 408A of the Code, through a direct rollover so long as there is included in the Participant’s gross income any amount that would be includable if the distribution were not rolled over.

(iii) Distributee: A distributee includes an employee or former employee. In addition, the employee’s or former employee’s surviving spouse or former spouse who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributes with regard to the interest of the spouse or former spouse.

(iv) Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee.

8.12 Non-Spouse Beneficiary Direct Rollovers. Notwithstanding any provision of the Plan to the contrary that would otherwise limit the ability of a non-spouse Beneficiary to rollover a distribution to an IRS, a non-spouse Beneficiary who is a designated Beneficiary within the meaning of Section 401(a)(9)(E) of the Code may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid via trustee-to-trustee transfer directly to an individual retirement plan within the meaning of Section 408(a) or (b) of the Code that is established to receive the distribution as specified by the non-spouse Beneficiary, in a direct rollover pursuant to the provisions of Section 402(c)(11) of the Code and as provided under IRS Notice 2007-7 and subsequent guidance.

ARTICLE NINE

Administration

9.1 The Company will furnish the Trustee with such information as the Trustee will deem necessary to carry out the Plan, but assumes no obligation to any Employee, Participant or Beneficiary for any act, of the Trustee, or the Plan Administrator.

9.2 The Company will indemnify and save each Trustee and the Plan Administrator harmless from and against any and all loss resulting from liability to which he may be subjected by any act or conduct (except for willful misconduct or gross negligence) in his official capacity in the administration of the Trust or Plan, except, however, from any liability he may have under the Act for breach of fiduciary duty.

9.3 (a) Subject to paragraph (b) below relating to qualified domestic relations orders, neither a Participant nor a Beneficiary shall anticipate, assign or alienate any benefit under the Plan, and the Trustees shall not recognize any such anticipation, assignment or alienation. Furthermore, a benefit under the Plan is not subject to attachment, garnishment, levy, execution or other legal or equitable process.

(b) Nothing contained in this Plan shall prevent the Trustees from complying with the provisions of a qualified domestic relations order (as defined in Code Section 414(p)).

The Plan Administrator shall establish reasonable procedures to determine the qualified status of a domestic relations order upon receiving a domestic relations order. The Plan Administrator promptly shall notify the Participant and any alternate payee named in the order, in writing, of the receipt of the order and the Plan’s procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Plan Administrator shall determine the qualified status of the order and shall notify the Participant and each alternate payee, in writing of the determination. The Plan Administrator shall provide notice under this paragraph by mailing to the individual’s address specified in the domestic relations order, or in a manner consistent with Department of Labor regulations. The Plan Administrator may treat as qualified any domestic relations order entered prior to January 1, 1985, irrespective of whether it satisfied all the requirements described in Code Section 414(p).

If any portion of the Participant’s non-forfeitable Account balance is payable during the period the Plan Administrator is making its determination of the qualified status of the domestic relations order, the Trustees shall segregate the amounts payable in a separate account and invest the segregated account solely in fixed income investments. If the Plan Administrator determines the order is a qualified domestic relations order within 18 months of receiving the order, the Trustees shall distribute the segregated account in accordance with the order. If the Plan Administrator does not make a determination of the qualified status of the order within 18 months of receiving the order, the Trustees shall distribute the segregated account in the manner the Plan would distribute if the order did not exist and shall apply the order prospectively if the Plan Administrator later determines the order is a qualified domestic relations order.

To the extent it is not inconsistent with the provisions of the qualified domestic relations order, the Trustees may invest any partitioned amount in a segregated sub-account or separate account and invest the account in federally insured, interest bearing savings account(s) or time deposit(s) (or a combination of both), or in other fixed income investments. A segregated sub-account shall remain a part of the Trust, but it alone shall share in any income it earns, and it alone shall bear any expense or loss it incurs.

The Trustees shall make any payments or distributions required under this Section 9.3(b) by separate checks or other separate distribution to the alternate payee(s).

9.4 Any Participant in the Plan or any Beneficiary may examine copies of the Plan description, latest annual report, this Plan and Trust or any other instrument under which the Plan was established or is operated. The Plan Administrator will maintain such copies on the premises of the Company for examination during reasonable business hours and will furnish copies at a reasonable charge upon request of a Participant or Beneficiary.

9.5 The Trustees shall establish a funding policy and method consistent with the objectives of the Plan and the requirements of Title I of ERISA. The Trustees shall meet at least annually to review such funding policy and method. All action of the Trustees, and the reasons therefore, taken pursuant to this Section 9.5 shall be recorded in the minutes of the meeting of the Trustees.

9.6 The Trustees, or an Investment Manager appointed by the Trustees, shall have the sole and complete discretion of the Trust Fund. The Trustees may reserve from investment such amounts of cash as they, from time to time, deem necessary or advisable in the administration of the Trust.

9.7 The Trust Fund shall be primarily invested in shares of Company Securities. Notwithstanding the foregoing, each “qualified Participant” may elect within 90 days after the close of the Plan Year in the “qualified election period” (a “Diversification Year”), as defined below, to direct the Trustees to distribute a number of shares from the Participant’s account up to (i) 25% of the total number of shares of Company Securities allocated to the Participant’s Account at any time after 1986 minus (ii) the total number of such shares of Company Securities that were previously distributed to the Participant pursuant to a prior election under this Section 9.7.

In the case of a qualified election period in which the Participant has attained the age of 60, the Participant can make an election in the same manner as described in the preceding sentence except that “50%” may be replaced for “25%” (the applicable percentage being the Maximum Diversification Amount).

For purposes of this Section, the term “qualified Participant” means any Participant who has attained age 55 and who has a 100% non-forfeitable right to their Account balance in accordance with Section 7.7.

For purposes of this Section, the term “qualified election period” begins as soon as the Participant becomes a qualified Participant and ends as of the earlier of the qualified Participant no longer maintaining an Account balance or electing distribution of the Maximum Diversification Amount, as defined in Section 9.7.

Notwithstanding the foregoing, nothing in this Section 9.7 shall limit the ability of any Participant who has terminated employment (including due to the Participant’s retirement on or after his Normal Retirement Date) or incurred a Disability or, in the case of the Participant’s death, his Beneficiary from electing a distribution in excess of his Maximum Diversification Amount in accordance with Article Eight.

ARTICLE TEN

Claim Procedures

10.1 The Trustees shall establish a procedure for the resolution of disputes and dispositions of claims arising under the Plan. Until modified by the Trustees, this procedure is as follows:

Any of the Employees, former Employees, or any Beneficiaries of such Employees or former Employees may, if they so desire, file with the Trustees a written claim for benefits under the Plan. Within 90 days after the filing of such a claim, the Trustees shall notify the claimant whether his claim is upheld or denied. The Trustees may, under special circumstances, extend the period of time for processing a claim by an additional 90 days. If such an extension of time is required written notice shall be furnished to the claimant or his duly authorized representative prior to the termination of the initial 90 day period. Such notice will indicate the special circumstance requiring an extension. in the event the claim is denied, the Trustees shall state in writing:

(a) the specific reason for the denial;

(b) specific references to pertinent Plan provisions on which the denial is based;

(c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(d) an explanation of the claim review procedure set forth in this Section 10.1.

Within 60 days after receipt of notice that his claim has been denied, the claimant or his duly authorized representative may file with the Trustees a written request for a review hearing and may, in conjunction therewith, submit written issues and comments. The Trustees shall then schedule, within 60 days after the filing of such request, a full and fair hearing of the claim before the Trustees. The Trustees may, under special circumstances, extend such period of time by an additional 60 days. Prior to said hearing, the claimant or his representative shall have a reasonable opportunity to review a copy of the Plan, the Trust agreement, and other pertinent documents in the possession of the Trustees. The Trustees shall communicate their decision in writing to the claimant within 30 days after the hearing. The decision will include the specific reasons for the decision, specify the pertinent Plan provisions on which the decision is based, a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits, and a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures and a statement of the claimant’s right to bring an action under Section 502(a) of ERISA. Any claim for benefits and any request for a review hearing must be filed on forms to be furnished by the Trustees upon a Participant’s request.

(e) To the extent a Disability benefit related claim is made under the Plan, the claim will be handled in accordance with the applicable regulations promulgated by the Department of Labor in 29 C.F.R. 2560.503-1.

ARTICLE ELEVEN

Trustees’ Powers and Duties

11.1 The Trustees accept the Trust created hereunder and agree to perform the obligations imposed. The Trustees shall provide a bond for the faithful performance of their duties under the Trust to the extent required by law.

11.2 The Trustees shall have full discretion and authority regarding the investment of the Trust Fund. The Trustees shall have, but not by way of limitation, the following powers, rights, and duties:

(a) to invest the Trust Fund primarily in Company Securities (“primarily” meaning the power and authority to acquire, from Company shareholders or the Company or any ERISA Affiliate at prices not in excess of fair market value, not more than 100% of the Trust Fund in Company Securities) and to invest the balance, if any, of the Trust Fund in any common or preferred stocks, bonds, share of investment companies, common trust funds, insurance contracts, mortgages, notes or other property of any kind, real or personal, as a prudent man would do under like circumstances with due regard for the purposes of the Plan;

(b) to retain in cash so much of the Trust Fund as they may deem advisable without liability for obtaining the highest rate of interest available;

(c) to manage, sell, exchange, transfer, and lease for any term, and otherwise deal with all Trust property, real or personal, in such manner, for such consideration, and on such terms and conditions as they deem best;

(d) to borrow money by mortgage, pledge or otherwise;

(e) to compromise, contest, arbitrate or abandon claims and demands in their discretion;

(f) to have with respect to the Trust all of the rights of an individual owner, including the power to give proxies, participate in voting trusts, mergers, consolidations or liquidations;

(g) to hold any securities or other property in the name of the Trustees or a nominee, or in another form as they deem best, without disclosing the trust relationship;

(h) to furnish the Company an annual statement of account showing the condition of the Trust Fund and all investments, receipts, disbursements and other transactions affected by the Trustees during the Plan Year covered by the statement, and the assets of the Trust held at the end of the Plan Year, which statement of account shall be conclusive on all persons unless objected to within 90 days after receipt; and

(i) to borrow money, to assume indebtedness, including installment obligations, extend mortgages and encumber by mortgage or pledge; provided, however, if any transaction is with a Disqualified Person or a Disqualified Person guarantees a loan to the Plan or Trust, any such Exempt Loan shall be primarily for the benefit of Participants or their Beneficiaries, and the following terms and conditions shall apply.

(1) The Trustees shall use the proceeds of the Exempt Loan within a reasonable time after receipt only for any or all of the following purposes: (i) to acquire Company Securities, (ii) to repay such Exempt Loan, or (iii) to repay a prior Exempt Loan. Except as may be expressly provided under this Plan, no Company Security acquired with the proceeds of an Exempt Loan may be subject to a put, call or other option, or buy/sell or similar arrangement while held by and when distributed form this Plan, whether or not this Plan is then a leveraged employee stock ownership plan.

(2) The interest rate on the Exempt Loan shall not be more than a reasonable rate of interest.

(3) Any collateral the Trustees pledge to the creditor shall consist only of the Company Securities purchased with the borrowed funds and Company Securities the Trust used as collateral on the prior Exempt Loan repaid with the proceeds of the current Exempt Loan.

(4) The creditor shall have no recourse against the Trust under the Exempt Loan except with respect to such collateral given for the Exempt Loan, contributions (other than contributions of Company Securities) that the Company makes to the Trust to meet its obligations under the Exempt Loan, and earnings attributable to such collateral and the investment of such contributions. The payment made with respect to an Exempt Loan by the Plan during a Plan Year must not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less such payments in prior years. The Trustees must account separately for such contributions and earnings in the books of account of the Plan until the Trust repays the Loan.

(5) In the event of default upon the Exempt Loan, the value of Plan assets transferred in satisfaction of the Exempt Loan must not exceed the amount of the default, and if the lender is a Disqualified Person, the Exempt Loan must provide for transfer of Plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Exempt Loan.

(6) The Trustees must deposit and maintain all assets acquired with the proceeds of an Exempt Loan in a Suspense Account. In withdrawing assets from the Suspense Account, the Trustees shall apply the provisions of Treasury Regulation 54.4975-7(b)(8) as if all securities in the Suspense Account were encumbered. Upon the payment of any portion of the Exempt Loan, the Trustees shall effect the release of assets in the Suspense Account from encumbrances, and the pledge agreement must so provide. For each Plan Year during the duration of the Exempt Loan, the number of Company Securities released must equal the number of encumbered Company Securities held immediately before the release for the current Plan Year multiplied by a fraction. The numerator of the fraction is the amount of principal paid for the Plan Year. The denominator of the fraction is the sum of the numerator plus the principal to be paid for all future years. The number of future Plan Years under the Exempt Loan must be definitely ascertainable and must be determined without taking into account any possible extension or renewal periods, and may not exceed 10 years. Further, any such Exempt Loan must provide for annual payments of principal and interest at a cumulative rate that cannot be less rapid at any time than any level annual payments of such amounts for 10 years. In determining principal, interest shall be disregarded only to the extent that it would be determined to the interest under the amortization tables. If the collateral includes more than one class of Company Securities, the number of Company Securities of each class will be released from the Suspense Accounts to the Accounts of Participants in accordance with Section 6.2 for the Plan Year with respect to which the Trustees have paid the corresponding portion of the Exempt Loan.

(7) The Exempt Loan must be for a specific term and may not be payable at the demand of any person except in the case of default.

(8) Notwithstanding the fact this Plan ceases to be an employee stock ownership plan, Company Securities acquired with the proceeds of an Exempt Loan shall continue after the Trustees repay the Exempt Loan to be subject to the provisions of Treasury Regulation Section 54.4975-7(b)(4), (10), (11) and (12) as provided under Article Fifteen.

11.3 The Trustees (except full-time Employees of an Employer or ERISA Affiliate) shall receive such reasonable annual compensation as may agree to from time to time between the Company and the Trustees, and shall pay all expenses reasonably incurred from the Trust Fund unless the Company pays such expenses.

11.4 The Trustees may employ agents, attorneys, accountants and other persons and pay their reasonable compensation from the Trust Fund. No person dealing with the Trustees shall be obligated to see to the proper application of any money paid or property delivered to them. The certificate of the Trustees that they are acting in accordance with the Plan shall be conclusive in favor of any person relying thereon.

11.5 Any Trustee may resign at any time by giving 30 days advance written notice to the Company and Trustees. The Company, by giving 30 days advance written notice to the Trustees, may remove any Trustee. In the event of resignation or removal of a Trustee, the Company may appoint a successor Trustee who shall succeed to the title of Trustee by accepting his appointment in writing and shall have and enjoy all of the powers conferred under this Agreement upon his predecessor Trustee.

11.6 The Trustees shall value the Trust Fund as of each Accounting Date to determine the Fair Market Value of each Participant’s Account, and shall credit (or debit) each Account with its proportionate share of gains, earnings, income, losses or expenses of the Trust Fund.

11.7 If there shall be more than one Trustee, they shall act by a majority of their number at a meeting, but may authorize one or more of them to sign papers on their behalf. The Trustees may also act by unanimous consent in lieu of a meeting.

11.8 Except as otherwise provided by ERISA, only the Company, the Plan Administrator, and the Trustees shall be necessary parties to any court proceeding involving the Trustees or the Trust Fund. No Participant or Beneficiary shall be entitled to any notice of process unless required by the Act. Any final judgment entered in any proceeding shall be conclusive upon the Company, the Plan Administrator, the Trustees, Participants, and Beneficiaries.

11.9 Every Participant shall have the right to direct the Trustees as to the exercise of any voting shares for the share of Company Securities then allocated to his Account with respect to any matter which involves the voting of such shares with respect to the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as the Secretary of the Treasury may prescribe by regulation. On other matters the Trustees shall solicit and follow voting instructions from a Participant with respect to shares of Company Securities entitled to vote that are then allocated to his Account if the Company has a registration type class of Securities (as defined in Section 409(e)(4) of the Code).

11.10 On a matter involving the voting of shares of Company Securities, the Trustees shall vote the shares of Company Securities then held in the Trust Fund (A) but not released from a Suspense Account or (B) otherwise not yet allocated to the Account of any Participant or (C) allocated to the Account of a Participant who has not provided the Trustees with the relevant voting instructions as described in Section 11.9, in proportion to the voting instructions of Participants as received by the Trustees. If no voting instructions are received or are required from Participants with respect to a voting matter, the Trustees shall vote the shares of Company Securities held in the Trust Fund (including the shares of Company Securities held in a Suspense Account and shares that have been allocated to the Accounts of the Participants) in a manner that they choose.

11.11 The Trustees and their assistants and representatives shall distribute benefits under the Plan in whole shares of Company Securities valued at Fair Market Value at the time of distribution, cash, or a combination of both, as they were determined, provided, however, a Participant shall have the right to demand distribution entirely in whole shares of Company Securities (with the value of any fractional shares paid in cash).

11.12 Subject to the last paragraph of this Section 11.12, all or any portion of any cash dividends declared by the Company with respect to shares of Company Securities held by the Trust as of the ex-dividend date with respect to such dividends (including shares held in a Suspense Account and shares that have been allocated to the Accounts of Participants) may, at the discretion of the Company, be distributed to those individuals who are Participants (or to the Beneficiaries of such Participants) in the Plan as of such ex-dividend date (A) directly to such Participants (or their Beneficiaries) or (B) through the Trust provided that the Trust in such case distributes such dividends to such Participants (or Beneficiaries) within 90 days after the close of the Plan Year in which such dividends are paid. Those Participants (or Beneficiaries) entitled to a share in a distribution of cash dividends in proportion to the number of shares of Company Securities allocated to their Accounts as of the relevant ex-dividend date.

If the Company chooses not to distribute to Participants a portion of any cash dividends declared with respect to shares of Company Securities held by the Trust, then all, or any part, as the Company decides, of the portion of such dividends that are not to be distributed may be used to repay all or a part of the interest and/or principal of an Exempt Loan then outstanding; provided, however, that dividends on shares of Company Securities that have been allocated to the Account of a Participant may not be used to pay interest or principal on an Exempt Loan unless shares of Company Securities having a Fair Market Value not less than the amount of such dividends so used are allocated to such Account for the Plan Year in which such dividends are so used, to the extent that dividends are so used. To the extent that dividends are not distributed to Participants or used to repay interest or principal on an Exempt Loan, such dividends, to the extent paid with respect to shares of Company Securities held in a Suspense Account shall be treated as an investment gain of the Trust, and to the extent paid with respect to shares of Company Securities allocated to the Accounts of Participants shall themselves be allocated to such Accounts as income.

Notwithstanding any other provision of this Section 11.12 or the Trust overall, effective with respect to cash dividends paid on Company Securities held by the Trust in which a Participant is fully vested, and which dividends have a record date of February 15, 2011 or later, the Participant (or his or her Beneficiary if applicable) in whose account such Company Securities are held shall have the right to receive current payment of such dividends from the Trust in lieu of reinvestment of the dividends in Company Securities. An election by a Participant or Beneficiary to receive payment of dividends under this Section 11.12 shall be made in the manner designated by the Company provided that, (1) any Participant or Beneficiary who fails to make an affirmative election to receive payment of dividends within the time prescribed for such election by the Company shall be deemed to have elected to have such dividends remain in the Trust and reinvested in Company Securities under the Trust, and (2) any election by a Participant or Beneficiary to receive payment of dividends in lieu of reinvestment shall remain in effect until such election is revoked by the Participant or Beneficiary. Distributions of dividends in accordance with a Participant’s or Beneficiary’s election shall occur not later than ninety (90) days after the close of the Plan Year in which such dividends were paid to the Trust. This final paragraph of this Section 11.12 shall not apply to cash dividends (and the remainder of this Section 11.12 shall apply instead), to the extent such dividends (and the underlying Company Securities) are not yet vested in accordance with Section 7.7 of this Trust.

11.13 The Trustees and its members, assistants and representatives shall be free from all liability for their acts and conduct in the administration of the Plan and Trust except for acts of willful misconduct; provided, however, that the foregoing shall not relieve any party from any liability for any responsibility, obligation or duty that may arise pursuant to ERISA or the Code.

11.14 In the event of and to the extent not insured against by any insurance company pursuant to provisions of any applicable insurance policy, the Company shall indemnify and hold harmless, to the extent permitted by law, any individual (but not a corporation), Trustees and their assistants and representatives from any claim, demands, suits or proceedings which may be in connection with the Plan or Trust be brought by the Company’s Employees, Participants or their Beneficiaries or legal representatives, or by any other person, corporation, entity, government, or agency thereof provided, however, that such indemnification shall not apply to any such person’s acts of willful misconduct in connection with the Plan or Trust.

11.15 If a tender offer is made for all or a portion of the outstanding shares of Company Securities, the Trustees shall poll the Participants with regard to such tender offer on the basis of the number of shares of Company Securities held in the Trust Fund (including shares held in a suspense account if, and only if, the number of votes of Participants in favor of a tender is greater than the number of votes of Participants opposed to tender).

ARTICLE TWELVE

Top Heavy Rules

12.1 Special Definitions. For the purposes of this Article Twelve, the following words and phrases shall have the meanings set forth below:

(a) “Aggregate Account” means, as of the Determination Date, the sum of:

(i) a Participant’s Account balance as of the most recent Valuation Date occurring within a 12 consecutive month period ending on the Determination Date, including, in the case of a plan subject to the minimum funding standards of Section 412 of the Code, amounts that would be allocated to such Account as of a date not later than the Determination Date even though such amounts are not yet required to be contributed to the plan by such Determination Date.

(ii) an adjustment for any contribution due as of the Determination Date. in the case of a plan not subject to the minimum funding standards of Section 412 of the Code, such adjustment shall be the amount of any contributions actually made after the Valuation Date but on or before the Determination Date. In the case of a plan that is subject to the minimum funding standards of Section 412 of the Code, such adjustment shall include any contribution made, or due to be made, after the Valuation Date but before the expiration of the extended payment period described in Section 412(c)(10) of the Code. in the first Plan Year, such adjustment shall also reflect the amount of any contributions made after the Determination Date that are allocated as of a date in the first Plan Year.

(iii) any distributions from this Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1 year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, has it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for reason other than a separation of service, death, or Disability, this provision shall be applied by substituting “5 year period” for “1 year period”. The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1 year period ending on the Determination Date shall not be taken into account.

(iv) any Employee contributions, whether voluntary or mandatory; provided, however, that amounts attributable to “deductible employee contributions,” as defined in Section 72(o)(5)(A) of the Code, if any, shall not be considered to be a part of the Participant’s Aggregate Account balance.

(v) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one Employer to a plan maintained by another Employer that is not an ERISA Affiliate), the Plan making the distribution or transfer shall consider such distribution or transfer as a distribution for the purposes of this Article Twelve.

If the Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider any such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Participant’s Aggregate Account balance. However, such unrelated rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Participant’s Aggregate Account balance.

(vi) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by an ERISA Affiliate), if the plan provides for rollovers or plan-to-plan transfers, they shall not be counted as a distribution for purposes of this Article Twelve. If the Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Participant’s Aggregate Account balance, irrespective of the date on which such rollover or plan-to-plan transfer is accepted.

(vii) if any individual is a non-key Employee with respect to any Plan for any Plan Year, but such individual was a Key Employee with respect to such Plan for any prior Plan Year, any accrued benefit for such Employee (and the Account of such Employee) shall not be taken into account.

(viii) if any individual has not performed services for the Employer maintaining the Plan at any time during the five-year period ending on the Determination Date, any accrued benefit for such individual (and the Account of such individual) shall not be taken into account.

(b) “Aggregation Group” means either a Required Aggregation Group or a Permissive Aggregation Group, as hereinafter determined.

(i) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a Participant, or has been a Participant during the Plan Year containing the Determination Date, or in any of the 4 preceding Plan Years (whether or not such plan has been terminated), and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Section 40l(a)(4) or 410 of the Code during such period, will be required to be aggregated. Such group shall be known as a Required Aggregation Group. In the case of a Required Aggregation Group, each plan in the group will be considered a “Top Heavy Plan” If the Required Aggregation Group is a Top Heavy Group. No plan in the Required Aggregation Group will be considered a Top Heavy Plan If the Aggregation Group is not a Top Heavy Group.

(ii) Permissive Aggregation Group: The Employer may also include any other plan which provides comparable benefits but is not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would satisfy the provisions of Sections 401(a)(4) and 410 of the Code. Such group shall be known as a Permissive Aggregation Group.

No plan in the Permissive Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is not a Top Heavy Group.

(iii) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top Heavy Plans.

(c) “Determination Date” means (1) the last day of the preceding Plan Year, or (2) in the case of the first Plan Year of a Plan, the last day of such Plan Year.

(d) “Key Employee” means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was:

(i) an “officer” of the Employer who at any time during the Plan Year that includes the determination date having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002);

(ii) a “5% owner” of the Employer. “5% owner” means any Employee who owns (or is considered as owning within the meaning of Section 318 of the Code) more than 5% of the value of the outstanding stock of the Employer or stock possessing more than 5% of the total combined voting power of all stock of the Employer;

(iii) a “1% owner” of the Employer having annual compensation of more than $150,000. For purpose of this subsection and subsection (i) above, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. “1% owner” means any Employee who owns (or is considered as owning within the meaning of Section 318 of the Code) more than 1% of the value of the outstanding stock of the Employer or stock possessing more than 1% of the total combined voting power of all stock of the Employer; and

(iv) The determination of who is a Key Employee will be made in accordance with Section 416(i)(I) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

(e) “Non-Key Employee” means any Employee who is not a Key Employee.

(f) “Top Heavy Plan Year” means that, for a particular Plan Year commencing after December 31, 1983, the Plan is a Top Heavy Plan.

(g) “Valuation Date” means the most recent valuation date within a 12-month period ending on the determination date.

12.2 Determination of Top Heavy Status.

(a) An Aggregation Group shall be a “Top Heavy Group” for any Plan Year commencing after December 31, 1983 in which, as of the Determination Date, the sum of the Present Value of Accrued Benefits of Key Employees and the Aggregate Account balances of Key Employees under all Plans of an Aggregation Group exceeds 60% of the sum of the Present Value of Accrued Benefits and the Aggregate Account balances of all Employees under the Plan and all Plans of the Aggregation Group.

(b) An Aggregation Group shall be a “Super Top Heavy Group” for any Plan Year commencing after December 31, 1983 in which, at the Determination Date, the sum of the Present Value of Accrued Benefits of Key Employees and the Aggregate Account balances of Key Employees and all Plans in an Aggregation Group exceeds 90% of the sum of the Present Value of Accrued Benefits and the Aggregate Account balances of all Employees under all Plans of the Aggregation Group.

(c) “Present Value of Accrued Benefit” means, in the case of a defined benefit plan, the present value of an accrued benefit, as determined under the provisions of the applicable defined benefit plan and in compliance with Treasury Regulations Section 1.416-l(T-25 and T-26).

(d) In determining Top Heavy Status, the accrued benefit of (i) an individual who is not a Key Employee with respect to any Plan in an Aggregation Group for a Plan Year but who was a Key Employee with respect to a Plan in an Aggregation Group for a prior Plan Year and (ii) an individual who performed no services for the Employer of an ERISA Affiliate during the 5-year period ending on the Determination Date, shall be disregarded.

12.3 For any Top Heavy Plan Year, the Plan shall provide special minimum benefit and contribution requirements of Section 416(c) of the Code, pursuant to Section 12.4 of the Plan.

12.4 Minimum Allocations and Benefits.

(a) In the case of a defined contribution plan, for any Top Heavy Plan Year, the sum of employer contributions and forfeitures allocated to the Account of each Non-Key Employee who is a Participant and who has not terminated employment by the end of such Plan Year (including (A) Participants who fail to complete at least 1,000 Hours of Service during the Plan Year, (B) Employees who are excluded from the Plan or accrue no benefit because their Compensation is less than a stated amount, and (C) Employees who are excluded from the Plan or accrue no benefit because they fail to make mandatory contributions, or, in the case of a Plan intended to qualify under Section 401(k) of the Code, elective contributions) shall be equal to at least 3% of such Non-Key Employee’s Compensation. However, should the sum of the Employer’s contributions and forfeitures allocated to the Account of each Key Employee for such Top Heavy Plan Year be less than 3% of each such Key Employee’s Compensation, the sum of the Employer’s contributions and forfeitures allocated to the Account of each Non-Key Employee who is a Participant (including the Employees referred to in the preceding sentence) shall be equal to the highest percentage allocated to the Account of a Key Employee. The preceding sentence shall not apply to any plan required to be included in an Aggregation Group if such plan enables a defined benefit plan required to be included in an Aggregation Group to meet the requirements of Section 401(a)(4) or Section 410 of the Code. For purposes of satisfying the minimum contribution requirements of this subparagraph, an Employee’s elective deferrals under a cash or deferred arrangement (as defined under Section 401(k) of the Code shall not be treated as an Employer Contribution. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the Plan.

(b) In the case of a defined benefit plan, for any Top Heavy Plan Year, the accrued benefit, when expressed as an Annual Retirement Benefit (as defined below), of a Participant who is a Non-Key Employee and who has completed at least 1,000 Hours of Service during the Plan Year (including Employees who are excluded from the Plan or accrue no benefit because their Compensation is less than a stated amount and Employees who are excluded from the Plan or accrue no benefit because they fail to make mandatory contributions) will be at least equal to the lesser of (i) the product of (A) an Employee’s average annual Compensation for the period of consecutive years (not exceeding (5)) when the Employee had the highest aggregate Compensation from the Employer and (B) 2% per year of service with the Employer, or (ii) 20%.

(i) The foregoing defined benefit minimum shall be determined without regard to any Social Security contribution or benefit.

(ii) “Annual Retirement Benefit” means a benefit which commences at age 65 and is payable annually in the form of a single life annuity.

(iii) A “year of Top Heavy Service” shall be a Year of Service as determined under the rules of Section 411(a)(4), (5) and (6) of the Code, provided, however, that a Plan may disregard any Year of Service if the Plan was not top heavy for any Plan Year ending during such Year of Service, or if the Year of Service was completed in a Plan Year beginning before January 1, 1984.

(c) Notwithstanding anything herein to the contrary, in any Plan Year in which both a defined benefit plan and a defined contribution plan are part of a Top Heavy Group, the following rules shall apply: For each Non-Key Employee who is participating in the Top Heavy defined contribution plan maintained by the Employer, the defined contribution minimum, as provided under Section 12.4(b) above, shall accrue, and the defined benefit minimum shall not be applicable. For each other Non-Key Employee who is a Participant in the Top Heavy defined benefit plan maintained by the Employer, the Employer shall satisfy the minimum contribution requirement of Section 12.4(b).

ARTICLE THIRTEEN

Miscellaneous

13.1 The Trustees and the Company in no way guarantee the Trust Fund from loss or depreciation, and the Company does not guarantee the payment of any money which may be or becomes due to any person from the Trust Fund. The liability of the Trustees to make any payment from the Trust Fund at any time and all times is limited to the then available assets of the Trust Fund.

13.2 Words used in the masculine hereunder shall apply to the feminine where applicable and the plural shall be read as the singular, and the singular as the plural, wherever the context dictates.

13.3 All questions with respect to the interpretation of this Agreement shall be determined by the laws of the State of New York, except to the extent that Federal law controls.

13.4 Conditional upon prior approval by the Company, any ERISA Affiliate may participate in this Plan as a participating company, provided it shall make, execute and deliver such instruments as the Company and the Trustees shall require. Such an ERISA Affiliate shall accept the Company as its agent to act for it in all transactions in which the Company believes such agency will facilitate the administration of the Plan. Any such ERISA Affiliate shall accept the Company as its agent to act for it in all transactions in which the Company believes such agency will facilitate the administration of the Plan. Any such ERISA Affiliate may withdraw from participation in this Plan upon written notice to the Company and the Trustees, and upon such withdrawal this Plan shall automatically terminate insofar as it relates to such withdrawing participating organization and its Employees.

13.5 Nothing contained in this Plan, or with respect to the establishment of the Trust, or any modification or amendment to the Plan or Trust, or in the creation of any Account, or the payment of any benefit, shall give any Employee, Employee-Participant or any Beneficiary any right to continue employment, any legal or equitable right against the Company, or Employee of the Company, or against the Trustees, or their agents or Employees, or against the Plan Administrator, except as expressly provided by the Plan, the Trust, the Act of by a separate agreement.

ARTICLE FOURTEEN

Amendment and Termination

14.1 The Company has the right to amend this Agreement at any time it deems necessary or advisable in order to maintain qualification of this Plan and Trust under the Code. It may further amend this Agreement for any other purpose provided no such amendment shall permit the Trust Fund to be used for or diverted to purposes other than for the exclusive benefit of the Participants or their Beneficiaries or estates, or cause or permit any portion of the Trust Fund to revert to or become the property of the Company.

14.2 The Company shall make all amendments in writing which shall state the date on which they are retroactively or prospectively effective.

14.3 Notwithstanding any other provision of this Plan to the contrary, upon the date of either partial or full termination of the Plan, or of Complete discontinuance of contributions to the Plan, an affected Participant’s right to his Account shall be 100% non-forfeitable.

14.4 The Trustees shall not consent to, or be a party to, any merger or consolidation with another Plan, or to a transfer of assets or liabilities to another Plan unless immediately after the merger, consolidation or transfer, the surviving Plan provides each Participant a benefit equal or greater than the benefit each Participant would have received had the Plan terminated immediately before the merger, consolidation or transfer. Upon termination of the Plan, the Trust shall continue until the Trustees have distributed all of its benefits under the Plan.

14.5 The Company shall not amend the vesting schedule (and no amendment shall be effective) if the amendment reduces the non-forfeitable percentage of any Participant’s Account balance derived from Employer contributions (determined as of the later of the date the Company adopts the amendment or the date the amendment becomes effective) to a percentage less than the non-forfeitable percentage computed under the Plan without regard to the amendment. If the Company amends the vesting schedule, each Participant having completed at least 3 Years of Service with the Company before the expiration of the election period may irrevocably elect during the election period to have the non-forfeitable percentage of his Account balance computed under the Plan without regard to the amendment. For purposes of the preceding sentence the election period shall begin no later than the date the Plan amendment is adopted and end no earlier than the latest of (i) the date which is 60 days after the day the Plan amendment is adopted; (ii) the date which is 60 days after the day the Plan amendment becomes effective, or (iii) the date which is 60 days after the day the Participant is given written notice of the Plan amendment by the Company or the Trustees. The Plan Administrator, as soon as practicable, shall forward a true copy of any amendment to the vesting schedule to each affected Participant, together with an explanation of the effect of the amendment, the appropriate form which the Participant may make an election to remain under the vesting schedule provided under the Plan prior to the amendment and notice of the time within which the Participant must make an election to remain under the prior vesting schedule.

ARTICLE FIFTEEN

Repurchase of Company Securities

15.1 Shares of Company Securities acquired with the proceeds of an Exempt Loan and distributed by the Trustees shall be subject to a “right of first refusal” which shall provide that, prior to any subsequent transfer, such shares must first be offered in writing to the Company and then if refused by the Company, to the Trust at the then Fair Market Value, or, if greater, at the purchase price offered by the first buyer making a good faith offer to purchase. A bona fide written offer from an independent prospective buyer shall be deemed to be the Fair Market Value of such shares for this purpose. The Company and the Trustees (on behalf of the Trust) shall have 14 days from the date of refusal on the same terms offered by the prospective buyer. A Participant (or Beneficiary) entitled to a distribution of Company Securities shall be required to execute an appropriate stock transfer agreement evidencing the right of first refusal prior to receiving a certificate for Company Securities. The right of first refusal shall be administered in accordance with Treasury Regulation Section 54.4975-7(b)(9).

15.2 The Company shall issue a “put option” to each Participant receiving a distribution of Company Securities from the Trust if such Company Securities are not readily tradeable on an established market when distributed, or are subject to a trading limitation. The put option shall permit the Participant (or his Beneficiary) to sell such Company Securities to the Company at any time during 2 option periods at their then Fair Market Value.

The first put option shall be a period of at least 60 days beginning on the date of distribution of Company Securities to the Participant. The second put option period shall be at least 60 days beginning after the new determination of the Fair Market Value of Company Securities by the Trustees (and notice to the Participant) in the next following Plan Year. The Company may permit the Trustees to direct the Plan to purchase Company Securities tendered to the Company under a put option.

Payment by the Company of Securities put to it pursuant to this Section 15.2 shall be made (A) in a single sum within 30 days after such put option is exercised if such securities were part of an installment distribution, or (B) if such securities were distributed to the Participant as part of a total distribution, in a single sum or substantially equal periodic installments (not less frequently than annually) over a period beginning not later than 30 days after the exercise of the put option and not exceeding 5 years, with adequate security provided and reasonable interest charged on unpaid installments. The put option shall be administered in accordance with Treasury Regulation Section 54.4975-7(b)(l0), (11) and (12).

15.3 Shares of Company Securities held or distributed by the Trustees may include such legend restrictions on transferability as the Company may reasonably require to assure compliance with applicable Federal and state securities laws. Except as otherwise provided herein, no shares of Company Securities held or distributed by the Trustees may be subject to a put, call or other option or buy-sell or other similar arrangement.

15.4 If shares of Company Securities are not readily tradeable on an established securities market, all valuations of such shares with respect to an activity carried on by the Plan shall be made by an independent appraiser meeting the requirements similar to the requirements for an appraiser under regulations promulgated by the Security of the Treasury or his delegates pursuant to Section 170(a)(1) of the Code. Valuations of Company Securities must be made in good faith and based on all relevant factors for determining the fair market value of securities.

15.5 (a) No portion of the Plan assets attributable to (or allocable in lieu of) Employer Stock acquired by the Plan in a Section 1042 Sale may accrue (or be allocated directly or indirectly under any plan qualified under Section 401(a) of the Code maintained by the Employer) (1) during the Nonallocation Period for the benefit of any Nonallocation Participant, or (2) for the benefit of a 25-Percent Shareholder.

(b) The following terms shall have the following meanings:

“Employer Stock” for purposes of this Section 15.5 means employer securities (as defined in Section 409(l) of the Code) which are issued by a domestic C corporation that has no stock outstanding that is readily tradable on an established securities market, and were not received by the Participant in a distribution from a plan described in Section 401(a) of the Code, or a transfer pursuant to an option or other right to acquire stock to which Sections 83, 422 or 423 of the Code applied (or to which Sections 422 or 424 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) applied).

“Nonallocation Participant” means any Participant who makes an election under Section 1042(a) of the Code with respect to Employer Stock and any Participant who is related to such Participant within the meaning of Section 267(b) of the Code. “Nonallocation Participant” does not include any participant who is a lineal descendant of a Participant who makes an election under Section 1042 of the Code if the aggregate amount allocated for the benefit of all such lineal descendants during the Nonallocation Period does not exceed more than 5 percent of the Employer Stock (or amounts allocated in lieu thereof) by any person related to such descendants (within the meaning of Section 267(c)(4) of the Code).

“Nonallocation Period” means the period beginning on the date of the Section 1042 Sale and ending on the later of the date that is 10 years after the date of the Section 1042 Sale, or the date of the plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with the Section 1042 Sale.

“Section 1042 Sale” means a sale of Employer Stock to the Plan in a transaction to which Section 1042 of the Code (pertains to the nonrecognition of gain) applies.

“25-percent Shareholder” means a Participant who owns more than 25 percent of any class of outstanding stock of Employer or any corporation that is a member of the same controlled group of corporations (within the meaning of Section 409(l)(4) of the Code)) as the Employer, or owns more than 25 percent of the total value of any class of outstanding company stock pursuant to Code Section 409(n)(1)(B). The rules of Section 318(a) of the Code, without regard to the employee trust exception in Section 318(a)(2)(B)(i), are used to calculate the ownership percentage. This definition is applicable at any time during either the 1-year period ending on the date of sale of such stock to the Plan, or on the date as of which Employer Stock is allocated to Participants.

15.6 The provisions of this Article Fifteen shall continue to apply to shares of Company Securities even if the Plan ceases to be an Employee Stock Ownership Plan under Section 4975(e)(7) of the Code.

IN WITNESS WHEREOF, this Plan has been executed this _________ day of ______________ of 2018.

STANDARD MOTOR PRODUCTS, INC.
By:
Title:
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TRUSTEES
Carmine J. Broccole, Trustee
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James J. Burke, Trustee
Sanford Kay, Trustee
Erin Pawlish, Trustee
Thomas Tesoro, Trustee

Appendix I

EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST<br><br> <br>OF STANDARD MOTOR PRODUCTS, INC.

Special provisions relating to the Employee Stock Ownership Plan and Trust of Standard Motor Products, Inc. (“ESOP”) and the participation of the employees of the Guaranteed Parts/Sorensen Division of Wickes Manufacturing Company, Inc. who transferred their employment to the Company on October 26, 1989 (“Transferred Employees”).

1.	For the purposes of determining a Transferred Employee’s vesting under the ESOP, and for purposes of determining any Hour of Service requirement with respect to eligibility for allocations for a Plan Year, all service from each such<br> Transferred Employee’s last date of hire with Wickes Manufacturing Company, Inc. shall be recognized.
2.	Each Transferred Employee who was an employee of Wickes Manufacturing Company, Inc. on June 30, 1989 shall be eligible to participate in the ESOP on January 1, 1990. Each other Transferred Employee (those Transferred Employees hired<br> after June 30, 1989) shall be subject to the Plan’s eligibility requirements as stated in Article Two of the Plan taking into account for this purpose his service from his late date of hire with Wickes Manufacturing Company, Inc.
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3.	For the purpose of determining the 1990 ESOP allocation for those Transferred Employees who became Participants in the ESOP on January 1, 1990, only Compensation earned from October 26, 1989 shall be taken into consideration.
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4.	Unless otherwise expressly provided to the contract, defined terms used in this Appendix I shall have their same meaning as in the Plan.
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EXHIBIT 21

SUBSIDIARIES OF STANDARD MOTOR PRODUCTS, INC.

Name	State or<br><br> <br>Country of<br><br> <br>Incorporation
SMP Automotive de Mexico, S.A. de C.V.	Mexico
SMP Engine Management de Mexico, S. de R.L. de C.V.	Mexico
SMP Four Seasons de Mexico, S. de R.L. de C.V.	Mexico
SMP Motor Products Limited	Canada
SMP Poland sp. z o.o.	Poland
STABIL ELEKTROTECHNIK GmbH	Germany
STABIL PRODUKT Elektrotechnikai Kft.	Hungary
STABIL VERBINDUNGSTECHNIK GmbH	Germany
Standard Motor Products de Mexico, S. de R.L. de C.V.	Mexico
Standard Motor Products (Hong Kong) Limited	Hong Kong
Trumpet Holdings, Inc.	Delaware
Trombetta Asia, Ltd.	Hong Kong
Trombetta Electric (Shanghai) Co., Ltd.	China
Trombetta Electric (Wuxi) Co., Ltd.	China
Trombetta S. de R.L. de C.V.	Mexico

The names of particular subsidiaries have been omitted where, considered in the aggregate as a single subsidiary, they would not constitute, as of the end of the year covered by this report, a “significant subsidiary” as that term is defined in Regulation S-X under the Securities Exchange Act of 1934.

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements (No. 333-256362, No. 333-211461, No. 333-174330, and No. 333-134239) on Form S-8 of our reports dated February 23, 2022, with respect to the consolidated financial statements and financial statement Schedule II, Valuation and Qualifying Accounts of Standard Motor Products, Inc. and Subsidiaries and the effectiveness of internal control over financial reporting.

Our audit report on the effectiveness of internal control over financial reporting contains an explanatory paragraph that states the Company acquired Trumpet Holdings, Inc. (“Trombetta”) and Stabil Operative Group GmbH, (“Stabil”) during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Trombetta and Stabil’s internal control over financial reporting associated with 13.8% of total assets and 3.5% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Trombetta and Stabil.

/s/ KPMG LLP

New York, New York

February 23, 2022

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric P. Sills, certify that:

1.	I have reviewed this annual report on Form 10-K of Standard Motor Products, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not<br> misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and<br> for, the periods presented in this report;
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4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial<br> reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated<br> subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and<br> the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by<br> this report based on such evaluation; and
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d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)<br> that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of<br> directors (or persons performing the equivalent functions):
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a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and<br> report financial information; and
---	---
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
---	---
Date: February 23, 2022
---	---
	/s/ Eric P. Sills
	Eric P. Sills
	Chief Executive Officer and President

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nathan R. Iles, certify that:

1.	I have reviewed this annual report on Form 10-K of Standard Motor Products, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not<br> misleading with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and<br> for, the periods presented in this report;
---	---
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial<br> reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated<br> subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
---	---
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and<br> the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
---	---
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by<br> this report based on such evaluation; and
---	---
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)<br> that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
---	---
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of<br> directors (or persons performing the equivalent functions):
---	---
a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and<br> report financial information; and
---	---
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
---	---
Date: February 23, 2022
---	---
	/s/ Nathan R. Iles
	Nathan R. Iles
	Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Standard Motor Products, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eric P. Sills, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
---	---

/s/ Eric P. Sills

Eric P. Sills

Chief Executive Officer

and President

February 23, 2022

* A signed original of this written statement required by Section 906 has been provided to Standard Motor Products, Inc. and will be retained by Standard Motor Products, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Standard Motor Products, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nathan R. Iles, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
---	---

/s/ Nathan R. Iles

Nathan R. Iles

Chief Financial Officer

February 23, 2022