Standard Motor Products Inc.
04/30/2026 | Press release | Distributed by Public on 04/30/2026 09:47
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this Report are indicated by words such as "anticipates," "expects," "believes," "intends," "plans," "estimates," "projects," "strategies" and similar expressions. These statements represent our expectations based on current information and assumptions and are inherently subject to risks and uncertainties. Our actual results could differ materially from those which are anticipated or projected as a result of certain risks and uncertainties, including, but not limited to, changes or loss in business relationships with our major customers and in the timing, size and continuation of our customers' programs; changes in our supply chain financing arrangements, such as changes in terms, termination of contracts and/or the impact of rising interest rates; increases in production or material costs, including procurement costs resulting from higher customs duties and tariffs; the ability of our customers to achieve their projected sales; competitive product and pricing pressures, and inflationary cost increases in raw materials, labor and transportation, that cannot be recouped in product pricing; the performance of the automotive aftermarket and/or other end-markets that we supply; changes in the product mix and distribution channel mix; economic and market conditions; successful integration of acquired businesses; our ability to achieve benefits from our cost savings initiatives; product liability matters (including, without limitation, those related to asbestos-related contingent liabilities); the effects of disruptions in the supply chain caused by geopolitical risks; uncertainties in U.S. trade policy, particularly as it relates to Mexico, Canada, China, and the European Union; as well as other risks and uncertainties, such as those described under Risk Factors, Quantitative and Qualitative Disclosures About Market Risk and those detailed herein and from time to time in the filings of the Company with the SEC. Forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. In addition, historical information should not be considered as an indicator of future performance. The following discussion should be read in conjunction with the unaudited consolidated financial statements, including the notes thereto, included elsewhere in this Report.
Overview
We are a leading manufacturer and distributor of premium replacement parts in the automotive aftermarket and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets. Our business is organized into four operating segments. Our automotive aftermarket business is comprised of three segments, Vehicle Control, Temperature Control and Nissens Automotive while our Engineered Solutions segment offers a broad array of conventional and future-oriented technologies. We sell our products primarily to retailers, warehouse distributors, original equipment manufacturers and original equipment service part operations in the United States, Europe, Canada, Mexico, and other foreign countries.
Our Vehicle Control operating segment services our core automotive aftermarket customers, deriving its sales from three major product groups: (1) Ignition, Emissions & Fuel Delivery, which includes the traditional internal combustion engine (ICE) dependent categories; (2) Electrical & Safety, which includes powertrain neutral vehicle technologies such as electrical switches/relays, safety related products such as anti-lock brake and vehicle speed sensors, tire pressure monitoring, park assist sensors, and advanced driver assistance components; and (3) Wire Sets & Other, which includes spark plug wire sets and other related products, and are product categories we have noted to be in secular decline based upon product life cycle.
Our Temperature Control operating segment services our core automotive aftermarket customers with thermal products, and is poised to benefit from the broader adoption of more complex air conditioning and other thermal systems. These systems will provide passenger comfort regardless of the vehicles' powertrain, and are being developed to cool batteries and other products used on electric vehicles. Segment offerings include sales from thermal products in the aftermarket business under two major product groups: (1) AC System Components, which includes compressors, connecting lines, heat exchangers, and expansion devices; and (2) Other Thermal Components, which includes parts that provide engine, transmission, electric drive motor, and battery temperature management.
Our Nissens Automotive operating segment services our core automotive aftermarket customers primarily in Europe with thermal management and engine efficiency products. Segment offerings include premium replacement parts within the following major product groups: (1) Air Conditioning, which includes compressors and condensers, electronics, such as blowers, fans and pressure sensors, and related components, such as evaporators, expansion valves and heaters; (2) Engine Cooling, which includes radiators and oil coolers, electronics, such as electric water pumps and temperature sensors, and related components, such as expansion tanks and fan clutches; and (3) Engine Efficiency, which includes turbochargers and
intercoolers, electronics, such as exhaust gas recirculation (EGR) valves and modules, and related components, such as EGR coolers and oil feed pipes.
Our Engineered Solutions operating segment supplies custom-engineered solutions to vehicle and equipment manufacturers in highly diversified global end-markets such as commercial and light vehicles, construction, agriculture, power sports and marine. Segment offerings include product categories that offer a broad array of conventional and future-oriented technologies, including those that are specific to vehicle electrification as well as those that are powertrain-neutral.
Overview of Financial Performance
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto. This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business during the three months ended March 31, 2026 and 2025.
|
Three Months Ended March 31, |
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| (In thousands, except per share data) | 2026 | 2025 | ||||||
| Net sales | $ | 451,166 | $ | 413,379 | ||||
| Gross profit | 139,173 | 124,722 | ||||||
| Gross profit % | 30.8 | % | 30.2 | % | ||||
| Operating income | 34,093 | 24,462 | ||||||
| Operating income % | 7.6 | % | 5.9 | % | ||||
| Earnings from continuing operations before income taxes | 25,296 | 18,949 | ||||||
| Provision for income taxes | 6,826 | 5,069 | ||||||
| Earnings from continuing operations | 18,470 | 13,880 | ||||||
| Loss from discontinued operations, net of income taxes | (1,185) | (1,139) | ||||||
| Net earnings | 17,285 | 12,741 | ||||||
| Net earnings attributable to noncontrolling interest | 149 | 175 | ||||||
| Net earnings attributable to SMP | 17,136 | 12,566 | ||||||
| Net earnings per share data attributable to SMP - Diluted: | ||||||||
| Continuing operations | $ | 0.81 | $ | 0.61 | ||||
| Discontinued operations | (0.06) | (0.05) | ||||||
| Net earnings per common share | $ | 0.75 | $ | 0.56 | ||||
Consolidated net sales for the three months ended March 31, 2026 were $451.2 million, an increase of $37.8 million, or 9.1%, compared to net sales of $413.4 million in the same period in 2025.
The increase in net sales in the three months ended March 31, 2026 when compared to the same period in the prior year reflects the impact of multiple factors including:
•higher net sales in our Vehicle Control operating segment as certain customers expanded their range of our products, as well as some benefit from higher prices following the pass through to customers of tariffs implemented later in 2025,
•improved net sales in our Engineered Solutions operating segment as growth begins to recover from the general softness in end markets experienced in 2025,
•increased net sales in our Nissens Automotive operating segment with the benefit of foreign exchange conversion and higher demand from existing customers, and
•slight increase in net sales in our Temperature Control operating segment as the benefits of the strong growth in 2025 continue into early 2026.
•Overall, full year results at our Temperature Control and Nissens Automotive operating segments will be dependent upon summer weather conditions and customer inventory levels.
Gross margins, as a percentage of net sales, increased to 30.8% in the first quarter of 2026 compared to 30.2% in the first quarter of 2025. Overall, the gross margin increase as a percentage of sales in the first quarter of 2026 primarily reflects
the positive impact of higher sales volumes including the impact of cost control measures and $4.6 million of amortization for inventory fair value adjustments related to the application of accounting for business combinations in the first quarter of 2025 that did not recur, which more than offset the impact of higher tariffs on imports into the United States.
Operating margin as a percentage of net sales for the three months ended March 31, 2026 increased to 7.6% as compared to 5.9% for the same period in 2025. Included in our operating margin were selling, general and administrative expenses of $104.8 million, or 23.2% of net sales for the three months ended March 31, 2026 compared to $99.8 million, or 24.2% of net sales, for the same period in 2025. The $5.0 million increase in selling, general and administrative expenses in the first quarter of 2026 as compared to the first quarter of 2025 is principally due to higher distribution expenses driven by higher sales. However, selling, general and administrative expenses as a percentage of net sales improved due to higher sales volume relative to fixed cost components.
United States Trade Policy
Since February 2025, the United States government imposed new tariffs on imports to the United States from certain countries and regions, including Canada, Mexico, China, the European Union and many other countries. Certain foreign governments have implemented retaliatory actions in response to the change in United States trade policy. We operate manufacturing plants in, and rely on imports primarily from Canada, Mexico, China and the European Union to serve our customers in the United States, and therefore, we are exposed to the adverse impacts of higher tariffs on imported raw materials, components and finished goods. In response, we have taken, and will continue to take actions to optimize our operations to minimize the impact of such tariffs and maintain our profitability through cost and pricing measures. We believe our diverse global footprint provides a competitive advantage and resiliency within our supply chain. More than one-half of our sales in the United States are from products manufactured in North America, which are currently mostly exempt from tariffs under the United States-Mexico-Canada Agreement. Products sourced from China represent approximately one-quarter of our sales in the United States, with the remainder of our sales in the United States from products sourced from other regions of the world which are currently subject to lower tariffs. Furthermore, our recent acquisition of Nissens Automotive provides sales diversification outside of the United States. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the United States and affected countries, retaliation imposed by other countries, tariff exemptions, and decisions to pause, reimpose or increase tariffs. We will continue to actively monitor international trade developments and evaluate the potential impact on our results of operations and financial condition, including the potential refund of tariffs that had been imposed under the International Emergency Economic Powers Act following the United States Supreme Court decision to invalidate such tariffs.
Sustainability
Our Company was founded in 1919 on the values of integrity, common decency and respect for others. These values are embodied in our Code of Ethics, which has been adopted by the Board of Directors of the Company to serve as a statement of principles to guide our decision-making and reinforce our commitment to these values in all aspects of our business. These values also serve as the foundation for our continued focus on many important sustainability issues.
We have made significant strides with respect to our sustainability initiatives, building awareness of the environmental impact of our operations, and challenging ourselves to reduce our impact by reducing our usage of energy and water, reducing our generation of waste, increasing our recycling efforts and reducing our Scope 1 and Scope 2 greenhouse gas emissions. Additionally, we believe our product offering contributes to a greener car parc through several key product categories that are critical components in automotive systems designed to improve fuel economy and reduce harmful emissions, such as fuel injectors, exhaust gas recirculation valves, sensors and tubes, and evaporative emission control system components. We also bring to market alternative energy products, which utilize cleaner burning fuels or are designed for electric or hybrid electric vehicles, and we remanufacture key categories within our product portfolio, such as air conditioning compressors, diesel injectors and diesel pumps, through processes that save energy and reduce waste.
With each year, we seek to enhance our commitment to sustainability initiatives, improve our employee engagement, and find ways to give back to our communities. Information on our sustainability initiatives can be found in our most current sustainability report and on our corporate website at smpcorp.com under "Our Company" and "Sustainability" and at smpcares.smpcorp.com. Information in our sustainability report and on our corporate websites regarding our sustainability initiatives are referenced for general information only and are not incorporated by reference in this Report.
Interim Results of Operations
Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025
Sales. Consolidated net sales for the three months ended March 31, 2026 were $451.2 million, an increase of $37.8 million, or 9.1%, compared to $413.4 million in the same period of 2025, with the majority of our net sales to customers located in the United States.
The following table summarizes consolidated net sales by segment and by major product group within each segment (in thousands):
|
Three Months Ended March 31, |
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| 2026 | 2025 | ||||||||||
| Vehicle Control | |||||||||||
| Engine Management (Ignition, Emissions and Fuel Delivery) | $ | 141,087 | $ | 118,366 | |||||||
| Electrical and Safety | 57,866 | 58,319 | |||||||||
| Wire Sets and Other | 14,886 | 15,657 | |||||||||
| Total Vehicle Control | 213,839 | 192,342 | |||||||||
| Temperature Control | |||||||||||
| AC System Components | 65,198 | 67,191 | |||||||||
| Other Thermal Components | 24,306 | 21,692 | |||||||||
| Total Temperature Control | 89,504 | 88,883 | |||||||||
| Nissens Automotive | |||||||||||
| Air Conditioning | 26,273 | 27,166 | |||||||||
| Engine Cooling | 31,451 | 27,773 | |||||||||
| Engine Efficiency | 16,643 | 11,243 | |||||||||
| Total Nissens Automotive | 74,367 | 66,182 | |||||||||
| Engineered Solutions | |||||||||||
| Light Vehicle | 22,920 | 21,404 | |||||||||
| Commercial Vehicle | 22,908 | 18,605 | |||||||||
| Construction/Agriculture | 9,504 | 9,408 | |||||||||
| All Other | 18,980 | 16,555 | |||||||||
| Total Engineered Solutions | 74,312 | 65,972 | |||||||||
| Intersegment sales | (856) | - | |||||||||
| Total | $ | 451,166 | $ | 413,379 | |||||||
Vehicle Control's net sales for the three months ended March 31, 2026 increased $21.5 million, or 11.2%, to $213.8 million compared to $192.3 million in the same period of 2025. The increase in Vehicle Control's net sales was primarily driven by higher demand from certain customers expanding their range of our products, as well as some benefit from higher prices following the pass through to customers of tariffs implemented later in 2025.
Temperature Control's net sales for the three months ended March 31, 2026 increased $0.6 million, or 0.7%, to $89.5 million compared to $88.9 million in the same period of 2025. Temperature Control's net sales for the first quarter of 2026 reflect continued strong customer demand experienced in the same period in 2025. Overall full year results will be dependent upon summer weather conditions and customer inventory levels.
Nissens Automotive's net sales for the three months ended March 31, 2026 increased $8.2 million, or 12.4%, to $74.4 million compared to $66.2 million in the same period of 2025. The increase in Nissens Automotive's net sales primarily resulted from the benefit of foreign exchange conversion and higher demand from existing customers. Overall full year results will be dependent upon summer weather conditions and customer inventory levels.
Engineered Solutions' net sales for the three months ended March 31, 2026 increased $8.3 million, or 12.6%, to $74.3 million compared to $66.0 million in the same period of 2025. The increase in Engineered Solutions' net sales reflects the recovery from the general softness in end markets experienced in 2025.
Gross Margins. Gross margins, as a percentage of consolidated net sales, increased to 30.8% in the first quarter of 2026, compared to 30.2% in the first quarter of 2025. The following table summarizes gross margins by segment (in thousands):
|
Three Months Ended March 31, |
Vehicle Control |
Temperature Control |
Nissens Automotive |
Engineered Solutions |
Intersegment sales
|
Total | |||||||||||||||||||||||||||||
| 2026 | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 213,839 | $ | 89,504 | $ | 74,367 | $ | 74,312 | $ | (856) | $ | 451,166 | |||||||||||||||||||||||
| Gross margins | 68,165 | 28,652 | 32,071 | 10,285 | - | 139,173 | |||||||||||||||||||||||||||||
| Gross margin percentage | 31.9 | % | 32.0 | % | 43.1 | % | 13.8 | % | - | 30.8 | % | ||||||||||||||||||||||||
| 2025 | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 192,342 | $ | 88,883 | $ | 66,182 | $ | 65,972 | $ | - | $ | 413,379 | |||||||||||||||||||||||
| Gross margins | 62,161 | 27,598 | 23,254 | 11,709 | - | 124,722 | |||||||||||||||||||||||||||||
| Gross margin percentage | 32.3 | % | 31.1 | % | 35.1 | % | 17.7 | % | - | 30.2 | % | ||||||||||||||||||||||||
Compared to the first quarter of 2025, gross margin percentage at our Temperature Control and Nissens Automotive operating segments increased by 0.9 percentage points from 31.1% to 32.0% and 8.0 percentage points from 35.1% to 43.1%, respectively, and decreased at our Vehicle Control and Engineered Solutions operating segments by 0.4 percentage points from 32.3% to 31.9% and 3.9 percentage points from 17.7% to 13.8%, respectively.
The gross margin percentage at our Temperature Control operating segment continued to benefit from higher sales volume leading to favorable manufacturing cost absorption due to higher production levels, as well as the impact of cost saving measures.
The gross margin percentage improvement at our Nissens Automotive operating segment is primarily driven by $4.6 million of amortization for inventory fair value adjustments related to the application of accounting for business combinations in the first quarter of 2025 that did not recur.
The gross margin percentage at our Vehicle Control operating segment decreased in the first quarter of 2026 when compared to the same period in 2025 primarily due to the continued impact of higher tariffs on imports into the United States which were passed through to customers at cost.
The gross margin percentage at our Engineered Solutions operating segment decreased in the first quarter of 2026 when compared to the same period in 2025 despite higher sales due to unfavorable capitalization of costs in prior periods that carried over into 2026, as well as inflationary pressures.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $104.8 million, or 23.2% of consolidated net sales, in the first quarter of 2026, as compared to $99.8 million, or 24.2% of consolidated net sales, in the first quarter of 2025. The $5.0 million increase in selling, general and administrative expenses in the first quarter of 2026 as compared to the first quarter of 2025 is principally due to higher distribution expenses driven by higher sales.
Operating Income. Operating income was $34.1 million, or 7.6% of consolidated net sales, in the first quarter of 2026, compared to $24.5 million, or 5.9% of consolidated net sales, in the first quarter of 2025. The year-over-year increase in operating income of $9.6 million is primarily driven by an increase of $5.3 million at our Nissens Automotive segment principally due to $4.6 million of amortization for inventory fair value adjustments related to the application of accounting for business combinations in the first quarter of 2025 that did not recur, and a $2.9 million increase at our Temperature Control operating segment driven by higher gross margins and cost saving measures, as well as controlled selling, general and administrative expenses.
Other Non-Operating Income, Net. Other non-operating income, net was a loss of $1.3 million in the first quarter of 2026, compared to a gain of $2.2 million in the first quarter of 2025 primarily due to the impact of unfavorable foreign currency exchange rates on transactions.
Interest Expense. Interest expense was $7.5 million in the first quarter of 2026, compared to $7.8 million in the first quarter of 2025. The year-over-year decrease in interest expense primarily reflects the impact of lower average interest
rates, partly offset by higher average outstanding borrowings in the first quarter of 2026 when compared to the first quarter of 2025 .
Income Tax Provision. The income tax provision in the first quarter of 2026 was $6.8 million at an effective tax rate of 27.0% compared to $5.1 million at an effective tax rate of 26.8% for the same period in 2025 primarily reflecting higher earnings.
Loss from Discontinued Operations. Loss from discontinued operations, net of income taxes, during the first quarter of 2026 and 2025 of $1.2 million and $1.1 million, respectively, reflects legal and other administrative expenses associated with our asbestos-related liability. As discussed more fully in Note 18, "Commitments and Contingencies" in the notes to our consolidated financial statements (unaudited), we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.
Restructuring Programs
For a detailed discussion on the restructuring costs, see Note 4, "Restructuring Expenses," of the notes to our consolidated financial statements (unaudited).
Liquidity and Capital Resources
Our primary cash requirements include working capital, capital expenditures, quarterly dividend payments, stock repurchases, principal and interest payments on indebtedness and acquisitions. The following table summarizes our primary sources of funds including ongoing net cash flows from operating activities and borrowing availability under our credit agreement (in thousands):
| March 31, | December 31, | |||||||||||||||||||
| 2026 | 2025 | 2025 | ||||||||||||||||||
| Operating cash flows | $ | (41,929) | $ | (60,220) | $ | 57,440 | ||||||||||||||
| Total debt | $ | 658,620 | $ | 650,555 | $ | 618,715 | ||||||||||||||
| Cash | 59,207 | 50,276 | 72,031 | |||||||||||||||||
| Net debt | $ | 599,413 | $ | 600,279 | $ | 546,684 | ||||||||||||||
| Remaining borrowing capacity | $ | 87,217 | $ | 108,463 | $ | 137,004 | ||||||||||||||
| Total liquidity | 146,424 | 158,739 | 209,035 | |||||||||||||||||
Operating Activities. During the first three months of 2026, cash used in operating activities was $41.9 million compared to $60.2 million in the same period of 2025.
Net earnings during the first three months of 2026 were $17.3 million compared to $12.7 million in the same period of 2025. The $18.3 million decrease in cash used in operating activities resulted primarily from higher net earnings, and lower net cash outflows from changes in working capital. Lower net cash outflows from changes in working capital are primarily due to a lower increase in the inventory balance due to the timing of shipments in early 2026 and improved accounts payable terms, partly offset by a growing accounts receivable balance due to higher net sales in the first three months of 2026, as compared to the same period of 2025.
During the year ended December 31, 2025, we generated operating cash flow from net earnings and by actively managing our payables and accounts receivable despite increased inventories due to higher sales and capitalized tariff costs. We continue to actively manage our working capital to maximize our operating cash flow.
Investing Activities. Cash used in investing activities was $6.7 million during the first three months of 2026, as compared to $6.2 million in the same period of 2025. Investing activities during the three months ended March 31, 2026 and 2025 primarily consisted of capital expenditures of $6.7 million and $9.1 million, respectively. Capital expenditures have returned to normal levels following a period of elevated spending due to the investment in our new distribution facility in Shawnee, Kansas.
Financing Activities. Cash provided by financing activities was $35.8 million and $72.5 million during the first three months of 2026 and 2025, respectively. During the first three months of 2026, we increased our borrowings under our 2024 Credit Agreement by $47.5 million, and paid dividends to SMP shareholders of $7.3 million. Cash provided by borrowings under our 2024 Credit Agreement in the three months ended March 31, 2026 was primarily used to fund our operating activities, including tariff costs, capital expenditures, and pay dividends.
During the first three months of 2025, we increased our borrowings by $79.1 million and paid dividends to SMP shareholders of $6.8 million. Cash provided by borrowings in the three months ended March 31, 2025 was primarily used to fund our operating activities, capital expenditures and pay dividends.
In February 2026, we raised our quarterly dividend to SMP shareholders from $0.31 to $0.33 per share of common stock. We anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon our future earnings, financial condition, capital requirements, legal requirements, and other factors.
Liquidity
Our primary sources of funds are ongoing net cash flows from operating activities and availability under our financing arrangements, primarily our 2024 Credit Agreement, as described below and further in Note 9, "Credit Facilities and Long-Term Debt," of the notes to our consolidated financial statements (unaudited) and Note 11 of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.
Our 2024 Credit Agreement matures in September 2029 and provides for an approximately $750 million credit facility, comprised of (i) a $430 million multi-currency revolving credit facility ("global tranche"); (ii) a $10 million multi-currency revolving credit facility, available to one or more wholly-owned Danish subsidiaries of the Company ("Danish tranche"); (iii) a $200 million term loan facility in U.S. dollars; and (iv) a 100 million euros term loan facility. The revolving credit facility has a $25 million sublimit for the issuance of letters of credit, and a $30 million sublimit for the borrowing of swingline loans.
The term loans amortize in quarterly installments of 1.25% in each of the first two years following the funding in 2024, 1.875% for the next year, and 2.50% in each quarter thereafter. The Company may request up to two one-year extensions of the maturity date.
The Company may, subject to customary conditions, increase the global tranche or obtain incremental term loans in an aggregate amount not to exceed (x) the greater of (i) $168 million and (ii) 100% of consolidated EBITDA for the four fiscal quarters ended most recently before such date, plus (y) any voluntary prepayment of term loans, plus (z) any amount that, after giving effect to the increase, the pro forma First Lien Net Leverage Ratio (as defined in the 2024 Credit Agreement) does not exceed 2.75 to 1.00. The Company may also, subject to customary conditions, request to increase the Danish tranche by up to $5 million.
Borrowings bear interest at the applicable interest rate index selected by the Company based on the particular currency borrowed plus a credit spread adjustment depending on the index, and a margin ranging from 1.25% to 2.25% per annum based on the total net leverage ratio of the Company and its restricted subsidiaries. The Company may select interest periods of one, three or six months depending on the index. Interest is payable at the end of the selected interest period, but no less frequently than quarterly.
The Company may prepay the borrowings, in whole or in part, at any time without premium or penalty, subject to certain conditions.
Outstanding borrowings, net of unamortized deferred financing costs, and letters of credit under the 2024 credit agreement consist of the following (in millions):
| March 31, 2026 | December 31, 2025 | |||||||||||||
| Current maturities of debt | $ | 47.1 | $ | 45.3 | ||||||||||
| Long-term debt | 594.7 | 552.8 | ||||||||||||
| Total outstanding borrowings | $ | 641.8 | $ | 598.1 | ||||||||||
| Letters of credit | $ | 4.5 | $ | 4.6 | ||||||||||
The weighted average interest rate under the 2024 Credit Agreement, adjusted for the impact of interest rate swap agreements, is 4.9% and 4.8% at March 31, 2026 and December 31, 2025, respectively. Interest rates primarily consist of Term SOFR for borrowings in U.S. dollars and EURIBOR for borrowings in euros.
The 2024 Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and
other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The Company is in compliance with its debt covenants. The 2024 Credit Agreement also contains customary events of default.
The Company has an overdraft facility that provides for borrowings of up to Polish zloty 30 million (approximately $8.0 million) if borrowings are solely in Polish zloty, or up to 85% of the Polish zloty 30 million limit (approximately $6.8 million) if borrowings are in euros and/or U.S. dollars. The overdraft facility automatically renews every three months until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period. There were $2.2 million of borrowings outstanding under the overdraft facility at March 31, 2026.
In order to reduce our accounts receivable balances and improve our cash flow, we are party to several supply chain financing arrangements, in which we may sell certain of our customers' trade accounts receivable to such customers' financial institutions. We sell our undivided interests in certain of these receivables at our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables, and do not service the receivables after the sale. As such, these transactions are accounted for as a sale.
Pursuant to these agreements, we sold $214.9 million and $184.6 million of receivables during the three months ended March 31, 2026 and 2025, respectively. Receivables presented at financial institutions and not yet collected as of March 31, 2026 were approximately $0.9 million and remained in our accounts receivable balance as of that date. All receivables sold were reflected as a reduction of accounts receivable in the consolidated balance sheet at the time of sale. A charge in the amount of $9.2 million and $9.3 million related to the sale of receivables was included in selling, general and administrative expenses in our consolidated statements of operations for the three months ended March 31, 2026 and 2025, respectively.
To the extent that these arrangements are terminated, our financial condition, results of operations, cash flows and liquidity could be adversely affected by extended payment terms, or delays or failures in collecting trade accounts receivable. The utility of the supply chain financing arrangements also depends upon a benchmark reference rate for the purpose of determining the discount rate applicable to each arrangement. If the benchmark reference rate increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows.
In 2022, our Board of Directors authorized the purchase of up to $30 million of our common stock under a stock repurchase program. Stock will be purchased from time to time in the open market, or through private transactions, as market conditions warrant. Under this program, there were no repurchases of common stock during the three months ended March 31, 2026 and 2025. As of March 31, 2026, there was approximately $19.6 million available for future stock purchases under the program.
Material Cash Commitments
Material cash commitments as of March 31, 2026 consist of required cash payments to service our outstanding borrowings of $641.8 million under our 2024 Credit Agreement, the future minimum cash requirements of $134.1 million through 2034 under operating leases, and expected future cash payments relating to our restructuring activities of $0.9 million with approximately $0.8 million to be paid in the remainder of 2026. All of our other known cash commitments as of March 31, 2026 are not material. For additional information related to our material cash commitments, see Note 4, "Restructuring Expenses", Note 8, "Leases," and Note 9, "Credit Facilities and Long-Term Debt," in the notes to our consolidated financial statements (unaudited).
We anticipate that our cash flow from operations, available cash, and available borrowings under our 2024 Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months. Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in the supply chain caused by geo-political risks, future increases in interest rates, and significant inflationary cost increases in raw materials, labor and transportation that we are unable to pass through our customers, macroeconomic uncertainty, and that there will be no material adverse developments in our business, liquidity or capital requirements. If material adverse developments were to occur in any of these areas, there can be no assurance that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our 2024 Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.
In addition, if we default on any of our indebtedness, or breach any financial covenant in our 2024 Credit Agreement, our business could be adversely affected.
For further information regarding the risks in our business, refer to Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2025.
Critical Accounting Policies and Estimates
We have identified the accounting policies and estimates surrounding the "Valuation of Long-Lived and Intangible Assets and Goodwill," and "Asbestos Litigation" as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies and estimates on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations," where such policies and estimates affect our reported and expected financial results. There have been no material changes to these and other accounting policies and estimates from the information provided in Note 1 of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. We can give no assurances that actual results will not differ from those estimates. Although we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates, or in the assumptions that we use in calculating the estimates, the uncertain future effects, if any, of the disruptions in the supply chain caused by geo-political risks, future increases in interest rates, inflation, macroeconomic uncertainty, and other unforeseen changes in the industry, or business, could materially impact the estimates, and may have a material adverse effect on our business, financial condition and results of operations.
Recently Issued Accounting Pronouncements
For a detailed discussion on recently issued accounting pronouncements and their impact on our consolidated financial statements, see Note 2, "Summary of Significant Accounting Policies" of the notes to our consolidated financial statements (unaudited).
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