# TO OUR SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_SMP_2021/NYSE_SMP_2021.mmd` · pages 3-9_

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TO OUR SHAREHOLDERS,

It is safe to say that 2021 was one of the most significant years in our 103 year history. We set records for sales and profits, completed three acquisitions that expanded our product offering, customer base, and geographical presence, and furthered our progress in corporate sustainability. And we accomplished this while successfully navigating various challenges related to supply chain disruption and an ongoing pandemic. None of this would have been possible without the continuous effort and support of our employees worldwide.

## Business Performance

We are pleased to report that we were able to achieve all-time records in both sales and profits. The industry overall has continued to perform very well. Key drivers such as increasing average vehicle age, rebounding miles driven, and lower levels of new vehicle sales continue to provide favorable tailwinds that should continue into the future. Yet we believe that we were able to outpace industry trends, with several contributing factors. First, we were very successful in garnering new business, achieving wins in both divisions with many different customers. Second, by working collaboratively with our customers on programs at the street level, we believe we were able to help them gain market share in our product lines. Third, our Temperature Control division benefitted from one of the longest and hottest summers on record. And last, we enjoyed a partial year of sales from acquisitions.

## Acquisitions and Strategic Business Diversification

We were quite active in 2021, consummating three complementary acquisitions during the year. The largest of these was Trumpet Holdings, Inc. (more commonly known as Trombetta). Trombetta is a worldwide leader in providing power switching and power management products to customers in various specialized original equipment markets. The company has facilities in Milwaukee and Sheboygan Falls, Wisconsin, Tijuana, Mexico, and a majority ownership in a joint venture in Wuxi, China.

Second, we acquired Stabil Operative Group with facilities in Germany and Hungary. Stabil manufactures and distributes a variety of components, including electronic sensors, control units, and clamping devices for the European original equipment market with an emphasis on heavy duty vehicles. Their location in Stuttgart, Germany—the automotive center of Germany—provides access to various blue-chip German customers.

Third, we acquired from Stoneridge, Inc. their manufacturing lines for particulate matter sensors (colloquially known as "soot sensors"), and relocated the production to existing SMP facilities in Kansas and Poland.

We are very pleased with our progress in seeking intelligent diversification into complementary channels. These three acquisitions combine for annualized revenue of \(100 million, and when added to our existing sales within specialized OE channels, we now have a business with approximately \)300 million in sales. We believe that this specialized OE business, which focuses on selling custom-engineered products into niche channels such as medium and heavy duty vehicles, construction and agricultural equipment, power sports, lawn and garden, and others, represents a significant growth opportunity. We are in the early stages of our integration, but we see great potential as we look at the breadth and depth of the various product portfolios, customer lists, manufacturing and engineering capabilities, and expanded international reach including footprints in North America, Europe and Asia.

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## Corporate Social Responsibility and Sustainability

Throughout our 103 year history, SMP has strived to be a good corporate citizen to our employees, customers, business partners and the communities within which we operate. We were founded on the values of ethics, integrity, common decency, and most importantly respect for others, and to this day, we pride ourselves on being diverse and inclusive. We also recognize our responsibility to be a good steward of the environment, both in our business model of promoting a greener car parc, as well as in the carbon footprint of our operations.

But we also recognize the need to be more deliberate in our actions, and more transparent in our disclosures. We have recently published our 2nd annual Corporate Social Responsibility and Sustainability Report, which makes major strides in increasing the amount of detailed information shared and targets set, including our ambition to be net-zero by 2050. We encourage you to read this report.

Finally, we wish to announce some changes to our board of directors. Richard Ward, who has served on our Board of Directors since 2004 and as the Chair of our Nominating and Corporate Governance Committee for the past 17 years, will be retiring as of May 2022. Dick has been a wonderful asset to our Board and we wish him a healthy, happy, and well-deserved retirement.

Meanwhile, we have recently added two new directors. First, we welcome Dr. Pamela Puryear, who most recently was the Chief Human Resources Officer at Walgreen Boots Alliance, and has held senior Human Resources positions at Zimmer Biomet Holdings, Pfizer, Inc., and others. Second, we welcome Mr. Alejandro Capparelli, a native of Argentina, who has spent over 20 years with Rockwell Automation, rising through a series of management roles to his current position of Vice President of Global Commercial and Lifecycle Services for all of North and South America. These two new directors bring invaluable skills and experiences to our Board, and we are confident that they will be major contributors to all areas of our business.

To conclude, we are very proud of what we were able to accomplish in 2021. In the face of major challenges, we set records for financial performance and made great strides in business diversification complemented by three outstanding acquisitions. We believe that we are very well positioned for the future, and we owe it all to the talented, dedicated, and hardworking 5,000 employees in our Company.

![](images/4_0.jpg)

LAWRENCE I. SILLS
Chairman of the
Board

![](images/4_1.jpg)

ERIC P. SILLS
Director, Chief
Executive Officer
& President

![](images/4_2.jpg)

JAMES J. BURKE
Chief Operating Officer

![](images/4_3.jpg)

DALE BURKS
Chief Commercial
Officer

![](images/4_4.jpg)

NATHAN R. ILES
Chief Financial Officer