STANDARD MOTOR PRODUCTS INC (Form: 10-K, Received: 02/26/2016 16:49:38)

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Net earnings	$	46,018		$	43,029		$	51,450
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(5,739	)		(3,781	)		(1,101	)
Pension and postretirement plans:
Amortization of:
Prior service benefit		(112	)		(3,017	)		(4,317	)
Unrecognized loss		2,261			2,435			3,123
Actuarial gains (losses)		462			(413	)		(343	)
Plan settlement		654			—			—
Foreign currency exchange rate changes		(23	)		(34	)		(32	)
Income tax (expense) benefit related to pension and postretirement plans		(1,325	)		372			577
Pension and postretirement plans, net of tax		1,917			(657	)		(992	)
Total other comprehensive income (loss), net of tax		(3,822	)		(4,438	)		(2,093	)
Comprehensive income	$	42,196		$	38,591		$	49,357

See accompanying notes to consolidated financial statements.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2015			2014
	(Dollars in thousands, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	18,800		$	13,728
Accounts receivable, less allowances for discounts and doubtful accounts of $4,246 and $6,369 in 2015 and 2014, respectively		123,853			126,524
Inventories		285,793			278,051
Deferred income taxes		40,626			36,534
Prepaid expenses and other current assets		10,668			11,196
Total current assets		479,740			466,033

Property, plant and equipment, net		68,882			64,611
Goodwill		54,881			54,975
Other intangibles, net		29,386			34,402
Deferred incomes taxes		10,737			14,941
Other assets		37,438			38,589
Total assets	$	681,064		$	673,551
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Notes payable	$	47,427		$	56,558
Current portion of long-term debt		16			175
Accounts payable		72,711			70,674
Sundry payables and accrued expenses		40,706			49,412
Accrued customer returns		38,812			30,621
Accrued rebates		27,196			26,076
Payroll and commissions		17,048			17,313
Total current liabilities		243,916			250,829

Long-term debt		62			83
Other accrued liabilities		12,922			15,024
Accrued asbestos liabilities		32,185			33,462
Total liabilities		289,085			299,398
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		93,247			91,411
Retained earnings		291,481			259,160
Accumulated other comprehensive income		(6,474	)		(2,652	)
Treasury stock - at cost (1,295,316 shares and 1,043,064 shares in 2015 and 2014, respectively)		(34,147	)		(21,638	)
Total stockholders’ equity		391,979			374,153
Total liabilities and stockholders’ equity	$	681,064		$	673,551

See accompanying notes to consolidated financial statements.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2015			2014			2013
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	46,018		$	43,029		$	51,450
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		17,637			17,295			17,595
Amortization of deferred financing cost		635			699			893
Increase (decrease) to allowance for doubtful accounts		3,371			(497	)		641
Increase to inventory reserves		1,864			3,553			4,636
Amortization of deferred gain on sale of buildings		(1,048	)		(1,048	)		(1,048	)
Equity (income) loss from joint ventures		(976	)		822			285
Employee Stock Ownership Plan allocation		2,208			1,826			4,376
Stock-based compensation		5,379			4,843			3,668
Excess tax benefits related to exercise of employee stock grants		(1,254	)		(1,269	)		(1,264	)
(Increase) decrease in deferred income taxes		(1,494	)		(4,959	)		(527	)
Decrease in unrecognized tax benefit		—			(350	)		—
Increase (decrease) in tax valuation allowance		87			(342	)		(480	)
Loss on discontinued operations, net of tax		2,102			9,870			1,593
Change in assets and liabilities:
(Increase) decrease in accounts receivable		(1,996	)		1,755			(27,278	)
Increase in inventories		(12,503	)		(6,712	)		(6,094	)
(Increase) decrease in prepaid expenses and other current assets		367			(959	)		(4,048	)
Increase (decrease) in accounts payable		1,882			(4,329	)		12,497
Increase (decrease) in sundry payables and accrued expenses		1,874			(7,697	)		8,673
Net changes in other assets and liabilities		1,018			(8,543	)		(7,952	)
Net cash provided by operating activities		65,171			46,987			57,616

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of and investments in businesses		—			(37,726	)		(12,760	)
Capital expenditures		(18,047	)		(13,904	)		(11,410	)
Other investing activities		36			430			(592	)
Net cash used in investing activities		(18,011	)		(51,200	)		(24,762	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit agreements		(9,131	)		35,152			(19,046	)
Net borrowings (payments) of long-term debt and capital lease obligations		(170	)		182			(120	)
Purchase of treasury stock		(19,623	)		(10,000	)		(6,864	)
Increase (decrease) in overdraft balances		851			522			(3,312	)
Payments of debt issuance costs		(748	)		—			(1,261	)
Proceeds from exercise of employee stock options		109			96			151
Excess tax benefits related to the exercise of employee stock grants		1,254			1,269			1,264
Dividends paid		(13,697	)		(11,905	)		(10,107	)
Net cash provided by (used in) financing activities		(41,155	)		15,316			(39,295	)
Effect of exchange rate changes on cash		(933	)		(2,934	)		(1,074	)
Net increase (decrease) in cash and cash equivalents		5,072			8,169			(7,515	)
CASH AND CASH EQUIVALENTS at beginning of year		13,728			5,559			13,074
CASH AND CASH EQUIVALENTS at end of year	$	18,800		$	13,728		$	5,559

Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	901		$	882		$	1,050
Income taxes	$	27,513		$	27,562		$	33,489

See accompanying notes to consolidated financial statements.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2015, 2014 and 2013

	Common Stock		Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total
(In thousands)
BALANCE AT DECEMBER 31, 2012	$	47,872	$	82,348	$	186,693		$	3,879		$	(13,205	)	$	307,587
Net earnings		—		—		51,450			—			—			51,450
Other comprehensive loss, net of tax		—		—		—			(2,093	)		—			(2,093	)
Cash dividends paid ($0.44 per share)		—		—		(10,107	)		—			—			(10,107	)
Purchase of treasury stock		—		—		—			—			(6,864	)		(6,864	)
Stock-based compensation and related tax benefits		—		2,917		—			—			1,933			4,850
Stock options exercised and related tax benefits		—		84		—			—			149			233
Employee Stock Ownership Plan		—		2,214		—			—			2,162			4,376

BALANCE AT DECEMBER 31, 2013		47,872		87,563		228,036			1,786			(15,825	)		349,432
Net earnings		—		—		43,029			—			—			43,029
Other comprehensive income (loss), net of tax		—		—		—			(4,438	)		—			(4,438	)
Cash dividends paid ($0.52 per share)		—		—		(11,905	)		—			—			(11,905	)
Purchase of treasury stock		—		—		—			—			(10,000	)		(10,000	)
Stock-based compensation and related tax benefits		—		3,005		—			—			3,065			6,070
Stock options exercised and related tax benefits		—		17		—			—			122			139
Employee Stock Ownership Plan		—		826		—			—			1,000			1,826

BALANCE AT DECEMBER 31, 2014		47,872		91,411		259,160			(2,652	)		(21,638	)		374,153
Net earnings		—		—		46,018			—			—			46,018
Other comprehensive income (loss), net of tax		—		—		—			(3,822	)		—			(3,822	)
Cash dividends paid ($0.60 per share)		—		—		(13,697	)		—			—			(13,697	)
Purchase of treasury stock		—		—		—			—			(19,623	)		(19,623	)
Stock-based compensation and related tax benefits		—		833		—			—			5,700			6,533
Stock options exercised and related tax benefits		—		2		—			—			207			209
Employee Stock Ownership Plan		—		1,001		—			—			1,207			2,208

BALANCE AT DECEMBER 31, 2015	$	47,872	$	93,247	$	291,481		$	(6,474	)	$	(34,147	)	$	391,979

See accompanying notes to consolidated financial statements.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	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” or the “Company”) is engaged in the manufacture and distribution of replacement parts for motor vehicles in the automotive aftermarket industry with a complementary focus on heavy duty, industrial equipment and the original equipment service market. The consolidated financial statements include our accounts and all domestic and international companies in which we have more than a 50% equity ownership. Our investments in unconsolidated affiliates are accounted for on the equity method, as we do not have a controlling financial interest. All significant inter-company items have been eliminated.

Use of Estimates

In conformity with generally accepted accounting principles, we have made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. 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, pensions and other postretirement benefits, asbestos, environmental and litigation matters, valuation of deferred tax assets, share based compensation and sales returns and other allowances. 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 estimate or in the assumptions that we use in calculating the estimate, unforeseen changes in the industry, or business could materially impact the estimate and may have a material adverse effect on our business, financial condition and results of operations.

Reclassification

Certain prior period amounts in the accompanying consolidated financial statements and related notes have been reclassified to conform to the 2015 presentation.

Cash and Cash Equivalents

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

Allowance for Doubtful Accounts 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, aging analysis, and specific account evaluations. When a receivable balance is known to be uncollectible, it is written off against the allowance for doubtful accounts. In January 2016, one of our customers filed a petition for bankruptcy. In connection with the bankruptcy filing, we evaluated our potential risk and exposure as related to our outstanding accounts receivable balance from the customer as of December 31, 2015, and estimated our anticipated recovery. As a result of our evaluation, we recorded a net $3.5 million pre-tax charge during the year ended December 31, 2015 to reduce our accounts receivable balance to our estimated recovery. We will continue to monitor the circumstances surrounding the bankruptcy in determining whether additional provisions may be necessary. Cash discounts are provided based on an overall average experience rate applied to qualifying accounts receivable balances.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Inventories

Inventories are valued at the lower of cost (determined by means of the first-in, first-out method) or market. 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 or market are determined based upon current economic conditions, historical sales quantities and patterns and, in some cases, the specific risk of loss on specifically identified inventories.

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. As such, the historical volatility of such estimates has been minimal. We maintain provisions for inventory reserves of $45 million and $45.2 million as of December 31, 2015 and 2014, respectively.

We utilize cores (used parts) in our remanufacturing processes for air conditioning compressors, diesel injectors, diesel pumps, and turbo chargers. The production of air conditioning compressors, diesel injectors, diesel pumps, and turbo chargers, 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, we reduce our inventory, through a charge to cost of sales, when we sell a finished good compressor, and put back to inventory the used core exchanged at standard cost through a credit to cost of sales when it is actually received from the customer.

Property, Plant and Equipment

These assets 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	7 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.

Valuation of Long-Lived and Intangible Assets and Goodwill

At acquisition, we estimate and record the fair value of purchased intangible assets, which primarily consists of customer relationships, trademarks and trade names, patents and non-compete agreements.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The fair values of these intangible assets are estimated based on our assessment. 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 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 the two-step impairment test is not required. If we are unable to reach this conclusion, then we would perform the two-step impairment test. Initially, the fair value of the reporting unit is compared to its carrying amount. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit; we are required to perform a second step, as this is an indication that the reporting unit goodwill may be impaired. In this step, we compare the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill and recognize a charge for impairment to the extent the carrying value exceeds the implied fair value. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all of the assets (recognized and unrecognized) and liabilities of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. In addition, identifiable intangible assets having indefinite lives are reviewed for impairment on an annual basis using a methodology consistent 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.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 stocklift. New customer acquisition costs are recorded as a reduction to revenue when incurred.

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 products are shipped and title has been transferred to a customer, the sales price is fixed and determinable, and collection is reasonably assured. For some 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 but rather carried as a core liability. The liability is extinguished when a core is actually returned to us. 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.

Selling, General and Administration Expenses

Selling, general and administration expenses includes 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 and are capitalized and amortized over the life of the related financing arrangements. 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.

Retirement and Post-Retirement Medical Benefits

The determination of defined benefit pension and postretirement plan obligations and their associated expenses requires the use of actuarial valuations to estimate participant plan benefits employees earn while working as well as the present value of those benefits. Inherent in these valuations are financial assumptions including discount rates at which liabilities can be settled, rates of increase of health care costs as well as employee demographic assumptions such as retirement patterns, mortality and turnover. Management reviews these assumptions annually with its actuarial advisors. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower turnover rates or longer or shorter life spans of participants. Benefits are determined primarily based upon employees’ length of service. We recognize the underfunded or overfunded status of a defined benefit pension and postretirement plan as an asset or liability and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Share-Based Compensation

We measure and recognize compensation expense for all share-based payment awards made to employees and directors based on estimated fair values on the grant date. The value of the portion of the award that is ultimately expected to vest 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.

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. The valuation allowance is intended in part to provide for the uncertainty regarding the ultimate utilization of our U.S. foreign tax credit carryovers and foreign net operating loss carryovers. 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 $0.4 million as of December 31, 2015 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 $51.4 million as of December 31, 2015, 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. The effective tax rate includes the net impact of changes in the liability for uncertain tax positions. As of December 31, 2015, we do not believe there is a need to establish a liability for uncertain tax positions.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net Earnings per Common Share

We present two calculations of earnings per common share. “Basic” earnings per common share equals net income divided by weighted average common shares outstanding during the period. “Diluted” earnings per common share equals net income 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 is a reconciliation of the shares used in calculating basic and dilutive net earnings per common share.

	2015		2014		2013
	(In thousands)
Weighted average common shares outstanding – Basic		22,812		22,900		22,975
Plus incremental shares from assumed conversions:
Dilutive effect of restricted shares and performance shares		330		335		287
Dilutive effect of stock options		—		5		8
Weighted average common shares outstanding – Diluted		23,142		23,240		23,270

The average shares listed below were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented or because they were excluded under the treasury method.

	2015		2014		2013
	(In thousands)
Stock options		—		4		8
Restricted and performance shares		307		276		203

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.

Asbestos Litigation

In evaluating our potential asbestos-related liability, we use an actuarial study that is prepared by a leading actuarial firm with expertise in assessing asbestos-related liabilities. We evaluate the estimate of the range of undiscounted liability to determine which amount to accrue. 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 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. Legal costs are expensed as incurred.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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. We accrue for product warranties and overstock returns as a percentage of sales at the time products are sold, based upon estimates established using historical information on the nature, frequency and average cost of claims. Revision to the accrual is made when necessary, based upon changes in these factors. We regularly study trends of such claims.

Trade Receivables

In compliance with accounting standards, sales of accounts receivable are reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale and any related expense is included in selling, general and administrative expenses in our consolidated statements 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. Our five largest individual customers, including members of a marketing group, accounted for approximately 68% of our consolidated net sales in 2015, 69% of our consolidated net sales in 2014 and 66% of our consolidated net sales in 2013. During 2015, O’Reilly Automotive, Inc., NAPA Auto Parts, Advance Auto Parts, Inc., and AutoZone, Inc. accounted for 19%, 19%, 17% and 11% 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, could have a materially adverse impact on our business, financial condition and results of operations.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In January 2016, one of our customers filed a petition for bankruptcy. In connection with the bankruptcy filing, we evaluated our potential risk and exposure as related to our outstanding accounts receivable balance from the customer as of December 31, 2015, and estimated our anticipated recovery. As a result of our evaluation, we recorded a net $3.5 million pre-tax charge during the year ended December 31, 2015 to reduce our accounts receivable balance to our estimated recovery. The net $3.5 million pre-tax charge is included in selling, general and administrative expenses in our consolidated statement of operations. We will continue to monitor the circumstances surrounding the bankruptcy in determining whether additional provisions may be necessary.

Substantially all of the cash and cash equivalents, including foreign cash balances, at December 31, 2015 and 2014 were uninsured. Foreign cash balances at December 31, 2015 and 2014 were $16.2 million and $10.7 million, respectively.

Recently Issued Accounting Pronouncements

Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements . Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The new standard applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. The amendment is effective for annual reporting periods beginning after December 15, 2014. We adopted the new standard as of January 1, 2015. The adoption of the new standard did not change the manner in which we present discontinued operations in our consolidated financial statements .

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under the new guidance, “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The new standard provides entities the option of using either a full retrospective or a modified approach to adopt the guidance.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date (“ASU 2015-14”), which defers by one year the mandatory effective date of its revenue recognition standard, and provides entities the option to adopt the standard as of the original effective date. The new standard is now effective for annual reporting periods beginning after December 15, 2017, which for us is January 1, 2018, and interim periods within those annual periods. Early adoption is now permitted, but not before the original effective date, which for us is January 1, 2017. We are currently evaluating the impact, if any, this new standard will have on our consolidated financial statements, when we will adopt the new standard, and the method of adoption.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance on determining when and how to disclose going concern uncertainties in the consolidated financial statements . Under the new guidance, management would be required to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. Certain disclosures must be provided if “conditions or events raise substantial doubt about an entity’s ability to continue as a going concern.” The new standard is effective for annual reporting periods ending after December 15, 2016, which for us is December 31, 2016, and interim periods thereafter. Early adoption is permitted. Upon adoption, although we do not anticipate that the new standard will have an impact on our disclosures, we will consider the new standard when conducting our interim and annual assessments of our ability to continue as a going concern.

Income Statement - Extraordinary and Unusual Items

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items, (“ASU 2015-01”), which removes the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is both unusual and occurs infrequently. This separate, net-of-tax presentation will no longer be allowed. The existing requirement to separately disclose events or transactions that are unusual or occur infrequently on a pre-tax basis within continuing operations in the income statement has been retained. Similarly, the new guidance requires that items that are both unusual and infrequent be presented separately within continuing operations in the income statement. The new standard is effective for periods beginning after December 15, 2015, which for us is January 1, 2016. Early adoption is permitted, but only as of the beginning of the fiscal year of adoption. Upon adoption, we will present transactions that are both unusual and infrequent, if any, on a pre-tax basis within continuing operations in the consolidated statement of operations.

Simplifying the Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, (“ASU 2015-03”), which requires that debt issuance costs be presented in the balance sheet as a direct deduction of the carrying value of the associated debt liability. Under the existing guidance, debt issuance costs are required to be presented in the balance sheet as a deferred charge (i.e., an asset). The new standard is effective for periods beginning after December 15, 2015, which for us is January 1, 2016. Early adoption is permitted for financial statements that have not been previously issued. The new standard should be applied retrospectively to all periods presented in the financial statements.

In June 2015, at the Emerging Issues Task Force meeting, the FASB clarified that ASU 2015-03 does not address debt issuance costs related to revolving credit debt arrangements. In connection therewith, at the June 2015 meeting, the SEC staff announced that it would not object to the presentation of issuance costs related to revolving debt arrangements as an asset that is amortized over the term of the arrangement. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which amended ASU 2015-03 to incorporate the conclusions reached by the SEC staff at its June 2015 Emerging Issues Task Force meeting. Currently, we present debt financing costs related to our revolving credit facility debt as an asset in our consolidated balance sheets. Upon adoption, we will continue to present debt financing costs related to our revolving credit facility debt as an asset in our consolidated balance sheets.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Simplifying the Measurement of Inventory

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory , (“ASU 2015-11”), which changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value for entities that do not measure inventory using the last-in, first-out, or retail inventory method. This ASU applies to all other inventory, which includes inventory that is measured using first-in, first-out or average cost. In addition, ASU 2015-11 eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. The new standard is effective for periods beginning after December 15, 2016, which for us is January 1, 2017. The new standard should be applied prospectively. Early adoption is permitted. We do not anticipate that the adoption of ASU 2015-11 will have a material effect on our consolidated financial statements.

Simplifying the Accounting for Measurement-Period Adjustments

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, (“ASU 2015-16”), which eliminates the requirement to restate prior period financial statements for measurement period adjustments related to business acquisitions. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. In addition, ASU 2015-16 requires that companies present separately on the face of the income statement, or disclose in the notes, the portion of the adjustment recorded in current period earnings by line item that would have been recorded in previous reporting periods if the adjustment had been recognized as of the acquisition date. The new standard is effective for periods beginning after December 15, 2015, which for us is January 1, 2016. The new standard should be applied prospectively to measurement period adjustments that occur after the effective date. Early adoption is permitted. Upon adoption, we will prospectively apply the new standard to measurement period adjustments related to business acquisitions.

Balance Sheet Classification of Deferred Taxes

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, (“ASU 2015-17”), which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The new guidance requires entities to offset all deferred tax assets and liabilities (and valuation allowances) for each tax-paying jurisdiction within each tax-paying component. The net deferred tax must be presented as a single noncurrent amount. The new standard is effective for periods beginning after December 15, 2016, which for us is January 1, 2017. The new standard provides entities the option of either a retrospective or prospective approach to adopt the guidance. Early adoption is permitted. We do not anticipate that the adoption of ASU 2015-17 will have a material effect on our consolidated financial statements.

2.	Business Acquisitions and Investments

2014 Business Acquisitions and Investment

Pensacola Fuel Injection, Inc, and Annex Manufacturing Acquisitions

In January 2014, we acquired certain assets and assumed certain liabilities of Pensacola Fuel Injection Inc., a privately held company, for $12.2 million in cash funded by our revolving credit facility. Pensacola Fuel Injection, Inc., located in Pensacola, Florida, remanufactures and distributes a wide range of diesel injectors, diesel pumps and turbo chargers. Prior to the acquisition, we were the primary purchaser of products supplied by the company.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In April 2014, we acquired certain assets and assumed certain liabilities of Annex Manufacturing, a privately held company, for $11.5 million in cash funded by our revolving credit facility. Annex Manufacturing, located in Fort Worth, Texas, distributes a variety of temperature control products for the automotive aftermarket. Revenues generated from the acquired business were approximately $22 million for the year ended December 31, 2013, of which approximately 40% of the volume was sold to us.

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

	Pensacola Fuel Injection, Inc.					Annex Manufacturing
Purchase price:				$	12,225				$	11,500
Assets acquired and liabilities assumed:
Receivables	$	—				$	2,581
Inventory		2,815					2,630
Property, plant and equipment, net		466					128
Intangible assets		—					4,760
Goodwill		12,528					4,567
Current liabilities		(3,584	)				(3,166	)
Net assets acquired				$	12,225				$	11,500

Goodwill related to the Pensacola Fuel Injection, Inc. and Annex Manufacturing acquisitions of $12.5 million and $4.6 million, respectively, was allocated to the Engine Management Segment and Temperature Control Segment, respectively, and is deductible for income tax purposes. The goodwill reflects business specific knowledge and the replacement cost of an assembled workforce, as well as the value of expected synergies.

Intangible assets acquired in the Annex Manufacturing acquisition consisted of customer relationships of $4.7 million that will be amortized on a straight-line basis over the estimated useful life of 7 years and non-compete agreements of $0.1 million that will be amortized on a straight-line basis over the estimated useful life of 5 years.

Revenues included in our consolidated statements of operations for the Annex Manufacturing acquisition from the date of acquisition through December 31, 2014 were $8.5 million. Revenues from the Pensacola Fuel Injection, Inc. acquisition from the date of acquisition through December 31, 2014 were not material.

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

In April 2014, we formed a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd., a China-based manufacturer of air conditioning accumulators, filter driers, hose assemblies, and switches for the automotive aftermarket and OEM/OES markets. We acquired our 50% interest in the joint venture for $14 million in cash funded by our revolving credit facility. 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.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.	Restructuring and Integration (Income) Expenses

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, 2015 and 2014, consisted of the following (in thousands):

	Workforce Reduction			Other Exit Costs			Total
Exit activity liability at December 31, 2013	$	2,800		$	942		$	3,742
Restructuring and integration costs:
Amounts provided for during 2014		639			558			1,197
Non-cash usage, including asset write-downs		—			(17	)		(17	)
Cash payments		(2,492	)		(754	)		(3,246	)
Exit activity liability at December 31, 2014	$	947		$	729		$	1,676
Restructuring and integration costs:
Amounts provided for during 2015		(212	)		78			(134	)
Cash payments		(465	)		(216	)		(681	)
Exit activity liability at December 31, 2015	$	270		$	591		$	861

Liabilities associated with the remaining restructuring and integration costs as of December 31, 2015 relate primarily to employee severance and other retiree benefit enhancements to be paid through 2019 and environmental clean-up costs at our Long Island City, New York location in connection with the closure of our manufacturing operations at the site.

4.	Sale of Receivables

From time to time, we sell undivided interests in certain of our receivables to financial institutions. We enter these agreements at our discretion when we determine that the cost of factoring 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 $693.6 million and $690.3 million of receivables for the years ended December 31, 2015 and 2014, respectively. A charge in the amount of $14.3 million, $13.1 million and $13.9 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, 2015, 2014 and 2013, respectively. If we do not enter into these arrangements or if any of the financial institutions with which we enter into these arrangements were to experience financial difficulties or otherwise terminate these arrangements, our financial condition, results of operations and cash flows could be materially and adversely affected by delays or failures to collect future trade accounts receivable.

5.	Inventories

	December 31,
	2015		2014
	(In thousands)
Finished goods	$	186,782	$	185,655
Work-in-process		5,456		4,722
Raw materials		93,555		87,674
Total inventories	$	285,793	$	278,051

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

6.	Property, Plant and Equipment

	December 31,
	2015		2014
	(In thousands)
Land, buildings and improvements	$	45,655	$	45,050
Machinery and equipment		131,959		128,998
Tools, dies and auxiliary equipment		43,044		40,352
Furniture and fixtures		25,287		23,830
Leasehold improvements		7,761		7,436
Construction-in-progress		9,253		7,409
Total property, plant and equipment		262,959		253,075
Less accumulated depreciation		194,077		188,464
Total property, plant and equipment, net	$	68,882	$	64,611

Depreciation expense was $12.1 million in 2015, $11.8 million in 2014 and $12 million 2013.

7.	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, 2015.

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 the two-step impairment test is not required. If we are unable to reach this conclusion, then we would perform the two-step impairment test. We elected to bypass the qualitative assessment and have decided to perform the two-step impairment test for goodwill at both the Engine Management and Temperature Control reporting units at December 31, 2015. The first step of the impairment analysis consists of a comparison of the fair value of the reporting units with their respective carrying amounts, including goodwill. If the fair value of the reporting unit exceeds the carrying amount of the reporting unit, step two of the impairment analysis is not required. The fair values of the Engine Management and Temperature Control reporting units were determined based upon the Income Approach, which estimates the fair value based on future discounted cash flows, and the Market Approach, which estimates the fair value based on market prices of comparable companies. We base our fair value estimates on projected financial information which we believe to be reasonable. We also considered our total market capitalization as of December 31, 2015. Our December 31, 2015 annual goodwill impairment analysis did not result in an impairment charge as it was determined that the fair values of our Engine Management and Temperature Control reporting units were in excess of their carrying amounts. While the fair values exceed the carrying amounts at the present time and we do not believe that impairments are probable, the performance of the business and brands require continued improvement in future periods to sustain their carrying values.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Changes in the carrying values of goodwill by operating segment during the years ended December 31, 2015 and 2014 are as follows (in thousands):

	Engine Management			Temperature Control		Total
Balance as of December 31, 2013
Goodwill	$	66,790		$	9,703	$	76,493
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	28,302		$	9,703	$	38,005
Activity in 2014
Acquisition of assets of Pensacola Fuel Injection, Inc.	$	12,528		$	—	$	12,528
Acquisition of assets of Annex Manufacturing		—			4,567		4,567
Foreign currency exchange rate change		(125	)		—		(125	)
Balance as of December 31, 2014
Goodwill		79,193			14,270		93,463
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	40,705		$	14,270	$	54,975
Activity in 2015
Foreign currency exchange rate change	$	(94	)	$	—	$	(94	)
Balance as of December 31, 2015
Goodwill		79,099			14,270		93,369
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	40,611		$	14,270	$	54,881

Acquired Intangible Assets

Acquired identifiable intangible assets as of December 31, 2015 and 2014 consist of:

	December 31,
	2015			2014
	(In thousands)
Customer relationships	$	48,475		$	48,646
Trademarks and trade names		6,800			6,800
Non-compete agreements		970			970
Patents and supply contracts		723			723
Leaseholds		160			160
Total acquired intangible assets		57,128			57,299
Less accumulated amortization (1)		(29,040	)		(24,120	)
Net acquired intangible assets	$	28,088		$	33,179

(1)

Applies to all intangible assets, except for related trademarks and trade names totaling $5.2 million, which have indefinite useful lives and, as such, are not being amortized.

Total amortization expense for acquired intangible assets was $4.9 million for the year ended December 31, 2015, $5 million for the year ended December 31, 2014, and $5 million for the year ended December 31, 2013. Based on the current estimated useful lives assigned to our intangible assets, amortization expense is estimated to be $4.9 million for 2016, $4.7 million in 2017, $4.5 million in 2018 and $8.8 million in the aggregate for the years 2019 through 2029.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other Intangible Assets

Other intangible assets include computer software. As of December 31, 2015 and 2014, these costs totaled $16.7 million and $17.2 million, respectively, and total accumulated computer software amortization was $15.4 million and $16 million, respectively. Computer software is amortized over its estimated useful life of 3 to 10 years. Amortization expense for computer software was $0.6 million, $0.5 million and $0.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

8.	Other Assets

	December 31,
	2015		2014
	(In thousands)
Equity in joint ventures	$	20,622	$	20,004
Deferred compensation		10,675		9,811
Long term receivables		4,215		6,513
Deferred financing costs, net		1,267		1,570
Other		659		691
Total other assets, net	$	37,438	$	38,589

Deferred compensation consists of assets held in a nonqualified defined contribution pension plan as of December 31, 2015 and 2014, respectively.

Equity Method Investments

In April 2014, we formed a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd. (“Gwo Yng”), a China-based manufacturer of air conditioner accumulators, filter driers, hose assemblies and switches for the automotive aftermarket and OEM/OES markets. We acquired our 50% interest in the joint venture for $14 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, 2015 and 2014, we made purchases from Gwo Yng of approximately $15 million and $8.6 million, respectively.

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. Our minority interest in Orange is accounted for using the equity method of accounting. During the years ended December 31, 2015 and 2014, we made purchases from Orange of approximately $4.4 million and $4.7 million, respectively.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9.	Credit Facilities and Long-Term Debt

Total debt outstanding is summarized as follows:

	December 31,
	2015		2014
	(In thousands)
Revolving credit facilities	$	47,427	$	56,558
Other		78		258
Total debt	$	47,505	$	56,816

Current maturities of long-term debt	$	47,443	$	56,733
Long-term debt		62		83
Total debt	$	47,505	$	56,816

Maturities of long-term debt are not material for the year ended December 31, 2016 and beyond.

Revolving Credit Facility

In October 2015, we entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as agent, and a syndicate of lenders 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 a maturity date in October 2020. The new credit agreement replaces our prior credit facility with General Electric Capital Corporation, as agent, and the lenders therein. Direct borrowings under the new 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 credit agreement is guaranteed by certain of our subsidiaries and secured by certain of our assets.

Borrowings under the new 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 credit agreement is based on a formula of eligible accounts receivable, eligible inventory, eligible equipment and eligible fixed assets. After taking into account outstanding borrowings under the credit agreement, there was an additional $128.5 million available for us to borrow pursuant to the formula at December 31, 2015. Outstanding borrowings under the credit agreements, which are classified as current liabilities, were $47.4 million and $56.6 million at December 31, 2015 and 2014, respectively. Borrowings under the restated credit agreement have been classified as current liabilities based upon the accounting rules and certain provisions in the agreement.

At December 31, 2015, the weighted average interest rate on our credit agreement was 1.7%, which consisted of $44 million in direct borrowings at 1.6% and an alternative base rate loan of $3.4 million at 3.8%. At December 31, 2014, the weighted average interest rate under our prior credit facility with General Electric Capital Corporation was 1.8%, which consisted of $53 million in direct borrowings at 1.7% and an index loan of $3.6 million at 3.8%. During 2015, our average daily alternative base rate/index loan balance was $4.9 million and during 2014 our average daily index loan balance under our prior credit facility with General Electric Capital Corporation was $4.4 million.

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 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, 2015, we were not subject to these covenants. The 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 credit agreement also permits acquisitions, permissible debt financing, capital expenditures, and cash dividend payments and stock repurchases of greater than $20 million.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The new credit agreement also replaces our Canadian Credit Agreement with GE Canada Finance Holding Company. The new agreement with JPMorgan Chase Bank, N.A. allows for a $10 million line of credit to Canada as part of the $250 million available for borrowing.

Deferred Financing Costs

We had deferred financing costs of $1.6 million and $2.3 million as of December 31, 2015 and 2014, respectively. Deferred financing costs as of December 31, 2015 are related to our revolving credit facility. In connection with the new revolving credit facility agreement entered into in October 2015 with JPMorgan Chase Bank, N.A., we incurred and capitalized approximately $0.7 million of deferred financing costs related to bank, legal, and other professional fees which are being amortized through 2020, the term of the agreement. In addition, upon entering into the new agreement, we wrote-off $0.8 million of unamortized deferred financing costs associated with the old agreement. Unamortized deferred financing costs written-off in 2015 were recorded in other non-operating income (expense), net in our consolidated statement of operations.

Scheduled amortization for future years, assuming no prepayments of principal is as follows:

(In thousands)
2016	$	330
2017		330
2018		330
2019		330
2020		277
Total amortization	$	1,597

10.	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, 2015 and 2014.

In May 2012, our Board of Directors authorized the purchase of up to $5 million of our common stock under a stock repurchase program. Under this program, during the years ended December 31, 2013 and 2012, we repurchased 30,601 shares and 312,527 shares, respectively, of our common stock at a total cost of $0.9 million and $4.1 million, respectively. No stock repurchases remain available under the 2012 program as the entire $5 million was utilized.

In February 2013, our Board of Directors authorized the purchase of up to $6 million of our common stock under a stock repurchase program. During the year ended December 31, 2013, we repurchased 179,372 shares of our common stock under this program at a total cost of $6 million. No stock repurchases remain available under the 2013 program as the entire $6 million was utilized.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In February 2014, our Board of Directors authorized the purchase of up to $10 million of our common stock under a stock repurchase program. During the year ended December 31, 2014, we repurchased 284,284 shares of our common stock under this program at a total cost of $10 million. No stock repurchases remain available under the 2014 program as the entire $10 million was utilized.

In February 2015, our Board of Directors authorized the purchase of up to $10 million of our common stock under a stock repurchase program. In July 2015, our Board of Directors authorized the purchase of up to an additional $10 million of our common stock under another stock repurchase program. Under these programs, during the year ended December 31, 2015, we repurchased 551,791 shares of our common stock at a total cost of $19.6 million. As of December 31, 2015, there was approximately $0.4 million available for future stock repurchases under the programs. In January 2016, we repurchased an additional 10,135 shares of our common stock under the programs at a total cost of $0.4 million, thereby completing the 2015 Board of Directors authorizations.

11.	Accumulated Other Comprehensive Income

Changes in Accumulated Other Comprehensive Income by Component

	Foreign Currency Translation Adjustments			Unrecognized Pension and Postretirement Benefit Costs (Credit)			Total
	(In thousands)
Balance at December 31, 2013	$	3,562		$	(1,776	)	$	1,786
Other comprehensive income before reclassifications		(3,781	)		(447	)		(4,228	)
Amounts reclassified from accumulated other comprehensive income		—			(210	)		(210	)
Other comprehensive income, net		(3,781	)		(657	)		(4,438	)
Balance at December 31, 2014	$	(219	)	$	(2,433	)	$	(2,652	)
Other comprehensive income before reclassifications		(5,739	)		1,093			(4,646	)
Amounts reclassified from accumulated other comprehensive income		—			824			824
Other comprehensive income, net		(5,739	)		1,917			(3,822	)
Balance at December 31, 2015	$	(5,958	)	$	(516	)	$	(6,474	)

Reclassifications Out of Accumulated Other Comprehensive Income

	Year Ended December 31,
Details About Accumulated Other Comprehensive Income Components	2015			2014
Amortization of pension and postretirement benefit plans:	(In thousands)
Prior service benefit (1)	$	(112	)	$	(3,017	)
Unrecognized loss (1)		2,261			2,435
Total before income tax		2,149			(582	)
Income tax (expense) benefit		(1,325	)		372
Total reclassifications for the period	$	824		$	(210	)

(1)

These accumulated other comprehensive income components are included in the computation of net periodic pension and postretirement benefit costs, which are included in selling, general and administrative expenses in our consolidated statements of operations (see Notes 13 and 14 for additional details).

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

12.	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. During 2015, we had three active stock-based compensation plans. As of December 31, 2015, we have only one active stock-based compensation plan, the 2006 Omnibus Incentive Plan. During 2015, the 2004 Omnibus Stock Option Plan and the 2004 Independent Directors Plan terminated as all outstanding options under the plans were exercised during the year.

We account for our stock-based compensation plans in accordance with the provisions of FASB 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.

Under the 2006 Omnibus Incentive Plan, which terminates in May 2016, we are authorized to issue, among other things, stock options and shares of restricted and performance based stock to eligible employees and directors of up to 1,900,000 shares of common stock. Stock options forfeited under the previous stock option plans and equity awards under the incentive plan are eligible to be granted again under the 2006 Omnibus Incentive Plan with respect to stock options and equity awards so forfeited.

Stock-based compensation expense under our existing plans was $5.0 million ($3.2 million, net of tax) or $0.14 per basic and diluted share, $4.3 million ($2.8 million, net of tax) or $0.12 per basic and diluted share, and $3.2 million ($2 million, net of tax) or $0.09 per basic and diluted share for the years ended December 31, 2015, 2014 and 2013, respectively.

Stock Option Grants

The following is a summary of the changes in outstanding stock options for the years ended December 31, 2015 and 2014:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)

Outstanding at December 31, 2013		16,875		$	12.14		1.0
Expired		—			—		—
Exercised		(7,000	)		13.76		—
Forfeited, other		—			—		—
Outstanding at December 31, 2014		9,875			10.99		0.4
Expired		—			—		—
Exercised		(9,875	)		10.99		—
Forfeited, other		—			—		—
Outstanding at December 31, 2015		—		$	—		—

Options exercisable at December 31, 2015		—		$	—		—

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The total intrinsic value of options exercised for the years ended December 31, 2015 and 2014 was $0.3 million and $0.2 million, respectively. There were no stock options granted in 2015.

Restricted Stock and Performance Share Grants

As part of the 2006 Omnibus Incentive Plan, we currently grant shares of restricted stock to eligible employees and our independent directors and performance-based stock to eligible employees. Selected executives and other key personnel are granted performance awards whose vesting is contingent upon meeting various performance measures with a retention feature. Performance-based shares 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 on the third anniversary of the date of grant. Each period we evaluate the probability of achieving the applicable targets and we adjust our accrual accordingly. Restricted shares granted to employees become fully vested upon the third anniversary of the date of grant; and for selected key executives certain additional restricted share grants vest 25% upon the attainment of age 60, 25% upon the attainment of age 63 and become fully vested upon the attainment of age 65. Restricted shares granted to directors become fully vested upon the first anniversary of the date of grant. Commencing with the 2015 grants, restricted 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 three year vesting period.

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 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 2006 Omnibus Incentive Plan, 1,900,000 shares are authorized to be issued. At December 31, 2015, under the plan, there were an aggregate of (a) 1,618,380 shares of restricted and performance-based stock grants issued, net of forfeitures, and (b) 281,620 shares of common stock available for future grants. For the year ended December 31, 2015, 211,950 restricted and performance-based shares were granted (164,450 restricted shares and 47,500 performance-based shares), and for the year ended December 31, 2014, 256,443 restricted and performance-based shares were granted (210,193 restricted shares and 46,250 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.

The fair value of the shares at the date of grant is amortized to expense ratably over the vesting period. Forfeitures on restricted stock grants are estimated at 5% for employees and 0% for executives and directors, respectively, based on evaluation of historical and expected future turnover.

As related to restricted and performance stock shares, we recorded compensation expense of $5.0 million ($3.2 million, net of tax), $4.3 million ($2.8 million, net of tax) and $3.2 million ($2 million, net of tax), for the years ended December 31, 2015, 2014 and 2013, respectively. The unamortized compensation expense related to our restricted and performance-based shares was $12.7 million and $11.8 million at December 31, 2015 and 2014, respectively and is expected to be recognized over a weighted average period of 5.8 years and 0.3 years for employees and directors, respectively, as of December 31, 2015 and over a weighted average period of 5.1 years and 0.3 years for employees and directors, respectively, as of December 31, 2014.

Index

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, 2015 and 2014:

	Shares			Weighted Average Grant Date Fair Value per Share
Balance at December 31, 2013		630,600		$	19.47
Granted		256,443			32.22
Vested		(132,325	)		15.50
Forfeited		(5,700	)		18.77
Balance at December 31, 2014		749,018			24.62
Granted		211,950			31.79
Vested		(192,768	)		22.13
Forfeited		(9,650	)		29.30
Balance at December 31, 2015		758,550		$	27.19

The weighted-average grant date fair value of restricted and performance-based shares outstanding as of December 31, 2015, 2014 and 2013 was $20.6 million (or $27.19 per share), $18.4 million (or $24.62 share), and $12.3 million (or $19.47 per share), respectively.

13.	Retirement Benefit Plans

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 Contribution
Year ended December 31,
2015	$	8,445
2014		8,267
2013		8,115

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 2014, contributions of $0.4 million were made related to calendar year 2013. In March 2015, contributions of $0.5 million were made related to calendar year 2014. We have recorded an obligation of $0.3 million for 2015.

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 2015, we contributed to the trust an additional 58,000 shares from our treasury and released 58,200 shares from the trust leaving 200 shares remaining in the trust as of December 31, 2015. The provision for expense in connection with the ESOP was approximately $2.2 million in 2015, $1.8 million in 2014 and $4.4 million in 2013.

Index

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. In October 2015, the sole remaining participant in the unfunded SERP reached his applicable payment date. In connection therewith, in October 2015, we recorded a settlement loss of $1.5 million and made the corresponding distribution of $7.6 million. We use a January 1 measurement date for this plan. Benefit obligations as of the end of each year reflect assumptions in effect as of this date.

The benefit obligation, funded status, and amounts recognized in the consolidated financial statements for the SERP, as of and for the years ended December 31, 2015 and 2014, were (in thousands):

	Defined Benefit Retirement Plan
	2015			2014
Change in benefit obligation :
Benefit obligation at beginning of year	$	6,538		$	5,661
Service cost		—			164
Interest cost		218			277
Actuarial loss		854			436
Benefits paid		(7,610	)		—
Benefit obligation at end of year	$	—		$	6,538

Unfunded status of the plan	$	—		$	(6,538	)

Amounts recognized in the balance sheet:
Accrued postretirement benefit liabilities	$	—		$	6,538
Accumulated other comprehensive loss (pre-tax) related to:
Unrecognized net actuarial losses		—			1,389
Unrecognized prior service cost		—			—

The unrecognized amounts recorded in accumulated other comprehensive income will be subsequently recognized as expense consistent with our historical accounting policy for amortizing those amounts. Actuarial gains and losses incurred in future periods and not recognized as expense in those periods will be recognized as increases or decreases in other comprehensive income (loss), net of tax. As they are subsequently recognized as a component of expense, the amounts recorded in other comprehensive income (loss) in prior periods are adjusted. As of December 31, 2015 there are no defined benefit plan amounts included in other comprehensive income.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The components of net periodic benefit cost for our defined benefit plan include the following (in thousands):

	December 31,
Defined benefit retirement plan:	2015		2014		2013
Service cost	$	—	$	164	$	180
Interest cost		218		277		235
Amortization of prior service cost		—		—		28
Actuarial net loss		735		388		690
Settlement loss		1,509		—		—
Net periodic benefit cost	$	2,462	$	829	$	1,133

Actuarial assumptions used to determine costs and benefit obligations related to our defined benefit plan are as follows:

	Settlement Date			December 31,
	2015			2014			2013
Discount rates		2.88	%		4.00	%		4.90	%
Salary increase		N/A			N/A			4.00	%

The discount rate used at the settlement date in October 2015 was determined in accordance with the terms of the plan for lump sum payments, using the GATT interest rate. The discount rates used at December 31, 2014 and 2013 was determined by considering the current yield curves representing high quality, long-term fixed income instruments. We set our discount rate for the plan at December 31, 2014 and 2013 based on a review of the Mercer Pension Discount Yield Curve and Index Rates. We believed at December 31, 2014 and 2013 that the timing and amount of cash flows related to these instruments closely matched the estimated defined benefit payment streams of our plan.

For the defined benefit pension plan, the projected benefit obligation (“PBO”), accumulated benefit obligation (“ABO”) and fair value of the plan’s assets are as follows (in thousands):

	December 31,
	2015		2014
Projected benefit obligation	$	—	$	6,538
Accumulated benefit obligation		—		6,538
Fair value of plan assets		—		—

14.	Postretirement Medical Benefits

We provide certain medical and dental care benefits to eligible retired U.S. and Canadian employees. Eligibility for U.S. employees is limited to employees hired before 1995. Under the U.S. plan, a Health Reimbursement Account (“HRA”) was established beginning January 1, 2009 for each qualified U.S. retiree. Monthly, a fixed amount is credited into the HRA to cover both medical and dental costs for all current and future eligible retirees. Under the Canadian plan, retiree medical and dental benefits are funded in a pay-as-you-go basis. The postretirement medical plans to substantially all eligible U.S. and Canadian employees will terminate on December 31, 2016. There will be no change to the eligibility or plan provided to the 39 former union employees.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The benefit obligation, funded status, and amounts recognized in the consolidated financial statements for our postretirement medical benefit plans as of and for the years ended December 31, 2015 and 2014, were as follows (in thousands):

	Postretirement Benefit Plans
	U.S. Plan						Canadian Plan
	2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	4,192		$	4,960		$	110		$	126
Service cost		—			1			—			—
Interest cost		24			26			3			4
Benefits paid		(833	)		(772	)		(16	)		(26	)
Actuarial loss (gain)		(455	)		(23	)		(7	)		17
Translation adjustment		—			—			(16	)		(11	)
Benefit obligation at end of year	$	2,928		$	4,192		$	74		$	110
(Unfunded) status of the plans	$	(2,928	)	$	(4,192	)	$	(74	)	$	(110	)

	Postretirement Benefit Plans
	U.S. Plan				Canadian Plan
	2015		2014		2015			2014
Amounts recognized in the balance sheet:
Accrued postretirement benefit liabilities	$	2,928	$	4,192	$	74		$	110
Accumulated other comprehensive (income) loss (pre-tax) related to:
Unrecognized net actuarial losses (gains)		970		2,973		(36	)		(65	)
Unrecognized prior service cost (credit)		—		—		(52	)		(201	)

The estimated net loss and prior service cost (credit) that is expected to be amortized from accumulated other comprehensive income into postretirement medical benefits cost during 2016 are $1.1 million and $(0.1) million, respectively.

Net periodic benefit cost related to our plans includes the following components (in thousands):

	December 31,
U.S. postretirement plan:	2015			2014			2013
Service cost	$	—		$	1		$	1
Interest cost		24			26			33
Amortization of prior service cost		—			(2,888	)		(4,206	)
Actuarial net loss		1,548			2,092			2,548
Net periodic benefit cost (credit)	$	1,572		$	(769	)	$	(1,624	)

Canadian postretirement plan:
Service cost	$	—		$	—		$	—
Interest cost		3			4			5
Amortization of prior service cost		(112	)		(129	)		(140	)
Actuarial net loss		(22	)		(45	)		(115	)
Net periodic benefit cost (credit)	$	(131	)	$	(170	)	$	(250	)
Total net periodic benefit cost (credit)	$	1,441		$	(939	)	$	(1,874	)

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Actuarial assumptions used to determine costs and benefit obligations related to our U.S. postretirement plan are as follows:

	December 31,
	2015			2014			2013
Discount rate		0.0	%		0.55	%		0.45	%

Actuarial assumptions used to determine costs and benefit obligations related to our Canadian postretirement plan are as follows:

	December 31,
	2015			2014			2013
Discount rates		3.00	%		3.00	%		3.50	%
Current medical cost trend rate		5.71	%		6.43	%		7.14	%
Ultimate medical cost trend rate		5	%		5	%		5	%
Year trend rate declines to ultimate		2017			2017			2017

The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. We set our discount rate for the U.S. plan based on a review of the Citigroup Pension Discount Curve and the duration of expected payments in the plan. We set our discount rate for the Canadian plan based upon similar benchmarks in Canada.

The following benefit payments which reflect expected future service, as appropriate, are expected to be paid (in thousands):

2016	$	2,568
2017		63
2018		59
2019		54
2020		50
Years 2021 – 2025		181

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects for 2016 (in thousands):

	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total of service and interest cost components	$	1	$	(1	)
Effect on postretirement benefit obligation		26		(24	)

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

15.	Other Non-Operating Income (Expense), Net

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

	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Interest and dividend income	$	151		$	296		$	302
Equity income (loss) from joint ventures		976			(822	)		(285	)
Loss on foreign exchange		(719	)		(1,562	)		(143	)
Write-off of deferred financing costs		(773	)		—			—
Other non-operating income, net		145			119			127
Total other non-operating income (expense), net	$	(220	)	$	(1,969	)	$	1

16.	Income Taxes

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

	Year Ended December 31,
	2015			2014			2013
Current:
Domestic	$	22,943		$	30,415		$	31,220
Foreign		4,324			3,740			1,706
Total current		27,267			34,155			32,926

Deferred:
Domestic		(1,210	)		(4,732	)		(1,178	)
Foreign		(74	)		(569	)		171
Total deferred		(1,284	)		(5,301	)		( 1,007	)
Total income tax provision	$	25,983		$	28,854		$	31,919

We have not provided for U.S. income taxes on the undistributed earnings of our foreign subsidiaries that are deferred from U.S. income taxation and that we intend to be permanently reinvested. Provision has been made for U.S. income taxes on the current earnings of our Canadian subsidiary as dividends are expected to be received from Canada related to these earnings. Cumulative undistributed earnings of foreign subsidiaries on which no U.S. income tax has been provided were $41.5 million at the end of 2015, $35.2 million at the end of 2014 and $25.5 million at the end of 2013. Earnings before income taxes for foreign operations amounted to approximately $14.7 million, $11.6 million and $6.4 million in 2015, 2014 and 2013, respectively.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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,
	2015			2014			2013

U.S. Federal income tax rate of 35%	$	25,936		$	28,614		$	29,737
Increase (decrease) in tax rate resulting from:
State and local income taxes, net of federal income tax benefit		1,857			2,309			2,936
Income tax (tax benefits) attributable to foreign income		(1,705	)		(1,511	)		(428	)
Change in unrecognized tax benefits		—			(350	)		—
Other non-deductible items, net		(192	)		134			(806	)
Change in valuation allowance		87			(342	)		480
Provision for income taxes	$	25,983		$	28,854		$	31,919

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,
	2015			2014
Deferred tax assets:
Inventories	$	17,651		$	17,529
Allowance for customer returns		14,551			11,409
Postretirement benefits		1,127			2,155
Allowance for doubtful accounts		1,512			2,347
Accrued salaries and benefits		9,683			10,802
Capital loss		234			234
Tax credit carryforwards		381			313
Deferred gain on building sale		891			1,299
Accrued asbestos liabilities		13,098			13,625
		59,128			59,713
Valuation allowance (1)		(440	)		(353	)
Total deferred tax assets		58,688			59,360
Deferred tax liabilities:
Depreciation		7,054			7,023
Promotional costs		230			124
Other		41			738
Total deferred tax liabilities		7,325			7,885

Net deferred tax assets	$	51,363		$	51,475

(1)

Current net deferred tax assets are $40.6 million and $36.6 million for 2015 and 2014, respectively. Non-current net deferred tax assets are $10.7 million and $14.9 million for 2015 and 2014, respectively. The tax valuation allowance was allocated to long term deferred tax assets in the amounts of $0.4 million in both 2015 and 2014. None of the valuation allowance was allocated to current deferred tax assets in 2015 and 2014 .

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.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The valuation allowance of $0.4 million as of December 31, 2015 was 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 believed it was more likely than not that we would realize the benefit of the net deferred tax asset of $51.4 million as of December 31, 2015, which was net of the remaining valuation allowance.

At December 31, 2015, we have foreign tax credit carryforwards of approximately $0.4 million that will expire in varying amounts by 2024.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance at January 1, 2014	$	350
Increase based on tax positions taken in the current year		—
Decrease based on tax positions taken in the current year		(350	)
Balance at December 31, 2014		—
Increase based on tax positions taken in the current year		—
Decrease based on tax positions taken in the current year		—
Balance at December 31, 2015	$	—

The amount of uncertain tax positions recognized in 2014 reduced our 2014 annual effective tax rate by 0.43%.

We are subject to taxation in the U.S. and various state, local and foreign jurisdictions. As of December 31, 2015, the Company is no longer subject to U.S. Federal tax examinations for years before 2012. We remain subject to examination by state and local tax authorities for tax years 2011 through 2015. 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 (2011 onward), Hong Kong (2010 onward) and Poland (2010 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.

17.	Industry Segment and Geographic Data

We have two major reportable operating segments, each of which focuses on a specific line of replacement parts. 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.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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,
	2015			2014			2013
Net sales:
Engine Management	$	698,021		$	709,263		$	711,245
Temperature Control		264,478			259,065			262,537
Other		9,476			12,064			9,922
Total net sales	$	971,975		$	980,392		$	983,704

Intersegment sales :
Engine Management	$	20,178		$	23,633		$	25,720
Temperature Control		6,542			6,966			6,329
Other		(26,720	)		(30,599	)		(32,049	)
Total intersegment sales	$	—		$	—		$	—

Depreciation and Amortization:
Engine Management	$	12,256		$	12,425		$	13,235
Temperature Control		4,329			4,171			3,763
Other		1,052			699			597
Total depreciation and amortization	$	17,637		$	17,295		$	17,595

Operating income (loss) :
Engine Management	$	88,007		$	103,861		$	96,335
Temperature Control		6,382			6,445			9,147
Other		(18,529	)		(24,968	)		(18,619	)
Total operating income	$	75,860		$	85,338		$	86,863

Investment in equity affiliates:
Engine Management	$	6,430		$	6,368		$	6,308
Temperature Control		14,192			13,636			—
Other		—			—			—
Total investment in equity affiliates	$	20,622		$	20,004		$	6,308

Capital expenditures :
Engine Management	$	14,574		$	11,182		$	8,628
Temperature Control		3,418			2,650			2,682
Other		55			72			100
Total capital expenditures	$	18,047		$	13,904		$	11,410

Total assets :
Engine Management	$	413,102		$	409,275		$	384,712
Temperature Control		177,201			173,070			150,280
Other		90,761			91,206			80,531
Total assets	$	681,064		$	673,551		$	615,523

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other consists of items pertaining to our corporate headquarters function, as well as our Canadian business unit that does not meet the criteria of a reportable operating segment. During 2014, included in operating income (loss) other is a $10.6 million litigation charge in connection with a settlement agreement in a legal proceeding with a third party.

Reconciliation of segment operating income to net earnings (in thousands):

	Year Ended December 31,
	2015			2014			2013
Operating income	$	75,860		$	85,338		$	86,863
Other non-operating income (expense)		(220	)		(1,969	)		1
Interest expense		1,537			1,616			1,902
Earnings from continuing operations before taxes		74,103			81,753			84,962
Income tax expense		25,983			28,854			31,919
Earnings from continuing operations		48,120			52,899			53,043
Discontinued operations, net of tax		(2,102	)		(9,870	)		(1,593	)
Net earnings	$	46,018		$	43,029		$	51,450

	Year Ended December 31,
	2015		2014		2013
Revenues :	(In thousands)
United States	$	881,206	$	884,701	$	895,648
Canada		48,072		51,526		46,133
Europe		16,305		18,061		15,413
Other foreign		26,392		26,104		26,510
Total revenues	$	971,975	$	980,392	$	983,704

	December 31,
	2015		2014		2013
Long-lived assets :	(In thousands)
United States	$	155,438	$	158,350	$	135,834
Canada		1,190		1,546		1,526
Europe		12,324		11,725		11,310
Other foreign		21,634		20,957		10,497
Total long-lived assets	$	190,586	$	192,578	$	159,167

Revenues are attributed to countries based upon the location of the customer. Long-lived assets are attributed to countries based upon the location of the assets.

Our five largest individual customers, including members of a marketing group, accounted for approximately 68% of our consolidated net sales in 2015, 69% of our consolidated net sales in 2014 and 66% of our consolidated net sales in 2013. During 2015, O’Reilly Automotive, Inc., NAPA Auto Parts, Advance Auto Parts, Inc., and AutoZone, Inc. accounted for 19%, 19%, 17% and 11% of our consolidated net sales, respectively. Net sales from each of the customers were reported in both our Engine Management and Temperature Control Segments.

18.	Fair Value of Financial Instruments

We follow a three-level fair value hierarchy that prioritizes the inputs to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows:

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect assumptions that market participants would use in pricing an asset or liability.

The following is a summary of the carrying amounts, estimated fair values, and classifications under the fair value hierarchy of our financial instruments at December 31, 2015 and 2014 (in thousands):

		December 31, 2015				December 31, 2014
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Cash and cash equivalents	LEVEL 1	$	18,800	$	18,800	$	13,728	$	13,728
Deferred compensation	LEVEL 1		10,675		10,675		9,811		9,811
Short term borrowings	LEVEL 1		47,443		47,443		56,733		56,733
Long-term debt	LEVEL 1		62		62		83		83

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 underlying assets held by the deferred compensation plan are based on the quoted market prices of the funds 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.

19.	Commitments and Contingencies

Total rent expense for the three years ended December 31, 2015 was as follows (in thousands):

	Total		Real Estate		Other
2015	$	9,756	$	7,218	$	2,538
2014		9,702		7,355		2,347
2013		9,814		7,331		2,483

At December 31, 2015, we are obligated to make minimum rental payments through 2024, under operating leases, which are as follows (in thousands):

2016	$	7,393
2017		6,278
2018		4,421
2019		2,645
2020		2,303
Thereafter		6,269
Total	$	29,309

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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, 2015 and 2014, we have accrued $23.4 million and $19.3 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 2015, 2014 and 2013 were $94.6 million, $84.5 million and $78.1 million, respectively.

T he following table provides the changes in our product warranties:

	December 31,
	2015			2014
	(In thousands)
Balance, beginning of period	$	19,328		$	18,041
Liabilities accrued for current year sales		94,593			84,480
Settlements of warranty claims		(90,526	)		(83,193	)
Balance, end of period	$	23,395		$	19,328

Letters of Credit

At December 31, 2015, we had outstanding letters of credit with certain vendors aggregating approximately $3.9 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 entered into change in control arrangements with two key officers. In the event of a change of control (as defined in the agreement), each executive will receive severance payments and certain other benefits as provided in their respective 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. 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 indemnity and defense thereof. At December 31, 2015, approximately 2,110 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through December 31, 2015, the amounts paid for settled claims are approximately $18.9 million.

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 settlement discussions. 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. 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; and (4) an analysis of our settlements to date in order to develop average settlement values.

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The most recent actuarial study was performed as of August 31, 2015. The updated study has estimated an undiscounted liability for settlement payments, excluding legal costs and any potential recovery from insurance carriers, ranging from $33.3 million to $51.1 million for the period through 2058. The change from the prior year study was a $2.8 million decrease for the low end of the range and a $4.3 million decrease for the high end of the range. The decrease in the estimated undiscounted liability from the prior year study at both the low end and high end of the range reflects our actual experience over the prior twelve months, our historical data and certain assumptions with respect to events that may occur in the future. 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 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. Based upon the results of the August 31, 2015 actuarial study, a favorable adjustment to the asbestos liability was not recorded in our consolidated financial statements as the difference between our recorded liability and the liability in the actuarial report at the low end of the range was not material. Future legal costs, which are expensed as incurred and reported in loss from discontinued operations in the accompanying statement of operations, are estimated, according to the updated study, to range from $40 million to $75.5 million for the period through 2058.

We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future. 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 the circumstances surrounding these potential liabilities in determining 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.

Litigation Charge

During the second quarter of 2014, we reached a settlement in a legal proceeding with a third party for $10.6 million. The legal proceeding resulted from the default of a loan by a former supplier and its related businesses and our subsequent purchases of product from a third party that was alleged to be a controlled company of the original supplier. Since the inception of the legal proceeding against us, we vigorously opposed all such allegations and believed that we had meritorious defenses. Prior to reaching the settlement, we considered that the incurrence of a loss contingency related to the lawsuit was not reasonably possible. Accordingly, we did not record any provisions in our financial statements since our potential liability was not considered probable and reasonably estimable. During the second quarter of 2014, at the time of the settlement, we recorded the settlement amount of $10.6 million. The settlement agreement was approved by the court in August 2014 and payment of the settlement amount was made in September 2014. The settlement amount was funded from cash on hand and available credit under our revolving credit facility.

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

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

20.	Quarterly Financial Data (Unaudited)

	2015 Quarter Ended
	Dec. 31			Sept. 30			June 30			Mar. 31
	(In thousands, except per share amounts)
Net sales	$	204,967		$	270,037		$	269,382		$	227,589
Gross profit		62,786			81,553			72,760			63,889
Earnings from continuing operations		5,779			19,194			13,808			9,339
Loss from discontinued operations, net of taxes		(553	)		(728	)		(430	)		(391	)
Net earnings	$	5,226		$	18,466		$	13,378		$	8,948

Net earnings from continuing operations per common share:
Basic	$	0.26		$	0.84		$	0.60		$	0.41
Diluted	$	0.25		$	0.83		$	0.59		$	0.40
Net earnings per common share:
Basic	$	0.23		$	0.81		$	0.58		$	0.39
Diluted	$	0.23		$	0.80		$	0.58		$	0.39

	2014 Quarter Ended
	Dec. 31			Sept. 30			June 30			Mar. 31
	(In thousands, except per share amounts)
Net sales	$	218,054		$	257,046		$	272,540		$	232,752
Gross profit		67,094			77,227			77,399			67,910
Earnings from continuing operations		11,517			17,806			11,169			12,407
Loss from discontinued operations, net of taxes		(419	)		(8,240	)		(529	)		(682	)
Net earnings	$	11,098		$	9,566		$	10,640		$	11,725

Net earnings from continuing operations per common share:
Basic	$	0.50		$	0.78		$	0.49		$	0.54
Diluted	$	0.50		$	0.77		$	0.48		$	0.53
Net earnings per common share:
Basic	$	0.48		$	0.42		$	0.47		$	0.51
Diluted	$	0.48		$	0.41		$	0.46		$	0.50

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

21.	Subsequent Event

In February 2016, in connection with our ongoing efforts to improve operating efficiencies and reduce costs, we announced and finalized our intention to implement a plant rationalization initiative. As part of the plant rationalization, we plan to relocate certain production activities from our Grapevine, Texas manufacturing facility to facilities in Greenville, South Carolina and Reynosa, Mexico, relocate certain service functions from Grapevine, Texas to our administrative offices in Lewisville, Texas, and close our Grapevine, Texas facility. In addition, certain production activities will be relocated from our Greenville, South Carolina manufacturing facility to our manufacturing facility in Bialystok, Poland. One-time plant rationalization costs of approximately $9 million are expected to be incurred in 2016 and 2017 consisting of restructuring and integration expenses of approximately $5 million related to employee severance and relocation of certain machinery and equipment; capital expenditures of approximately $2.6 million; and temporary incremental operating expenses of approximately $1.4 million. Substantially all of the one-time plant rationalization costs are anticipated to result in future cash expenditures. We anticipate that the plant rationalization will be completed within 12 to 24 months.

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, 2015. 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 is 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, 2015. 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, 2015 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.

We continue to 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.

Index

ITEM 9B.

OTHER INFORMATION

None.

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 2016 Annual Meeting of Stockholders (the “2016 Proxy Statement”) set forth under the captions “Election of Directors,” “Management Information,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

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 www.smpcorp.com under “Investor Relations─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 2016 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 2016 Proxy Statement set forth under the captions “Executive Compensation and Related Information” and “Security Ownership of Certain Beneficial Owners and Management.”

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by reference to the information in our 2016 Proxy Statement set forth under the captions “Corporate Governance” and “Executive Compensation and Related Information.”

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated herein by reference to the information in our 2016 Proxy Statement set forth under the captions “Audit and Non-Audit Fees.”

Index

PART IV

ITEM 15.

EXHIBITS, 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 Report.

(2)

The following financial schedule and related report for the years 2015, 2014 and 2013 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.

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/ Lawrence I. Sills
	Lawrence I. Sills
	Chairman, Chief Executive Officer and Director

	/s/ James J. Burke
	James J. Burke
	Vice President, Finance and Chief Financial Officer

New York, New York

February 26, 2016

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lawrence I. Sills and James J. Burke, 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 26, 2016	/s/ Lawrence I. Sills
	Lawrence I. Sills
	Chairman, Chief Executive Officer and Director
	(Principal Executive Officer)

February 26, 2016	/s/ James J. Burke
	James J. Burke
	Vice President, Finance and Chief Financial Officer
	(Principal Financial and Accounting Officer)

Index

February 26, 2016	/s/ Pamela Forbes Lieberman
	Pamela Forbes Lieberman, Director

February 26, 2016	/s/ Joseph W. McDonnell
	Joseph W. McDonnell, Director

February 26, 2016	/s/ Alisa C. Norris
	Alisa C. Norris, Director

February 26, 2016	/s/ Arthur S. Sills
	Arthur S. Sills, Director

February 26, 2016	/s/ Peter J. Sills
	Peter J. Sills, Director

February 26, 2016	/s/ Frederick D. Sturdivant
	Frederick D. Sturdivant, Director

February 26, 2016	/s/ William H. Turner
	William H. Turner, Director

February 26, 2016	/s/ Richard S. Ward
	Richard S. Ward, Director

February 26, 2016	/s/ Roger M. Widmann
	Roger M. Widmann, Director

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit Number

3.1	Restated By-Laws, dated May 23, 1996, filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996.

3.2	Restated Certificate of Incorporation, dated July 31, 1990, filed as an Exhibit to the Company’s Annual Report on Form 10‑K for the year ended December 31, 1990.

3.3	Certificate of Amendment of the Certificate of Incorporation, dated February 15, 1996, filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.

10.1	Amended and Restated Employee Stock Ownership Plan and Trust of Standard Motor Products, Inc., dated January 1, 2015.

10.2	2006 Omnibus Incentive Plan of Standard Motor Products, Inc., as amended (incorporated by reference to the Company’s Registration Statement on Form S-8 (Registration No. 333-174330), filed on May 19, 2011).

10.3	2004 Omnibus Stock Option Plan of Standard Motor Products, Inc. and 2004 Independent Directors’ Stock Option Plan of Standard Motor Products, Inc. (incorporated by reference to the Company’s Registration Statement on Form S-8 (Registration No. 333-134239), filed on June 7, 2005).

10.4	Supplemental Compensation Plan effective October 1, 2001 (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001).

10.5	Severance Compensation Agreement, dated December 12, 2001, between Standard Motor Products, Inc. and John Gethin (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001).

10.6	Severance Compensation Agreement, dated December 12, 2001, between Standard Motor Products, Inc. and James Burke (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001).

10.7	Credit Agreement, dated as of December 29, 2005, among SMP Motor Products, Ltd., as Borrower, (incorporated by reference to the Company’s Current Report on Form 8-K filed on January 3, 2006).

10.8	Amendment to the Standard Motor Products, Inc. Supplemental Compensation Plan, effective December 1, 2006 (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006).

10.9	Retention Bonus and Insurance Agreement dated December 26, 2006, between Standard Motor Products, Inc. and James Burke (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006).

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit Number

10.10	Purchase and Sale Agreement, dated December 21, 2007, between Standard Motors Products, Inc. and EXII Northern Boulevard Acquisition LLC (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007).

10.11	Lease Agreement, dated March 12, 2008, between Standard Motors Products, Inc. and 37-18 Northern Boulevard LLC (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007).

10.12	First Amendment Agreement dated as of March 20, 2007, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed March 21, 2007).

10.13	Second Amendment Agreement dated as of May 1, 2007, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009).

10.14	Amendment No. 3 to Credit Agreement dated as of December 18, 2008, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed December 22, 2008).

10.15	Amendment to Severance Compensation Agreement, dated as of December 15, 2008, between Standard Motor Products, Inc. and John Gethin (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009).

10.16	Amendment to Severance Compensation Agreement, dated as of December 15, 2008, between Standard Motor Products, Inc. and James Burke (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009).

10.17	Amended and Restated Supplemental Executive Retirement Plan, dated as of December 31, 2010 (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 20 1 0).

10.18	Amendment No. 4 to Credit Agreement, dated as of June 26, 2009, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed June 29, 2009).

10.19	Amendment No. 5 to Credit Agreement, dated as of May 20, 2010, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed May 20, 2010).

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit Number

10.20	Third Amended and Restated Credit Agreement, dated as of November 2, 2010, among Standard Motor Products, Inc., as borrower and the other credit parties thereto, and General Electric Capital Corp., as agent and lender, Bank of America, N.A. and Wells Fargo Capital Finance, LLC, as lenders and co-syndication agents, JPMorgan Chase Bank, N.A., as lender and as documentation agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed November 12, 2010).

10.21	Amendment No. 6 to Credit Agreement, dated as of November 10, 2010, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed November 12, 2010).

10.22	Amendment to Severance Compensation Agreement, dated as of March 8, 2011, between Standard Motor Products, Inc. and John Gethin (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).

10.23	Amendment to Severance Compensation Agreement, dated as of March 8, 2011, between Standard Motor Products, Inc. and James Burke (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).

10.24	Amendment No. 1 to Third Amended and Restated Credit Agreement, dated as of September 22, 2011, among Standard Motor Products, Inc., as borrower and the other credit parties thereto, and General Electric Capital Corp., as agent and lender, Bank of America, N.A. and Wells Fargo Capital Finance, LLC, as lenders and co-syndication agents, JPMorgan Chase Bank, N.A., as lender and as documentation agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed September 22, 2011).

10.25	Amendment No. 7 to Credit Agreement, dated as of September 22, 2011, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed September 22, 2011).

10.26	Amendment No. 2 to Third Amended and Restated Credit Agreement, dated as of February 22, 2013, among Standard Motor Products, Inc., as borrower and the other credit parties thereto, and General Electric Capital Corp., as agent and lender, Bank of America, N.A. and Wells Fargo Capital Finance, LLC, as lenders and co-syndication agents, JPMorgan Chase Bank, N.A., as lender and as documentation agent, and the other lenders thereto (incorporated by reference to the Company’s Annual Report on Form 10-K filed March 8, 2013).

10.27	Amendment No. 8 to Credit Agreement, dated as of May 16, 2013, among SMP Motor Products, Ltd., as borrower and the other credit parties thereto, and GE Canada Finance Holding Company, as lender and agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed May 20, 2013).

10.28	Amendment No. 3 to Third Amended and Restated Credit Agreement, dated as of May 16, 2013, among Standard Motor Products, Inc., as borrower and the other credit parties thereto, and General Electric Capital Corp., as agent and lender, Bank of America, N.A. and Wells Fargo Capital Finance, LLC, as lenders and co-syndication agents, JPMorgan Chase Bank, N.A., as lender and as documentation agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed May 20, 2013).

Index

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit Number

10.29	Amendment No. 4 to Third Amended and Restated Credit Agreement, dated as of June 12, 2015, among Standard Motor Products, Inc., as borrower and the other credit parties thereto, and General Electric Capital Corp., as agent and lender, Bank of America, N.A. and Wells Fargo Capital Finance, LLC, as lenders and co-syndication agents, JPMorgan Chase Bank, N.A., as lender and as documentation agent, and the other lenders thereto (incorporated by reference to the Company’s Form 8-K filed June 18, 2015).

10.30	Credit Agreement, dated as of October 28, 2015, among Standard Motor Products, Inc., as borrower and the other loan parties thereto, and JPMorgan 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 other lenders thereto (incorporated by reference to the Company’s Form 8-K filed October 30, 2015).

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 2002.

32.2	Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document

** 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

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Schedule II ‑ Valuation and Qualifying Accounts

Years ended December 31, 2015, 2014 and 2013

			Additions
Description	Balance at beginning of year		Charged to costs and expenses			Other		Deductions		Balance at end of year
Year ended December 31, 2015:
Allowance for doubtful accounts	$	4,894,000	$	3,371,000 (1	)	$	—	$	5,064,000	$	3,201,000
Allowance for discounts		1,475,000		9,872,000			—		10,302,000		1,045,000
	$	6,369,000	$	13,243,000		$	—	$	15,366,000	$	4,246,000

Allowance for sales returns	$	30,621,000	$	133,355,000		$	—	$	125,164,000	$	38,812,000


Year ended December 31, 2014:
Allowance for doubtful accounts	$	5,528,000	$	(497,000	)	$	—	$	137,000	$	4,894,000
Allowance for discounts		1,441,000		13,568,000			—		13,534,000		1,475,000
	$	6,969,000	$	13,071,000		$	—	$	13,671,000	$	6,369,000

Allowance for sales returns	$	31,464,000	$	126,608,000		$	—	$	127,451,000	$	30,621,000

Year ended December 31, 2013:
Allowance for doubtful accounts	$	4,944,000	$	641,000		$	—	$	57,000	$	5,528,000
Allowance for discounts		1,180,000		14,802,000			—		14,541,000		1,441,000
	$	6,124,000	$	15,443,000		$	—	$	14,598,000	$	6,969,000

Allowance for sales returns	$	29,033,000	$	114,958,000		$	—	$	112,527,000	$	31,464,000

(1)

Includes a net $3,514,000 charge relating to one of our customers that filed a petition for bankruptcy in January 2016.

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, N.Y.		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:

Title of each class		Name of each exchange on which registered
Common Stock, par value $2.00 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:		None

Large Accelerated Filer ☑	Accelerated Filer ☐
Non-Accelerated Filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

PART I.		Page No.

Item 1.	Business	3

Item 1A.	Risk Factors	13

Item 1B.	Unresolved Staff Comments	21

Item 2.	Properties	21

Item 3.	Legal Proceedings	22

Item 4.	Mine Safety Disclosures	22

PART II.

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22

Item 6.	Selected Financial Data	25

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 8.	Financial Statements and Supplementary Data	44

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

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	89

Item 14.	Principal Accounting Fees and Services	89

PART IV.

Item 15.	Exhibits, Financial Statement Schedules	90

	Signatures	91

	Year Ended December 31,
	2015					2014					2013
	Amount		% of Total			Amount		% of Total			Amount		% of Total
	(Dollars in thousands)
Engine Management:
Ignition, Emission and Fuel System Parts	$	607,134		62.5	%	$	609,383		62.1	%	$	604,646		61.5	%
Wires and Cables		90,887		9.4	%		99,880		10.2	%		106,599		10.8	%
Total Engine Management		698,021		71.9	%		709,263		72.3	%		711,245		72.3	%

Temperature Control:
Compressors		127,861		13.2	%		124,238		12.7	%		135,456		13.8	%
Other Climate Control Parts		136,617		14.1	%		134,827		13.8	%		127,081		12.9	%
Total Temperature Control		264,478		27.3	%		259,065		26.5	%		262,537		26.7	%

All Other		9,476		0.8	%		12,064		1.2	%		9,922		1	%

Total	$	971,975		100	%	$	980,392		100	%	$	983,704		100	%

Location	State or Country	Principal Business Activity	Approx. Square Feet	Owned or Expiration Date of Lease

		Engine Management

Orlando	FL	Manufacturing	50,600	2017
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	74,800	2018
Greenville	SC	Manufacturing	184,500	Owned
Disputanta	VA	Distribution	411,000	Owned
Reynosa	Mexico	Manufacturing	100,000	2018
Reynosa	Mexico	Manufacturing	153,000	2018
Bialystok	Poland	Manufacturing	89,700	2022

		Temperature Control

Lewisville	TX	Administration and Distribution	415,000	2024
Grapevine	TX	Manufacturing	180,000	Owned
St. Thomas	Canada	Manufacturing	40,000	Owned
Reynosa	Mexico	Manufacturing	82,000	2019
Reynosa	Mexico	Warehousing	55,000	2017

		Other

Mississauga	Canada	Administration and Distribution	128,400	2018
Irving	TX	Training Center	13,400	2021

	High		Low		Dividend

Fiscal Year ended December 31, 2015:
First Quarter	$	43.72	$	35.07	$	0.15
Second Quarter		42.96		34.75		0.15
Third Quarter		37.06		30.30		0.15
Fourth Quarter		45.72		34.29		0.15

Fiscal Year ended December 31, 2014:
First Quarter	$	37.02	$	30.28	$	0.13
Second Quarter		44.85		35.50		0.13
Third Quarter		45.80		34.17		0.13
Fourth Quarter		40.25		32.62		0.13

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs (2)

October 1-31, 2015		70,242	$	35.37		70,242	$	1,996,614
November 1-30, 2015		—		—		—		1,996,614
December 1-31, 2015		41,747		38.79		41,747		377,398
Total		111,989	$	36.64		111,989	$	377,398

	SMP	S&P 500	S&P 1500 Auto Parts & Equipment Index
2010	100	100	100
2011	149	102	87
2012	169	118	87
2013	284	157	144
2014	298	178	149
2015	302	181	140

Year Ended December 31,	Engine Management			Temperature Control			Other			Total
2015
Net sales	$	698,021		$	264,478		$	9,476		$	971,975
Gross margins		212,021			57,977			10,990			280,988
Gross margin percentage		30.4	%		21.9	%		—	%		28.9	%

2014
Net sales	$	709,263		$	259,065		$	12,064		$	980,392
Gross margins		220,145			55,838			13,647			289,630
Gross margin percentage		31	%		21.6	%		—	%		29.5	%

	Workforce Reduction			Other Exit Costs			Total
Exit activity liability at December 31, 2013	$	2,800		$	942		$	3,742
Restructuring and integration costs:
Amounts provided for during 2014		639			558			1,197
Non-cash usage, including asset write-downs		—			(17	)		(17	)
Cash payments		(2,492	)		(754	)		(3,246	)
Exit activity liability at December 31, 2014	$	947		$	729		$	1,676
Restructuring and integration costs:
Amounts provided for during 2015		(212	)		78			(134	)
Cash payments		(465	)		(216	)		(681	)
Exit activity liability at December 31, 2015	$	270		$	591		$	861

	Page No.

Management’s Report on Internal Control over Financial Reporting	45

Report of Independent Registered Public Accounting Firm—Internal Control Over Financial Reporting	46

Report of Independent Registered Public Accounting Firm—Consolidated Financial Statements	47

Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013	48

Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013	49

Consolidated Balance Sheets as of December 31, 2015 and 2014	50

Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013	51

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013	52

Notes to Consolidated Financial Statements	53

		Page

ARTICLE ONE	DEFINITIONS	1

ARTICLE TWO	PURPOSE	12

ARTICLE THREE	PARTICIPANTS	13

ARTICLE FOUR	COMPANY CONTRIBUTIONS	14

ARTICLE FIVE	EMPLOYEE CONTRIBUTIONS	16

ARTICLE SIX	ALLOCATION OF CONTRIBUTIONS AND FORFEITURES	17

ARTICLE SEVEN	TERMINATION OF EMPLOYMENT	26

ARTICLE EIGHT	MANNER OF PAYMENT	30

ARTICLE NINE	ADMINISTRATION	43

ARTICLE TEN	CLAIM PROCEDURES	47

ARTICLE ELEVEN	TRUSTEES’ POWERS AND DUTIES	49

ARTICLE TWELVE	TOP HEAVY RULES	57

ARTICLE THIRTEEN	MISCELLANEOUS	65

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

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

	STANDARD MOTOR PRODUCTS, INC.

	By:	/s/ Carmine J. Broccole

	Title:	Secretary

	TRUSTEES

		/s/ Carmine J. Broccole
		Carmine J. Broccole, Trustee

		/s/ James J. Burke
		James J. Burke, Trustee

		/s/ Sanford Kay
		Sanford Kay, Trustee

		/s/ Robert H. Martin
		Robert H. Martin, Trustee

		/s/ Thomas Tesoro
		Thomas Tesoro, Trustee

Name	State or Country of Incorporation	Percent of Voting Securities Owned

SMP Motor Products Limited	Canada	100
SMP Poland sp. z o.o. (1)	Poland	100
Motortronics, Inc	New York	100
Standard Motor Products (Hong Kong) Limited	Hong Kong	100
Standard Motor Products de Mexico, S. de R.L. de C.V. (2 )	Mexico	100
SMP Engine Management de Mexico, S. de R.L. de C.V. (2 )	Mexico	100
SMP Four Seasons de Mexico, S. de R.L. de C.V. (2 )	Mexico	100

Date: February 26, 2016

	/s/ Lawrence I. Sills
	Lawrence I. Sills
	Chief Executive Officer

/s/ James J. Burke
James J. Burke
Chief Financial Officer
February 26, 2016