10-Q 1 ef20030117_10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2024

or

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

Commission file number:  001-04743

Standard Motor Products, Inc.
(Exact name of registrant as specified in its charter)

New York
 
11-1362020
(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)

(718) 392-0200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $2.00 per share
SMP
New York Stock Exchange LLC

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 definitions 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐     No ☑

As of the close of business on July 30, 2024, there were 21,712,938 outstanding shares of the registrant’s Common Stock, par value $2.00 per share.

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

INDEX

PART I - FINANCIAL INFORMATION

    
Page No.
     
Item 1.
Consolidated Financial Statements:
     
 
3
     
 
4
     
 
5
     
 
6
     
 
7
     
 
9
     
Item 2.
29
     
Item 3.
43
     
Item 4.
44

PART II – OTHER INFORMATION
     
Item 1.
45
     
Item 2.
 Unregistered Sales of Equity Securities and Use of Proceeds
 45
     
Item 6.
46
     
Signatures

47

2
PART I - FINANCIAL INFORMATION

ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
(In thousands, except share and per share data, unaudited)
  
2024
    
2023
    
2024
    
2023
  
Net sales
  
$
389,829
    
$
353,075
    
$
721,232
    
$
681,103
  
Cost of sales
    
278,382
      
251,806
      
520,263
      
488,567
  
Gross profit
    
111,447
      
101,269
      
200,969
      
192,536
  
Selling, general and administrative expenses
    
83,885
      
73,843
      
158,618
      
143,476
  
Restructuring and integration expenses
    
2,559
      
294
      
2,751
      
1,206
  
Other income (expense), net
     (17 )     46       5       70  
Operating income
    
24,986
      
27,178
      
39,605
      
47,924
  
Other non-operating income, net
    
2,199
      
802
      
3,018
      
1,027
  
Interest expense
    
2,752
      
3,283
      
4,819
      
7,145
  
Earnings from continuing operations before taxes
    
24,433
      
24,697
      
37,804
      
41,806
  
Provision for income taxes
    
6,109
      
6,289
      
9,451
      
10,661
  
Earnings from continuing operations
    
18,324
      
18,408
      
28,353
      
31,145
  
Loss from discontinued operations, net of income taxes
    
(917
)
    
(9,221
)
    
(1,956
)
    
(10,001
)
Net earnings
    
17,407
      
9,187
      
26,397
      
21,144
  
Net earnings attributable to noncontrolling interest
    
344
      
50
      
510
      
89
  
Net earnings attributable to SMP (a)
  
$
17,063
    
$
9,137
    
$
25,887
    
$
21,055
  
                                 
Net earnings (loss) attributable to SMP
                                
Continuing operations
  
$
17,980
    
$
18,358
    
$
27,843
    
$
31,056
  
Discontinued operations
    
(917
)
    
(9,221
)
    
(1,956
)
    
(10,001
)
Net earnings attributable to SMP
  
$
17,063
    
$
9,137
    
$
25,887
    
$
21,055
  
                                 
Per common share data
                                
Basic:
                                
Continuing operations
  
$
0.83
    
$
0.85
    
$
1.27
    
$
1.43
  
Discontinued operations
    
(0.05
)
    
(0.43
)
    
(0.09
)
    
(0.46
)
Net earnings attributable to SMP per common share
  
$
0.78
    
$
0.42
    
$
1.18
    
$
0.97
  
                                 
Diluted:
                                
Continuing operations
  
$
0.81
    
$
0.83
    
$
1.25
    
$
1.40
  
Discontinued operations
    
(0.04
)
    
(0.42
)
    
(0.09
)
    
(0.45
)
Net earnings attributable to SMP per common share
  
$
0.77
    
$
0.41
    
$
1.16
    
$
0.95
  
                                 
Dividend declared per common share
  
$
0.29
    
$
0.29
    
$
0.58
    
$
0.58
  
                                 
Weighted average number of common shares, basic    
21,767,526
      
21,689,067
      
21,845,678
      
21,649,562
  
Weighted average number of common shares, diluted
    
22,185,536
      
22,183,489
      
22,277,590
      
22,139,708
  

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

See accompanying notes to consolidated financial statements (unaudited).

3
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
(In thousands, unaudited)
  
2024
    
2023
    
2024
    
2023
  
 
                        
Net earnings
  
$
17,407
    
$
9,187
    
$
26,397
    
$
21,144
  
Other comprehensive income (loss), net of tax:
                                
Foreign currency translation adjustments
    
(3,744
)
    
1,166
      
(4,968
)
    
3,986
  
Derivative instruments
     79       1,831       1,470       454  
Pension and postretirement plans
    
(2
)
    
(4
)
    
(5
)
    
(7
)
Other comprehensive income, net of tax
    
(3,667
)
    
2,993
      
(3,503
)
    
4,433
  
Comprehensive income
    
13,740
      
12,180
      
22,894
      
25,577
  
Comprehensive income (loss) attributable to noncontrolling interest, net of tax:
                                
Net earnings
    
344
      
50
      
510
      
89
  
Foreign currency translation adjustments
    
(11
)
    
(81
)
    
(15
)
    
(110
)
Comprehensive income (loss) attributable to noncontrolling interest, net of tax
    
333
      
(31
)
    
495
      
(21
)
Comprehensive income attributable to SMP
  
$
13,407
    
$
12,211
    
$
22,399
    
$
25,598
  

See accompanying notes to consolidated financial statements (unaudited).

4
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (In thousands, except share and per share data, unaudited)
  
June 30,
2024
    
December 31,
2023
  
ASSETS
            
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
26,156
    
$
32,526
  
Accounts receivable, less allowances for discounts and expected credit losses of $8,672 and $8,045 for 2024 and 2023, respectively
      239,317
        160,282
  
Inventories
    
508,183
      
507,075
  
Unreturned customer inventories
    
18,119
      
18,240
  
Prepaid expenses and other current assets
    
24,880
      
26,100
  
Total current assets
    
816,655
      
744,223
  
 
                
Property, plant and equipment, net of accumulated depreciation of $265,904 and $259,656 for 2024 and 2023, respectively
    
131,921
      
121,872
  
Operating lease right-of-use assets
    
99,121
      
100,065
  
Goodwill
    
134,476
      
134,729
  
Other intangibles, net
    
87,597
      
92,308
  
Deferred income taxes
    
40,287
      
40,533
  
Investments in unconsolidated affiliates
    
25,615
      
24,050
  
Other assets
    
38,656
      
35,267
  
Total assets
  
$
1,374,328
    
$
1,293,047
  
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
CURRENT LIABILITIES:
                
Current portion of term loan and other debt
  
$
5,030
    
$
5,029
  
Accounts payable
    
105,094
      
107,455
  
Sundry payables and accrued expenses
    
66,239
      
63,303
  
Accrued customer returns
    
53,102
      
38,238
  
Accrued core liability
    
16,017
      
18,399
  
Accrued rebates
    
54,280
      
42,278
  
Payroll and commissions
    
32,404
      
29,561
  
Total current liabilities
    
332,166
      
304,263
  
                 
Long-term debt
    
203,162
      
151,182
  
Noncurrent operating lease liabilities
    
88,820
      
88,974
  
Other accrued liabilities
    
29,501
      
25,742
  
Accrued asbestos liabilities
    
66,357
      
72,013
  
Total liabilities
    
720,006
      
642,174
  
Commitments and contingencies
    
     
 
Stockholders’ equity:
                
Common stock – par value $2.00 per share:
                
Authorized – 30,000,000 shares; issued 23,936,036 shares
    
47,872
      
47,872
  
Capital in excess of par value
    
102,738
      
101,751
  
Retained earnings
    
586,407
      
573,226
  
Accumulated other comprehensive income
    
(9,462
)
    
(5,974
)
Treasury stock – at cost (2,223,698 shares and 2,018,982 shares in 2024 and 2023, respectively)
    
(87,537
)
    
(81,811
)
Total SMP stockholders’ equity
    
640,018
      
635,064
  
Noncontrolling interest
    
14,304
      
15,809
  
Total stockholders’ equity
    
654,322
      
650,873
  
Total liabilities and stockholders’ equity
  
$
1,374,328
    
$
1,293,047
  

See accompanying notes to consolidated financial statements (unaudited).

5
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
(In thousands, unaudited)
  
Six Months Ended
June 30,
  
 
  
2024
    
2023
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net earnings
  
$
26,397
    
$
21,144
  
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
                
Depreciation and amortization
    
14,619
      
14,129
  
Amortization of deferred financing cost
    
240
      
248
  
Increase to allowance for expected credit losses
    
418
      
204
  
Increase to inventory reserves
    
2,907
      
1,600
  
Equity income from joint ventures
    
(2,207
)
    
(943
)
Employee stock ownership plan allocation
    
1,394
      
1,483
  
Stock-based compensation
    
3,049
      
3,633
  
Increase in deferred income taxes
    
(241
)
    
(390
)
Loss on discontinued operations, net of tax
    
1,956
      
10,001
  
Change in assets and liabilities:
                
Increase in accounts receivable
    
(81,060
)
    
(48,271
)
(Increase) decrease in inventories
    
(3,641
)
    
30,924
  
Increase (decrease) in prepaid expenses and other current assets
    
2,757
      
(468
)
Increase (decrease) in accounts payable
    
(2,168
)
    
4,323
  
Increase in sundry payables and accrued expenses
    
29,966
      
2,776
  
Net change in other assets and liabilities
    
(4,525
)
    
(1,023
)
Net cash provided by (used in) operating activities
    
(10,139
)
    
39,370
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Capital expenditures
    
(22,941
)
    
(9,507
)
Other investing activities
    
18
      
66
  
Net cash used in investing activities
    
(22,923
)
    
(9,441
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Repayments of term loan
     (2,500 )     (2,500 )
Net borrowings (repayments) under revolving credit facilities
    
54,500
      
(14,000
)
Net borrowings (repayments) of other debt and lease obligations
    
(14
)
    
(47
)
Purchase of treasury stock
    
(10,409
)
    
—
  
Increase in overdraft balances
    
200
      
258
  
Dividends paid
    
(12,706
)
    
(12,544
)
Dividends paid to noncontrolling interest
    (600 )     (255 )
Net cash provided by (used in) financing activities
    
28,471
      
(29,088
)
Effect of exchange rate changes on cash
    
(1,779
)
    
1,028
  
Net increase (decrease) in cash and cash equivalents
    
(6,370
)
    
1,869
  
CASH AND CASH EQUIVALENTS at beginning of period
    
32,526
      
21,150
  
CASH AND CASH EQUIVALENTS at end of period
  
$
26,156
    
$
23,019
  
                 
Supplemental disclosure of cash flow information:                
Cash paid during the period for:
                
Interest
  
$
5,603
    
$
7,694
  
Income taxes
  
$
6,435
    
$
9,356
  
Noncash financing activity:
               
Dividend payable to noncontrolling interest
  $
1,400
     $
—
  

See accompanying notes to consolidated financial statements (unaudited).

6
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended June 30, 2024

 (In thousands, unaudited)
 
  
Common
Stock
    
Capital in
Excess of 
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at March 31, 2024
  
$
47,872
    
$
102,704
    
$
575,658
    
$
(5,806
)
  
$
(81,278
)
  
$
639,150
    
$
15,971
    
$
655,121
  
Net earnings
    
—
      
—
      
17,063
      
—
      
—
      
17,063
      
344
      
17,407
  
Other comprehensive income (loss), net of tax
    
—
      
—
      
—
      
(3,656
)
    
—
      
(3,656
)
    
(11
)
    
(3,667
)
Cash dividends paid
    
—
      
—
      
(6,314
)
    
—
      
—
      
(6,314
)
    
—
      
(6,314
)
Purchase of treasury stock
    —       —       —       —       (7,838 )     (7,838 )      —
       (7,838 )
Dividends to noncontrolling interest
    —
       —
       —
       —
       —
       —
       (2,000 )     (2,000 )
Stock-based compensation
    
—
      
34
      
—
      
—
      
1,579
      
1,613
      
—
      
1,613
  
Balance at June 30, 2024
  
$
47,872
    
$
102,738
    
$
586,407
    
$
(9,462
)
  
$
(87,537
)
  
$
640,018
    
$
14,304
    
$
654,322
  

Three Months Ended June 30, 2023

(In thousands, unaudited) 
 
  
Common
Stock
    
Capital in
Excess of
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at March 31, 2023
  
$
47,872
    
$
106,675
    
$
569,899
    
$
(11,001
)
  
$
(91,801
)
  
$
621,644
    
$
11,028
    
$
632,672
  
Net earnings
    
—
      
—
      
9,137
      
—
      
—
      
9,137
      
50
      
9,187
  
Other comprehensive income (loss), net of tax
    
—
      
—
      
—
      
3,074
      
—
      
3,074
      
(81
)
    
2,993
  
Cash dividends paid
    
—
      
—
      
(6,283
)
    
—
      
—
      
(6,283
)
    
—
      
(6,283
)
Dividends to noncontrolling interest 
    —
       —
       —
       —
       —
       —
       (255 )     (255 )
Stock-based compensation
    
—
      
(146
)
    
—
      
—
      
2,247
      
2,101
      
—
      
2,101
  
Balance at June 30, 2023
  
$
47,872
    
$
106,529
    
$
572,753
    
$
(7,927
)
  
$
(89,554
)
  
$
629,673
    
$
10,742
    
$
640,415
  

See accompanying notes to consolidated financial statements (unaudited).

7
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Six Months Ended June 30, 2024

(In thousands, unaudited)
 
  
Common
Stock
    
Capital in
Excess of
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at December 31, 2023
  
$
47,872
    
$
101,751
    
$
573,226
    
$
(5,974
)
  
$
(81,811
)
  
$
635,064
    
$
15,809
    
$
650,873
  
Net earnings
    
—
      
—
      
25,887
      
—
      
—
      
25,887
      
510
      
26,397
  
Other comprehensive income (loss), net of tax
    
—
      
—
      
—
      
(3,488
)
    
—
      
(3,488
)
    
(15
)
    
(3,503
)
Cash dividends paid
    
—
      
—
      
(12,706
)
    
—
      
—
      
(12,706
)
    
—
      
(12,706
)
Purchase of treasury stock
     —       —       —       —       (10,409 )     (10,409 )     —       (10,409 )
Dividends to noncontrolling interest
     —       —       —       —       —       —       (2,000 )     (2,000 )
Stock-based compensation
    
—
      
984
      
—
      
—
      
1,899
      
2,883
      
—
      
2,883
  
Employee Stock Ownership Plan
    
—
      
3
      
—
      
—
      
2,784
      
2,787
      
—
      
2,787
  
Balance at June 30, 2024
  
$
47,872
    
$
102,738
    
$
586,407
    
$
(9,462
)
  
$
(87,537
)
  
$
640,018
    
$
14,304
    
$
654,322
  

Six Months Ended June 30, 2023

(In thousands, unaudited)
 
  
Common
Stock
    
Capital in
Excess of
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at December 31, 2022
  
$
47,872
    
$
105,615
    
$
564,242
    
$
(12,470
)
  
$
(95,239
)
  
$
610,020
    
$
11,018
    
$
621,038
  
Net earnings
    
—
      
—
      
21,055
      
—
      
—
      
21,055
      
89
      
21,144
  
Other comprehensive income (loss), net of tax
    
—
      
—
      
—
      
4,543
      
—
      
4,543
      
(110
)
    
4,433
  
Cash dividends paid
    
—
      
—
      
(12,544
)
    
—
      
—
      
(12,544
)
    
—
      
(12,544
)
Dividends to noncontrolling interest
    —
       —
       —
       —
       —
       —
       (255 )     (255 )
Stock-based compensation
    
—
      
898
      
—
      
—
      
2,735
      
3,633
      
—
      
3,633
  
Employee Stock Ownership Plan
    
—
      
16
      
—
      
—
      
2,950
      
2,966
      
—
      
2,966
  
Balance at June 30, 2023
  
$
47,872
    
$
106,529
    
$
572,753
    
$
(7,927
)
  
$
(89,554
)
  
$
629,673
    
$
10,742
    
$
640,415
  

See accompanying notes to consolidated financial statements (unaudited).
8
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1.  Basis of Presentation

Standard Motor Products, Inc. and its subsidiaries (referred to hereinafter in these notes to the consolidated financial statements as “we,” “us,” “our,” “SMP,” or the “Company”) is a leading manufacturer and distributor of premium replacement parts in the automotive aftermarket, and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets.  Our automotive aftermarket is comprised of two segments, Vehicle Control and Temperature Control, while our Engineered Solutions segment offers a broad array of conventional and future-oriented technologies in markets for commercial and light vehicles, construction, agriculture, power sports, marine, hydraulics and lawn and garden.  We sell our products primarily to retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Canada, Europe, Asia, Mexico and other Latin American countries.

The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.  The unaudited 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.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire year.

Reclassification

Certain prior period amounts in the accompanying consolidated financial statements and related notes have been reclassified to conform to the 2024 presentation.

Note 2.  Summary of Significant Accounting Policies

The preparation of consolidated annual and quarterly financial statements in conformity with GAAP 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 assurance 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 disruptions in the supply chain caused by geo-political risks, future increases in interest rates, inflation, macroeconomic uncertainty, and other unforeseen changes in the industry, or business, could materially impact the estimates, and may have a material adverse effect on our business, financial condition and results of operations.  Some of the more significant estimates include allowances for expected credit losses, 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.

9
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
There have been no material changes to our critical accounting policies and estimates from the information provided in Note 1 of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Issued Accounting Pronouncements


Standards not yet adopted as of June 30, 2024


Standard
Description
Effective date
Effects on the financial statements or other significant matters
ASU 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
 
ASU 2023-07 will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis.
 
ASU 2023-07 expands segment disclosures by requiring disclosure of (1) significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; (2) the amount and description of the composition of other segment items to reconcile to segment profit and loss; and (3) the CODM’s title and position and how the CODM uses the reported segment measures to allocate resources.  Additionally, ASU 2023-07 requires interim disclosures of all reportable segment profit or loss and assets previously required annually by Topic 280.
 
The ASU is effective for the fiscal years beginning after December 15, 2023, which for us is December 31, 2024, and all subsequent interim periods, with full retrospective application required to all prior periods presented. Early adoption is permitted.
 
The new standard will require expanding our segment disclosure to include additional segment level information. We are currently evaluating the full impact of adopting ASU 2023-07 on our consolidated financial statements, disclosures, processes and controls. On an ongoing basis, we will continue to assess the impact of the new standard through our planned date of adoption of December 31, 2024.
 
 
ASU 2023-09,
Income Taxes (Topic 270): Improvements to Income Tax Disclosures
 
ASU 2023-09 will improve transparency and decision making usefulness of income tax disclosures.
 
ASU 2023-09 will expand the annual required effective income tax rate reconciliation disclosures to include (1) eight specific categories of rate reconciling items; (2) additional information for reconciling items that meet or exceed a quantitative threshold; and (3) expand the required disclosures to include reconciling percentages as well as reported amounts.  Additionally, the ASU 2023-09 will expand required annual disclosures of income taxes paid to include the disaggregation by federal, state and foreign jurisdictions.
The ASU is effective for annual reporting periods beginning after December 15, 2024, which for us is December 31, 2025, with prospective application. Early adoption and retrospective application are permitted.
The new standard will require expanding our annual income tax disclosures in our financial statements. We are currently evaluating the full impact of adopting ASU 2023-09 on our consolidated financial statements, disclosures, processes and controls. On an ongoing basis, we will continue to assess the impact of the new standard through our planned date of adoption of December 31, 2025.


10
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We have reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements.

Note 3.  Business Acquisitions and Investments


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



In April 2014, we formed Foshan GWO YNG SMP Vehicle Climate Control & Cooling Products Co. Ltd. (“Gwo Yng”), a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd., a China-based manufacturer of air conditioner accumulators, filter driers, hose assemblies and switches.  We acquired our 50% interest in the joint venture for approximately $14 million.  In March 2018, we acquired an additional 15% equity interest in the joint venture for Chinese yuan renminbi 26,475,583 (approximately $4.2 million), thereby increasing our equity interest in the joint venture to 65%.  While we increased our equity interest in the joint venture to 65%, the minority shareholder maintained substantive 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, we continued to account for our investment in the joint venture under the equity method of accounting.



In July 2023, we acquired an additional 15% equity interest in the joint venture for Chinese yuan renminbi 27,378,290 (approximately $4 million), thereby increasing our equity interest in Gwo Yng to 80%.  In connection with the transaction, we amended and restated the charter documents of Gwo Yng to remove all minority shareholder substantive participating rights, giving SMP control of Gwo Yng.  As a result, as of the closing date of the transaction, Gwo Yng was accounted for as a business combination achieved in stages (“a step acquisition”).  Accordingly, commencing on the closing of the transaction, we reported the results of Gwo Yng on a consolidated basis with the minority ownership interest reported as a noncontrolling interest.



The following table summarizes the allocation of the total step acquisition purchase consideration to the identifiable assets acquired and liabilities assumed based on their fair values (in thousands):

Total purchase consideration (a)
        
$
21,725
  
Assets acquired and liabilities assumed:
              
Cash and cash equivalents          
  
$
6,779