Edgar Filing: STANDARD MOTOR PRODUCTS INC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A

AMENDMENT NO. 1

(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-4743

STANDARD MOTOR PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

NEW YORK 11-1362020
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

37-18 NORTHERN BLVD., LONG ISLAND CITY, N.Y. 11101
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (718) 392-0200
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common stock New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes |X| No |_|

The aggregate market value of the Common voting stock based on a closing price
on the New York Stock Exchange on June 28, 2002 of $16.95 per share held by
non-affiliates of the registrant was $119,803,041. For purposes of the foregoing
calculation, all directors and officers have been deemed to be affiliates, but
the registrant disclaims that any of such are affiliates.

As of the close of business on March 25, 2003 there were 12,558,009 outstanding
shares of the Registrant's Common Stock, par value $2.00 per share.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report, to the extent not set forth
herein, is incorporated herein by reference from the registrant's definitive
proxy statement relating to the annual meeting of stockholders to be held in
2003, which definitive proxy statement shall be filed with the Securities and
Exchange Commission within 120 days after the end of the fiscal year to which
this Report relates.

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EXPLANATORY NOTE

This Amendment No. 1 to our Annual Report on Form 10-K for the year ended
December 31, 2002, as originally filed on March 31, 2003, is being filed to
amend and reflect the restatement of our Consolidated Balance Sheets of December
31, 2002 and 2001. During the third quarter of 2003, we re-examined the
provisions of our revolving credit facility. Based on the applicable accounting
rules and certain provisions in the Credit Agreement, we are required to
reclassify our credit facility from long-term to short-term debt, though the
existing credit facility does not mature until 2008. As a result, we
reclassified $76,249 and $106,790 (in thousands) as of December 31, 2002 and
2001, respectively, from long-term debt to notes payable which is classified as
current liabilities. See Note 21 of Notes to Consolidated Financial Statements
for further discussion. Each item of the Annual Report on Form 10-K as filed on
March 31, 2003 that was affected by the restatement has been amended and
restated. No attempt has been made in this Form 10-K/A to modify or update other
disclosures as presented in the original Form 10-K except as required to reflect
the effects of the restatement.

STANDARD MOTOR PRODUCTS, INC.

INDEX

PART I. PAGE

Item 1. Business ...........................................................4

Item 2. Properties ........................................................15

Item 3. Legal Proceedings .................................................16

Item 4. Submission of Matters to a Vote of Security Holders ...............16

PART II.

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ...............................................17

Item 6. Selected Financial Data ...........................................17

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...............................20

Item 7A. Quantitative and Qualitative Disclosures About Market Risk ........30

Item 8. Financial Statements and Supplementary Data .......................31

Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure ...............................32

-2-

STANDARD MOTOR PRODUCTS, INC.

INDEX

(CONTINUED)

PART III.

Item 10. Directors and Executive Officers of the Registrant ................32

Item 11. Executive Compensation ............................................32

Item 12. Security Ownership of Certain Beneficial Owners
and Management ....................................................32

Item 13. Certain Relationships and Related Transactions ....................32

Item 14. Controls and Procedures ...........................................32

PART IV.

Item 15. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ...............................................33

Signatures ........................................................37

-3-

PART I

In this Annual Report, "Standard Motor Products," "we", "us", "our", and the
"Company" refer to Standard Motor Products, Inc. and its subsidiaries, unless
the context requires otherwise.

THIS ANNUAL REPORT ON FORM 10-K/A AND THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE CONTAIN FORWARD-LOOKING STATEMENTS BASED ON EXPECTATIONS, ESTIMATES
AND PROJECTIONS AS OF THE DATE OF THIS FILING. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE EXPRESSED IN FORWARD-LOOKING STATEMENTS. SEE ITEM 7--
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- FORWARD-LOOKING STATEMENTS."

ITEM 1. BUSINESS

OVERVIEW

We are a leading independent manufacturer and distributor of replacement parts
for motor vehicles in the automotive aftermarket industry. We are organized into
two major operating segments, each of which focuses on a specific line of
replacement parts. Our Engine Management Segment manufactures ignition and
emission parts, on-board computers, ignition wires, battery cables and fuel
system parts. Our Temperature Control Segment manufactures and remanufactures
air conditioning compressors, and other air conditioning and heating parts.

We sell our products primarily to warehouse distributors and large retail chains
in the United States, Canada and Latin America. We also sell our products in
Europe through our European Segment. Our customers consist of many of the
leading warehouse distributors, such as Carquest and NAPA Auto Parts, as well as
many of the leading auto parts retail chains, such as Advance Auto Parts,
AutoZone and O'Reilly Automotive. We distribute parts under our own brand names,
such as Standard, Blue Streak and Four Seasons, and through private labels, such
as Carquest and NAPA Auto Parts.

We are a New York corporation founded in 1919. Our principal executive offices
are located at 37-18 Northern Boulevard, Long Island City, New York 11101, and
our main telephone number at that location is (718) 392-0200. Our Internet
address is WWW.SMPCORP.COM. We do not make our period filings available on our
website. However, for those persons that make a request in writing or by e-mail
(financial@smpcorp.com), we will provide free of charge our Annual Report on
Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K
and any amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 .

BUSINESS STRATEGY

Our goal is to grow revenues and earnings and deliver returns in excess of our
cost of capital by providing high quality, low cost replacement parts in the
engine management and temperature control automotive aftermarkets. The key
elements of our strategy are as follows:

o MAINTAIN OUR STRONG COMPETITIVE POSITION IN THE ENGINE MANAGEMENT AND
TEMPERATURE CONTROL BUSINESSES. We are one of the leading independent
manufacturers serving North America and other geographic areas in our
core businesses of Engine Management and Temperature Control. We
believe that our success is attributable to our emphasis on product
quality, the breadth and depth of our product lines for both domestic
and imported automobiles, and our reputation for outstanding customer
service, as measured by rapid order turn-around times and high-order
fill rates.

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

o providing our customers with broad lines of high quality engine
management and temperature control products, supported by the highest
level of customer service and reliability;

-4-

o continuing to maximize our production and distribution efficiencies;

o continuing to improve our cost position; and

o focusing further our engineering development efforts.

o PROVIDE SUPERIOR CUSTOMER SERVICE, PRODUCT AVAILABILITY AND TECHNICAL
SUPPORT. Our goal is to increase sales to existing and new customers by
leveraging our skills in rapidly filling orders, maintaining high levels of
product availability and providing technical support in a cost-effective
manner. In addition, our technically-skilled sales force of approximately
200 sales professionals provides product selection and application support
to our customers.

o EVOLVE AND EXPAND OUR PRODUCT LINES. We intend to increase our sales by
continuing to develop and expand the range of Engine Management and
Temperature Control products that we offer to our customers. We are
committed to investing the resources necessary to maintain and expand our
technical capability to manufacture multiple product lines that incorporate
the latest technologies developed by OEMs in North America and Europe.

o BROADEN OUR CUSTOMER BASE. Our goal is to increase our business by
marketing our products more broadly to the distribution businesses of OEMs
who sell products to new car dealer service areas.

o IMPROVE OPERATING EFFICIENCY AND COST POSITION. Our management places
significant emphasis on improving our financial performance, by achieving
operating efficiencies and improving asset utilization, while maintaining
product quality and high customer order fill rates. We have a proven track
record of managing costs and improving operating efficiency through
consolidating redundant functions and realizing cost savings in our
business. We intend to continue to improve our operating efficiency and
cost position by:

o increasing cost-effective vertical integration in key product lines
through internal development;

o focusing on efficient inventory management, including warranty and
overstock return management;

o maintaining and improving our cost effectiveness and competitive
responsiveness to better serve the automotive aftermarket customer
base;

o adopting company-wide programs geared toward manufacturing and
distribution efficiency; and

o initiating company-wide overhead and operating expense cost reduction
programs, such as closing excess facilities.

o REDUCE OUR DEBT. We intend to apply any excess cash flow from operations
and the management of working capital to reduce our outstanding
indebtedness.

-5-

ACQUISITION

On February 7, 2003, we signed an agreement to purchase Dana Corporation's
Engine Management Group (EMG) which we refer to throughout this Annual Report as
Dana's EMG Business, for a purchase price equal to the closing net book value of
the business, subject to a maximum purchase price of $125 million. Dana's EMG is
a leading manufacturer of aftermarket parts in the automotive industry focused
exclusively on engine management. Dana's EMG Business manufacturers ignition
systems, emission parts, engine computers, ignition wires, battery cables and
fuel system parts. Customers of Dana's EMG Business include NAPA Auto Parts, CSK
Auto, O'Reilly Automotive and Pep Boys. We intend to integrate Dana's EMG
Business into our Engine Management Segment within 18 months from the closing of
the acquisition. The closing of the acquisition is subject to our financing of
the purchase price. We intend to finance the acquisition and the payment of
related fees and expenses and restructuring and integration costs by (a) drawing
on our revolving credit facility, (b) issuing shares of our common stock and (c)
obtaining seller financing.

The acquisition purchase price is subject to a post-closing adjustment based
upon the book value of the acquired assets of Dana's EMG Business less the book
value of the assumed liabilities of Dana's EMG Business as of the close of
business on the closing date.

The acquisition is subject to our obtaining financing for the acquisition and
other customary closing conditions. We expect to close the acquisition during
the second quarter of 2003.

THE AUTOMOTIVE AFTERMARKET

The automotive aftermarket industry is comprised of a large, diverse number of
manufacturers varying in product specialization and size. In addition to
manufacturing, aftermarket companies allocate resources towards an efficient
distribution process and product engineering in order to maintain the
flexibility and responsiveness on which their customers depend. Aftermarket
manufacturers must be efficient producers of small lot sizes and do not have to
provide systems engineering support. Aftermarket manufacturers also must
distribute, with rapid turnaround times, products for a full range of vehicles
on the road.

During periods of economic decline or weakness, more automobile owners may
choose to repair their current automobiles using replacement parts rather than
purchasing new automobiles, which benefits the automotive aftermarket industry,
including suppliers like us. The automotive aftermarket industry is also
dependent on new car sales, although to a lesser degree than original equipment
manufacturers, or OEMs, and their suppliers, because these sales create the
total number of cars available for repair. Despite the current economic climate,
the current interest rate environment and aggressive financing programs by
automakers has increased demand for new cars and trucks, which should benefit
the automotive aftermarket manufacturers in the long term as vehicles age.

The automotive aftermarket industry differs substantially from the OEM supply
business. Unlike the OEM supply business that primarily follows trends in new
car production, the automotive aftermarket industry's performance primarily
tends to follow different trends, such as:

o growth in number of vehicles on the road;
o increase in average vehicle age;
o increase in total miles driven per year;
o new and modified environmental regulations;
o increase in pricing of new cars; and
o new car quality and related warranties.

Traditionally, the supply arms of OEMs and the independent manufacturers who
supply the original equipment part applications have supplied a majority of the
business to new car dealer networks. However, Ford and General Motors have
recently moved to make their supply arms more independent, which may provide
future opportunities for independent automotive aftermarket manufacturers to
supply replacement parts to the dealer networks of the original equipment
vehicle manufacturers, both for warranty and out-of-warranty repairs.

-6-

The primary customers of the automotive aftermarket manufacturers are national
and regional warehouse distributors, large retail chains, automotive repair
chains and the dealer service networks of the original equipment vehicle
manufacturers.

FINANCIAL INFORMATION ABOUT OUR OPERATING SEGMENTS

The table below shows our consolidated net sales by operating division and by
major product group within each division for the three years ended December 31,
2002. Our three reportable operating segments are Engine Management, Temperature
Control and Europe.

YEAR ENDED
DECEMBER 31,
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2002 2001 2000
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Amount % of Total Amount % of Total Amount % of Total
------ ---------- ------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
ENGINE MANAGEMENT:
Ignition and Emission

Parts ............... $232,511 38.9% $218,694 37.0% $219,337 36.5%
Wires and Cables ....... 63,267 10.6% 58,720 9.9% 59,517 9.9%
Fuel System Parts ..... 7,334 1.2% 8,084 1.4% 9,386 1.6%
-------- ----- -------- ----- -------- -----
TOTAL ENGINE MANAGEMENT ...... 303,112 50.7% 285,498 48.3% 288,240 48.0%
-------- ----- -------- ----- -------- -----

TEMPERATURE CONTROL:
Compressors ............. 105,301 17.6% 117,965 19.9% 118,399 19.7%
Other Air Conditioning
Parts ................. 136,973 22.9% 138,542 23.4% 139,051 23.1%
Heating Parts ........... 12,814 2.1% 13,349 2.3% 13,398 2.2%
-------- ----- -------- ----- -------- -----
TOTAL TEMPERATURE CONTROL .... 255,088 42.6% 269,856 45.6% 270,848 45.0%
-------- ----- -------- ----- -------- -----

EUROPE:
Engine Management Parts . 26,575 4.4% 26,315 4.4% 32,179 5.4%
Temperature Control Parts 9,453 1.6% 7,134 1.2% 6,131 1.0%
-------- ----- -------- ----- -------- -----
TOTAL EUROPE ................ 36,028 6.0% 33,449 5.6% 38,310 6.4%
-------- ----- -------- ----- -------- -----

ALL OTHER ................... 4,209 0.7% 2,849 0.5% 3,994 0.6%
-------- ----- -------- ----- -------- -----

TOTAL ................. $598,437 100.0% $591,652 100.0% $601,392 100.0%
======== ===== ======== ===== ======== =====

The table below shows our operating profit and identifiable assets by operating
segment for the three years ended December 31, 2002.

YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------------
2002 2001 2000
------------------------- ------------------------- --------------------------
OPERATING IDENTIFIABLE OPERATING IDENTIFIABLE OPERATING IDENTIFIABLE
PROFIT ASSETS PROFIT ASSETS PROFIT ASSETS
------ ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)

Engine Management . $ 41,844 $247,318 $ 26,432 $233,564 $ 37,974 $265,336
Temperature Control 10,095 157,343 3,624 182,083 11,513 224,410
Europe ............. (10,464) 30,728 (1,718) 40,407 517 39,321
All Other ......... (16,407) 55,369 (13,215) 53,375 (19,293) 20,329
-------- -------- -------- -------- -------- --------
TOTAL ............ $ 25,068 $490,758 $ 15,123 $509,429 $ 30,711 $549,396
======== ======== ======== ======== ======== ========

"All Other" consists of items pertaining to the corporate headquarters function,
as well as the Canadian business unit that do not meet the criteria of a
reportable operating segment.

-7-

ENGINE MANAGEMENT SEGMENT

BREADTH OF PRODUCTS. In our Engine Management Division, replacement parts for
ignition and emission control systems accounted for approximately 39% of our
2002 consolidated net sales. These parts include distributor caps and rotors,
electronic ignition control modules, voltage regulators, coils, switches,
sensors and EGR valves. We are a basic manufacturer of many of the ignition
parts we market and continue to develop ways of increasing the number of parts
we manufacture, rather than purchasing such parts from third parties and then
reselling such parts to our customers. We believe our customers benefit from
lower prices and improved quality from our manufacturing such parts. These
products cover a wide range of applications, from 30-year old vehicles to
current models, both domestic and imports, and include passenger cars, light
trucks and certain off-road and marine applications.

We offer products at three different price points under a "good-better-best"
concept. We began offering ignition parts under the "Standard" brand name that
are equal in quality to original equipment parts installed on new vehicles. Soon
afterward, we pioneered the concept of offering higher quality parts, sold at
premium prices under the "Blue Streak" brand name, that are significantly better
than original equipment. We also offer lower-priced lines under the "COBRA"
brand to compete with lower priced private labels.

COMPUTER CONTROLLED TECHNOLOGY. Nearly all new vehicles are factory-equipped
with computer-controlled engine management systems to control ignition, emission
control and fuel injection. These computer-controlled engine management systems,
as opposed to the traditional breaker-point ignition systems installed in prior
generations of new vehicles, reflect the automobile industry's response to
decades of pressure from the government and environmental groups to reduce
national fuel consumption and the level of pollutants from auto exhaust. The
on-board computers monitor inputs from many types of sensors located throughout
the vehicle, and control a myriad of valves, switches and motors to manage
engine and vehicle performance. Electronic ignition systems enable the engine to
improve fuel efficiency and reduce the level of hazardous fumes in exhaust
gases. We are a leading manufacturer and distributor of replacements for these
engine management component parts, including remanufactured automotive
computers. Electronic control modules and electronic voltage regulators
comprised approximately 12% of our total ignition and emission consolidated net
sales in 2002.

In 1992, we entered into a 50/50 joint venture in Canada with Blue Streak
Electronics, Inc. to rebuild automotive engine management computers and mass air
flow sensors. The volume of products produced by the joint venture are sold
primarily to us and has positioned us as a key supplier in the growing
remanufactured electronics markets. In 1994, we vastly increased our offering of
remanufactured computers and instituted a program to offer slower-moving items
by overnight shipment from our factory, which has enabled our customers to
expand their coverage without increasing inventory investment. The Blue Streak
joint venture has further expanded its product range to include computers used
in temperature control, anti-lock brake systems and air bags.

We divide our electronic operations between product design and highly automated
manufacturing operations in Orlando, Florida and assembly operations, which are
performed in assembly plants in Orlando and Hong Kong.

Our sales of sensors, valves, solenoids and related parts have increased
steadily as automobile manufacturers equip their cars with more complex engine
management systems. Government emission laws have been implemented throughout
the majority of the United States. The Clean Air Act, as amended in 1990,
imposes strict emission control test standards on existing and new vehicles, and
remains the preeminent legislation in the area of vehicle emissions. As many
states have implemented required inspection/maintenance tests, the Environmental
Protection Agency, through its rulemaking ability, has also encouraged both
manufacturers and drivers to reduce vehicle emissions. As the Clean Air Act was
"phased in" beginning in 1994, automobiles must now comply with emission
standards from the time they are manufactured, and in most states, until the
last day they are in use. This law has, and in the future we expect this law and
other new government emission laws to have, a positive impact on sales of our
ignition and emission controls parts. Vehicles failing these new, more stringent
tests have required repairs utilizing parts sold by us.

-8-

WIRE AND CABLE PRODUCTS. Wire and cable parts accounted for approximately 11% of
our 2002 consolidated net sales. These products include ignition (spark plug)
wires, battery cables and a wide range of electrical wire, terminals, connectors
and tools for servicing an automobile's electrical system.

The largest component of this product line is the sale of ignition wire sets. We
have historically offered a premium brand of ignition wires and battery cables,
which capitalize on the market's awareness of the importance of quality. With
the growing customer interest in lower-priced products, we introduced a second
line of wire and products in 1989. This line has steadily expanded to include
import coverage, and in 1995 was reintroduced under the Tru-Tech brand name.

In 1999, we relocated two of our wire and cable operations, one in Dallas, Texas
and the other in Bradenton, Florida, to a new facility in Reynosa, Mexico. The
Mexican operation focuses on assembly and packaging of the economy wire sets,
while our premium line is manufactured at our facility in Edwardsville, Kansas.

TEMPERATURE CONTROL SEGMENT

We manufacture, remanufacture and market a broad line of replacement parts for
automotive temperature control systems (air conditioning and heating), primarily
under the brand names of Four Seasons, Everco, Factory Air, Trumark, NAPA Auto
Parts and Carquest. The major product groups sold by our Temperature Control
Segment are compressors, other air conditioning parts including small motors,
fan clutches, dryers, evaporators, accumulators and hoses, and heating parts,
including heater cores and valves. Total sales for our Temperature Control
Segment accounted for approximately 43% of our 2002 consolidated net sales.

A major factor in the Temperature Control Segment's business is the federal
regulation of chlorofluorocarbon refrigerants. United States legislation phased
out the production of domestic R-12 refrigerant (e.g., DuPont's Freon)
completely by the end of 1995. As the new law became effective, vehicle air
conditioners needing repair or recharge were retrofitted to use the new R-134a
refrigerant. New vehicles began to use the new refrigerants in 1993. Installers
continue to seek training and certification in the new technology and our
Temperature Control Segment has taken the lead in providing this training and
certification. Additionally, as technological changes necessitate many new
automotive parts, as well as new service equipment, in anticipation of the
phase-out of chlorofluorocarbon refrigerants, in 1994 we reengineered our
compressor line to be able to operate efficiently utilizing either R-12 or
R-134a refrigerants, and remain a leader in providing retrofit kits for
conversion of R-12 systems.

In 1998, we exchanged our brake business for the Moog automotive temperature
control business of Cooper Industries, which expanded our position in
temperature control. The Moog acquisition also expanded our position in the
small motor and heater parts markets. In 1999, we acquired Eaglemotive
Corporation, a manufacturer of fan clutches and oil coolers. In consolidating
these two businesses with our existing operations, we closed three manufacturing
facilities and consolidated three distribution sites into one.

EUROPE SEGMENT

In July 1996, the Company acquired an equity interest in Standard Motor Products
(SMP) Holdings Limited (formerly Intermotor Holdings Limited) located in
Nottingham, England. This was the Company's first investment in Europe. (During
2002, the Company acquired the remaining equity interest bringing the Company's
ownership percentage to 100%). SMP Holdings Limited manufacturers and
distributors a broad line of engine management products primarily to customers
in Europe. Also in 1996, the Company expanded its presence in Europe by opening
a European distribution center in Strasbourg, France for temperature control
products. A joint venture (Blue Streak-Europe) between SMP Holdings Limited and
Blue Streak Electronics was also initiated in 1996, which supplies rebuilt
engine computers for the European market.

-9-

Since 1996, the Company has made a series of smaller acquisitions supplementing
both the Engine Management and Temperature Control portions of the business.
With respect to the engine management business, in January 1999 the Company
acquired Webcon UK Limited, an assembler and distributor of fuel system
components and other engine management and motor sport performance products, and
later in 1999 acquired Lemark Auto Accessories, a supplier of wire sets. In
January 1999, Blue Streak Europe acquired Injection Correction UK LTD, and in
September 2001, it also acquired TRW Inc.'s electronic control unit
remanufacturing division, also located in the United Kingdom. In April of 2002,
the wire business was further expanded by acquiring Carol Cable Limited, a
manufacturer and distributor of wire.

With respect to the temperature control portion of the business, following the
opening of the distribution center in France, in 1997 a joint venture was
entered into with Valeo, SA to remanufacture air conditioner compressors for the
European market. In addition, in January 2000 the Company acquired Four Seasons
UK Ltd. (formerly Vehicle Air Conditioning Parts Ltd.) a distributor of
components for the repair of air conditioning systems. In July 2000, the
Temperature Control business was further expanded by purchasing Automotive
Heater Exchange SRL in Italy.

Our European Segment accounted for approximately 6% of our 2002 total net sales.
Aftermarket margins are under pressure from OE suppliers, while volumes are in a
general decline in the ignition and carburetor product lines. The combination
has had a negative impact on Engine Management product sales with increasing
amounts of underabsorbed overhead. Excluding sales from our 2002 acquisition of
Carol Cable, Engine Management sales have declined from $32.2 million in 2000 to
$22.8 in 2002. We are currently planning on ways of reducing manufacturing
costs, including outsourcing products where their respective volumes are
declining and margins can be improved by outsourcing. In addition, we have made
investments in capital projects to facilitate the sale of new OE niche customers
and the aftermarket. We are also giving preliminary consideration to
consolidating certain facilities and reducing costs wherever we can.

Unlike Engine Management sales, European Temperature Control product sales are
increasing. Through acquisitions and more importantly a growing market, net
sales have increased from $6.1 million in 2000 to $9.5 million in 2002. To date,
the focus has been on product coverage and high customer service levels. Without
sacrificing growth, we are giving preliminary consideration to consolidating
certain facilities and reducing costs wherever we can.

FINANCIAL INFORMATION ABOUT OUR FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

We sell our line of products primarily in the United States, with additional
sales in Canada, Europe and Latin America. Our sales are substantially
denominated in U.S. dollars.

The table below shows our consolidated net sales by geographic area for the
three years ended December 31, 2002:

Year Ended
December 31,
-----------------------------------------------------------------------
2002 2001 2000
---------------------- ------------------ ---------------------
(Dollars in thousands)

United States . . . . . . $ 512,055 $ 515,322 $ 521,593
Europe . . . . . . . . . 36,028 33,449 38,310
Canada . . . . . . . . . 32,188 28,811 27,942
Other Foreign . . . . . . 18,166 14,070 13,547
---------------------- ------------------ ---------------------
Total . . . . . . . $ 598,437 $ 591,652 $ 601,392
====================== ================== =====================

-10-

The table below shows our long-lived assets by geographical area for the three
years ended December 31, 2002:

Year Ended
December 31,
-----------------------------------------------------------------------
2002 2001 2000
---------------------- ------------------ ---------------------
(Dollars in thousands)

United States . . . . . . . . . $ 109,778 $ 118,455 $ 122,825
Europe . . . . . . . . . . . 7,153 17,301 17,573
Canada . . . . . . . . . . . 2,450 2,829 3,511
Other Foreign . . . . . . . . . 1,124 1,101 1,312
---------------------- ------------------ ---------------------
Total . . . . . . . . . $120,505 $ 139,686 $ 145,221
====================== ================== =====================

SALES AND DISTRIBUTION

We sell our products under proprietary brand names throughout the United States,
Canada, Europe and Latin America. Products are distributed to warehouse
distributors, including 15,000 jobber outlets located throughout the United
States and Canada. The jobbers sell our products primarily to professional
mechanics and to consumers who perform their own automobile repairs. In
addition, we sell directly to large auto parts retail chains, such as Advance
Auto Parts, AutoZone and O'Reilly Automotive.

As of December 31, 2002, we sold and serviced our products through a direct
sales force of approximately 200 employees and, in some instances, through
independent sales representatives.

We believe that our sales force is the premier direct sales force for our two
product lines. We believe the primary reason for this reputation is our high
concentration of highly-qualified, well-trained salespeople dedicated to
geographic territories, which allows us to provide a level of customer service
that we believe is unmatched. The United States sales force is divided into
three regions, each with five to six zones and approximately eight salespeople
per zone.

From the outset, we thoroughly train our salespeople both in the function and
application of every product line we sell, as well as in proven sales
techniques. Customers therefore depend on these salespeople as a reliable source
for technical information. We give newly hired salespeople extensive instruction
at our training facility in Irving, Texas and have a policy of continuing
education that allows our sales force to stay current on troubleshooting and
repair techniques, as well as the latest automotive parts and systems
technology. We employ a comprehensive CD-ROM training program that further
broadens our capability to provide real-time updated training to our
salespeople.

We generate demand for our products by directing a significant portion of our
sales effort to the end-customers' customers (i.e., jobbers and professional
mechanics), creating demand through our traditional distribution system. We also
conduct instructional clinics, which teach mechanics how to diagnose and repair
complex systems related to our products. To help our salespeople to be teachers
and trainers, we focus our recruitment efforts on candidates who already have
strong technical backgrounds as well as sales experience. We also create demand
for our products through the Standard Plus Club. Our Standard Plus Club, a
professional service dealer network comprised of approximately 7,900 members,
offers technical and business development support and has a technical service
telephone hotline which provides diagnostics and installation support. This club
is available to any jobber or installer and provides training, special discount
programs, on-line diagnostics assistance and logo merchandise.

In connection with our sales activities, we offer several types of discounts and
allowances. We believe these discounts and allowances are a common practice
throughout the automotive aftermarket industry. First, we offer cash discounts
for paying invoices in accordance with the discounted terms of the invoice.
Second, we offer pricing discounts based on volume and different product lines
purchased from us. Supplementally, rebates and discounts are provided to
customers as advertising and sales force allowances. In addition to the
aforementioned discounts and rebates, allowances for warranty and overstock
returns are also provided.

-11-

CUSTOMERS

Our customer base is comprised largely of warehouse distributors, jobber
outlets, other manufacturers and export customers. In addition to serving our
traditional customer base, we have expanded into the retail market by selling to
large retail chains such as Advance Auto Parts, AutoZone and O'Reilly
Automotive. Our retail channel of distribution has grown significantly from
approximately $41 million in consolidated net sales to retailers in 1993
(representing 7% of consolidated net sales), to approximately $138 million in
1997 (representing 26% of consolidated net sales), and to approximately $169
million in 2002 (representing 28% of consolidated net sales). In 1997, we
commenced distributing our products through the original equipment service
supplier channel, and sold approximately $3 million in consolidated net sales to
original equipment service suppliers (representing 0.6% of consolidated net
sales), which increased to approximately $23 million in 2002 (representing 3.8%
of consolidated net sales).

Our five largest individual customers accounted for 46% of our 2002 consolidated
net sales. Members of one marketing group represent our largest group of
customers and accounted for approximately 15% of our 2002 consolidated net
sales. One individual member of this marketing group accounted for 13% of our
2002 consolidated net sales.

COMPETITION

We are a leading independent manufacturer of replacement parts for the product
lines in Engine Management and Temperature Control. We compete primarily on the
basis of price, product quality, customer service, product coverage, product
availability, order turn-around time and order fill rate. We believe we
differentiate ourselves from our competitors primarily through:

o a value-added, knowledgeable sales force;

o extensive product coverage;

o sophisticated parts cataloguing systems; and

o inventory levels sufficient to meet the rapid delivery requirements of
customers.

In the engine management business, we are one of the leading independent
manufacturers in the United States. Our significant competitors include Delco
Electronics Corporation, Delphi Corporation, Federal-Mogul Corporation, KEM
Manufacturing Products, Inc., Robert Bosch Corporation and Wells Manufacturing
Corporation (a UIS, Inc. subsidiary).

Our temperature control business is one of the leading independent producers and
distributors of a full line of temperature control products in North America and
other geographic areas. Delphi Corporation, Visteon Corporation, AC Delco,
Transpro, Inc. and Jordan Automotive Aftermarket, Inc. are some of our key
competitors in this market.

Although we are a leading independent manufacturer of automotive replacement
parts with strong brand name recognition, we face substantial competition in all
markets that we serve. The automotive aftermarket is highly competitive and our
success in the marketplace continues to depend on our ability to offer
competitive prices, improved products and expanded offerings in competition with
many other suppliers to the aftermarket. Some major manufacturers of replacement
parts are divisions of companies having greater financial, marketing and other
resources than we do. In addition, automobile manufacturers supply virtually
every replacement part sold by us, although these manufacturers generally supply
parts only for cars they produce.

SEASONALITY

Historically, our operating results have fluctuated by quarter, with the
greatest sales occurring in the second and third quarters of the year, with
revenues generally being recognized at the time of shipment. It is in these
quarters that demand for our products is typically the highest, specifically in
the Temperature Control segment of our business. In addition to this
seasonality, the demand for our Temperature Control products during the second
and third quarters of the year may vary significantly with the summer weather.
For example, a cool summer may lessen the demand for our Temperature Control
products, while a hot summer may increase such demand. As a result of this
seasonality and variability in demand of our Temperature Control products, our
working capital requirements peak near the end of the second quarter, as the
inventory build-up of air conditioning products is converted to sales and
payments on the receivables associated with such sales have yet to be received.
During this period, our working capital requirements are typically funded by
borrowings from our revolving credit facility.

-12-

The seasonality of our business offers significant operational challenges in our
manufacturing and distribution functions. To limit these challenges and to
provide a rapid turnaround time of customer orders, we traditionally offer a
pre-season selling program, known as our "Spring promotion", in which customers
are offered a choice of a price discount or longer payment terms.

WORKING CAPITAL MANAGEMENT

Automotive aftermarket companies have been under increasing pressure to provide
broad SKU (stock keeping unit) coverage in response to parts and brand
proliferation. Since 1996, we have made significant changes to the inventory
management system to reduce inventory requirements. We launched a new
forecasting system in our Engine Management Segment that permitted a significant
reduction in safety stocks. Our Engine Management Segment also introduced a new
distribution system in the second half of 1999, which permits pack-to-order
systems to be implemented. Such systems permit us to retain slow moving items in
a bulk storage state until an order for a specific brand part is received. This
system reduces the volume of a given part in inventory and reduces the labor
requirements to package and repackage inventory.

We instituted an aggressive inventory reduction campaign initiated in 2001. We
targeted a minimum $30 million inventory reduction in 2001, but exceeded our
goal by reducing inventory by $57 million that year. Importantly, while reducing
inventory levels, we maintained customer service fill rate levels of
approximately 93%. In 2002, we further reduced inventory by $8 million.

We face inventory management issues as a result of 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.
In addition to warranty returns, we also permit our customers to return products
to us within customer-specific limits in the event that they have overstocked
their inventories. In particular, the seasonality of our Temperature Control
Segment requires that we increase our inventory during the winter season in
preparation of the summer selling season and customers purchasing such inventory
have the right to make returns.

In order to better control warranty and overstock return levels, beginning in
2000 we tightened the rules for authorized warranty returns, placed further
restrictions on the amounts customers can return and instituted a program so
that our management can better estimate potential future product returns. In
addition, with respect to our air conditioning compressors, our most significant
customer product warranty returns, we established procedures whereby a warranty
will be voided if a customer does not follow a twelve step warranty return
process.

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

SUPPLIERS

The principal raw materials purchased by us consist of brass, electronic
components, fabricated copper (primarily in the form of magnet and insulated
cable), ignition wire, stainless steel coils and rods, aluminum coils and rods,
lead, rubber molding compound, thermo-set and thermo plastic molding powders.
Additionally, we use components and cores (used parts) in our remanufacturing
processes for computerized electronics and air conditioning compressors.

-13-

We purchase many materials in the U.S. open market, but do have a limited number
of supply agreements on key components. A number of prime suppliers make these
materials available. In the case of cores, we obtain them either from exchanges
with customers who return cores when purchasing remanufactured parts, or through
direct purchases from a network of core brokers.

We believe there is an adequate supply of primary raw materials and cores. In
order to ensure a consistent, high quality, low cost supply of key components
for each product line, we continue to develop our own sources through internal
manufacturing capacity.

PRODUCTION AND ENGINEERING

We engineer, tool and manufacture many of the components for our products,
except for some commonly available small component parts from outside suppliers.
We also perform our own plastic and rubber molding operations, stamping and
machining operations, automated electronics assembly and a wide variety of other
processes. In the case of remanufactured components, we conduct our own
teardown, diagnostics and rebuilding for computer modules and air conditioning
compressors. We have found this level of vertical integration to provide
advantages in terms of cost, quality and availability. We intend to selectively
continue efforts toward further vertical integration to ensure a consistent
quality and supply of low cost components.

We use the "just-in-time" cellular manufacturing concept as a major program to
lower costs and improve efficiency. The main thrust of "just-in-time" cellular
manufacturing is reducing work-in-process and finished goods inventory, and its
implementation reduces the inefficient operations that burden many manufacturing
processes. In 2000, we launched a program for the installation of a fully
integrated enterprise resource planning (ERP) system. The implementation is
expected to be fully completed in 2003 in our Temperature Control Segment. At
that time, the system will encompass all aspects of the supply chain, including
procurement, manufacturing, sales, distribution and finance at all of our
Temperature Control facilities. The existing Engine Management information
system continues to meet the need of our Engine Management Segment.

EMPLOYEES

As of December 31, 2002, we employed approximately 2,200 people in the United
States, and 1,100 people in Mexico, Canada, Puerto Rico, Europe and Hong Kong.
Of these, approximately 2,200 are production employees. We operate primarily in
non-union facilities and have binding labor agreements with the workers at our
two unionized facilities. We have approximately 130 production employees in
Edwardsville, Kansas who are covered by a contract with The International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America
("UAW") that expires April 4, 2003. We expect to renew this agreement prior to
its expiration. As of December 31, 2002, approximately 120 of our production
employees in Long Island City, New York are under a UAW contract that expires
October 2, 2004. We also have a union relationship in Mexico with an agreement
negotiated each year. The current union agreement in Mexico, which covers
approximately 260 employees, expires on January 29, 2004. We believe that our
facilities are in favorable labor markets with ready access to adequate numbers
of skilled and unskilled workers, and we believe our relations with our union
and non-union employees are good.

INSURANCE

We maintain basic liability coverage up to $2 million for automobile liability,
general and product liability and $50 million for umbrella liability coverage.
We also maintain a $10 million environmental policy to cover our existing
facilities, except for one of our facilities which is currently undergoing minor
environmental remediation. The environmental remediation costs at such facility
are covered by an insurance policy of $3 million, which is subject to a $1.5
million deductible. Historically, we have not experienced casualty losses in any
year in excess of our coverage. We have no reason to expect this experience to
change, but can offer no assurances that liability losses in the future will not
exceed our coverage.

-14-

ITEM 2. PROPERTIES

We maintain our executive offices and a manufacturing plant in Long Island City,
New York.

The table below describes our principal physical properties.

OWNED OR
APPROX. EXPIRATION
LOCATION STATE OR SQUARE DATE
-------- COUNTRY PRINCIPAL BUSINESS ACTIVITY FEET OF LEASE
------- --------------------------- ---- --------

ENGINE MANAGEMENT

Orlando FL Manufacturing (Ignition) 50,640 2007
Edwardsville KS Manufacturing and Distribution (Wire) 355,000 Owned
Wilson NC Manufacturing (Ignition) 31,500 2008
Reno NV Distribution (Ignition) 67,000 Owned
Long Island City NY Administration and Manufacturing 318,000 Owned
(Ignition)
Greenville SC Manufacturing (Ignition) 181,525 Owned
Disputanta VA Distribution (Ignition) 411,000 Owned
Fajardo Puerto Rico Manufacturing (Ignition) 114,000 2007
Hong Kong HK Manufacturing (Ignition) 21,350 2003
Reynosa Mexico Manufacturing (Wire) 62,500 2004
Nottingham England Administration and Distribution 29,000 Owned
(Ignition and Wire)
Nottingham England Manufacturing (Ignition) 46,777 Owned
Nottingham England Manufacturing (Ignition) 10,000 2012
Wellingborough England Manufacturing (Wire) 18,500 2,017

TEMPERATURE CONTROL

Corona CA Manufacturing and Distribution 78,200 2008
Lewisville TX Administration and Distribution 415,000 2009
Fort Worth TX Manufacturing and Distribution 204,000 Owned
Fort Worth TX Manufacturing and Distribution 103,000 2004
Grapevine TX Manufacturing 180,000 Owned
St. Thomas Canada Manufacturing 40,000 Owned
Strasbourg France Administration and Distribution 16,146 2003
Massa Italy Administration and Distribution 13,100 2004

TEMPERATURE CONTROL/ENGINE MANAGEMENT

Mississauga Canada Administration and Distribution 128,400 2006
(Ignition, Wire, Temperature Control)
Sunbury at England Distribution (Ignition and Temperature
Control) 28,095 2007
Thames
OTHER

Ontario CA Vacated-subleased 250,200 2003
Cumming GA Vacated 77,000 2007
Grapevine TX Storage 83,125 2004
Irving TX Training Center 13,400 2004

The real property we own in Kansas, Nevada, South Carolina, Virginia and Texas
is encumbered by a mortgage or deed of trust, as applicable, in favor of General
Electric Capital Corporation, as agent for our secured revolving credit
facility.

-15-

ITEM 3. LEGAL PROCEEDINGS

On January 28, 2000, a former significant customer of ours which is currently
undergoing a Chapter 7 liquidation in U.S. Bankruptcy Court filed claims against
a number of its former suppliers, including us. The claim against us alleged
$0.5 million of preferential payments in the 90 days prior to the related
Chapter 11 bankruptcy petition. The claim pertaining to the preferential
payments was settled for an immaterial amount during the second quarter of 2002.
In addition, this former customer seeks $9.4 million from us for a variety of
claims including antitrust, breach of contract, breach of warranty and
conversion. These latter claims arise out of allegations that this customer was
entitled to various discounts, rebates and credits after it filed for
bankruptcy. We have purchased insurance with respect to the actions. On August
22, 2002, the court dismissed the antitrust claims. We believe that these
remaining matters will not have a material adverse effect on our business,
financial condition or results of operations.

In 1986, we acquired a brake business, which we subsequently sold in March 1998
and which is accounted for as a discontinued operation in the accompanying
consolidated financial statements. 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 1, 2001. Our
ultimate exposure will depend upon the number of claims filed against us on or
after September 1, 2001 and the amounts paid for indemnity and defense thereof.
At December 31, 2001, approximately 100 cases were outstanding for which we were
responsible for any related liabilities. At December 31, 2002, the number of
cases outstanding for which we were responsible for related liabilities
increased to approximately 2,500, which include approximately 1,600 cases filed
in December 2002 in Mississippi. We believe that these Mississippi cases filed
against us in December 2002 were due in large part to potential plaintiffs
accelerating the filing of their claims prior to the effective date of
Mississippi's tort reform statute in January 2003, which statute eliminated the
ability of plaintiffs to file consolidated cases. To date, the amounts paid for
settled claims have been immaterial. We do not have insurance coverage for the
defense and indemnity costs associated with these claims. We recorded a
liability associated with future settlements through 2052 and recorded an after
tax charge of $16.9 million as a loss from a discontinued operation during the
third quarter of 2002 to reflect such liability.

We are involved in various other litigation and product liability matters
arising in the ordinary course of business. Although the final outcome of any
asbestos-related matters or any other litigation or product liability matter
cannot be determined, based on our understanding and evaluation of the relevant
facts and circumstances, it is our opinion that the final outcome of these
matters will not have a material adverse effect on our business, financial
condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

-16-

PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Our common stock trades publicly on the New York Stock Exchange under the
trading symbol "SMP." The following table shows the high and low sales prices
per share of the common stock as reported by the New York Stock Exchange and the
dividends declared per share for the periods indicated:

HIGH LOW DIVIDEND
---- --- --------
FISCAL YEAR ENDED DECEMBER 31, 2001

First Quarter................................... $ 10.60 $ 7.44 $0.09
Second Quarter.................................. 14.50 9.90 0.09
Third Quarter................................... 13.70 11.65 0.09
Fourth Quarter.................................. 14.95 10.45 0.09
FISCAL YEAR ENDED DECEMBER 31, 2002
First Quarter................................... $ 15.15 $ 12.90 $0.09
Second Quarter.................................. 17.04 14.30 0.09
Third Quarter................................... 17.39 10.63 0.09
Fourth Quarter.................................. 13.90 9.45 0.09

The last reported sale price of our common stock on the NYSE on March 25, 2003
was $11.82 per share. As of March 25, 2003, there were 505 holders of record of
our common stock.

Dividends are declared and paid on the common stock at the discretion of our
board of directors and depend on our profitability, financial condition, capital
needs, future prospects, and other factors deemed relevant by our board. Our
current policy is to pay dividends on a quarterly basis. Our credit agreement
permits dividends and distributions by us provided specific conditions are met.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the last
five years. This selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and the notes thereto
included elsewhere in this Form 10-K/A.

YEAR ENDED
DECEMBER 31,
-------------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----

STATEMENT OF OPERATIONS DATA:

Net sales(1)........................... $598,437 $591,652 $601,392 $653,451 $640,179
Gross profit(1)........................ 157,544 139,055 162,701 170,809 183,657
Operating income....................... 25,068 15,123 30,711 30,223 43,781
Earnings (loss) from continuing
operations (2)....................... 6,091 (2,485) 9,729 7,625 22,257
Net earnings (loss)(3)(4).............. (30,556) (2,485) 9,729 7,625 22,257

PER SHARE DATA:
Earnings from continuing operations:

Basic............................. $ .51 $(.21) $ .82 $ .58 $ 1.70
Diluted........................... .51 (.21) .81 . 58 1.69
Net earnings (loss) per common share:
Basic............................. (2.57) (.21) .82 .58 1.70
Diluted........................... (2.54) (.21) .81 .58 1.69
Cash dividends per common share...... .36 .36 .36 .34 .16

OTHER DATA:
Depreciation and amortization.......... $ 16,128 $18,909 $ 18,922 $ 17,230 $ 17,274
Capital expenditures................... 7,598 13,740 16,652 14,423 15,325
Dividends.............................. 4,290 4,236 4,324 4,456 2,092
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.............. $ 9,690 $ 7,496 $7,699 $40,380 $23,457
Working capital (As Restated).......... 140,683 121,566 188,091 205,806 178,324
Total assets........................... 490,758 509,429 549,396 556,021 521,556
Total debt............................. 176,917 205,925 202,591 195,425 159,708
Long-term debt (excluding current
portion) (As Restated)............... 93,191 93,276 150,018 163,868 133,749
Stockholders' equity................... 153,881 185,687 194,305 203,518 205,025

-17-

(1) On January 1, 2002, we adopted the guidelines of the Emerging Issues Task
Force (EITF) entitled "Accounting for Certain Sales Incentives" and
"Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products." These guidelines address when sales
incentives and discounts should be recognized and the accounting for
certain costs incurred by a vendor on behalf of a customer, as well as
where the related revenues and expenses should be classified in the
financial statements. Net sales and gross profit amounts for the periods
prior to 2002 included in this Annual Report have been reclassified to
conform to our 2002 presentation. As a result, certain costs of
approximately $30.4 million, $25.4 million, $18 million and $21.8 million
have been reclassified for December 31, 2001, 2000, 1999 and 1998.

(2) Effective January 1, 2003, we adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and
Technical Corrections ("Statement No. 145"). Statement No. 145 eliminates
the automatic classification of gain or loss on extinguishment of debt as
an extraordinary item of income and requires that such gain or loss be
evaluated for extraordinary classification under the criteria of
Accounting Principles Board ("APB") No. 30, Reporting Results of
Operations. As a result, the extraordinary loss on the early
extinguishment of debt of approximately $1.1 million, $0.5 million and
$2.8 million has been reclassified to interest expense for December 31,
1999, 2000 and 2001, respectively.

(3) Effective January 1, 2002, we adopted the provisions of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets ("SFAS No. 142"). In accordance with SFAS No. 142, goodwill will no
longer be amortized, but instead, will be subject to an annual review for
potential impairment. As a result, we recorded an impairment loss on
goodwill as a cumulative effect of accounting change of $18.3 million, net
of tax, or $1.55 per diluted share, during the first quarter of 2002. The
impairment loss relates to goodwill pertaining to certain of our reporting
units with our European Segment and with our Temperature Control Segment
and we recorded charges of $10.9 million related to our European
Operations and $7.4 million related to our Temperature Control Segment.

-18-

Upon adoption of SFAS No. 142, our earnings before cumulative effect of
accounting change for basic and diluted earnings per share adjusted to
exclude goodwill amortization expense (net of tax) are as follows:

YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Reported earnings (loss) before cumulative
effect of accounting change ............ $ (12,206) $ (2,485) $ 9,729 $ 7,625 $ 22,257
Add back: goodwill amortization expense,
net of tax ............................. -- 2,727 2,574 2,481 2,335
---------- --------- ---------- ---------- ----------
Adjusted earnings (loss) before cumulative
effect of accounting change ............ $ (12,206) $ 242 $ 12,303 $ 10,106 $ 24,592
========== ========= ========== ========== ==========
BASIC EARNINGS (LOSS) PER SHARE:

Reported basic earnings (loss) per share
before cumulative effect of accounting
change ................................. $ (1.03) $ (0.21) $ 0.82 $ 0.58 $ 1.70
Add back: goodwill amortization expense,
net of tax ............................. -- 0.23 0.22 0.19 0.18
---------- --------- ---------- ---------- ----------
Adjusted basic earnings (loss) per share
before cumulative effect of accounting
change ................................. $ (1.03) $ 0.02 $ 1.04 $ 0.77 $ 1.88
========== ========= ========== ========== ==========
DILUTED EARNINGS (LOSS) PER SHARE:

Reported diluted earnings per share before
cumulative effect of accounting change . $ (1.01) $ (0.21) $ 0.81 $ 0.58 $ 1.69
Add back: goodwill amortization expense,
net of tax ............................. -- 0.23 0.21 0.19 0.18
---------- --------- ---------- ---------- ----------
Adjusted diluted earnings (loss) per share
before cumulative effect of accounting
change ................................. $ (1.01) $ 0.02 $ 1.02 $ 0.77 $ 1.87
========== ========= ========== ========== ==========

Upon adoption of SFAS No. 142, our net earnings (loss) for basic and
diluted earnings per share adjusted to exclude goodwill amortization
expense (net of tax) are as follows:

YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Reported net earnings (loss) .................. $ (30,556) $ (2,485) $ 9,729 $ 7,625 $ 22,257
Add back: goodwill amortization expense, net of
tax ........................................ -- 2,727 2,574 2,481 2,335
---------- --------- ---------- ---------- ----------
Adjusted net earnings (loss) .................. $ (30,556) $ 242 $ 12,303 $ 10,106 $ 24,592
========== ========= ========== ========== ==========
BASIC NET EARNINGS (LOSS) PER SHARE:

Reported basic net earnings (loss)
per share ................................. $ (2.57) $ (0.21) $ 0.82 $ 0.58 $ 1.70
Add back: goodwill amortization expense, net of
tax ........................................ -- 0.23 0.22 0.19 0.18
---------- --------- ---------- ---------- ----------
Adjusted basic net earnings (loss)
per share .................................. $ (2.57) $ 0.02 $ 1.04 $ 0.77 $ 1.88
========== ========= ========== ========== ==========
DILUTED NET EARNINGS (LOSS) PER SHARE:

Reported diluted net earnings (loss)
per share .................................. $ (2.54) $ (0.21) $ 0.81 $ 0.58 $ 1.69
Add back: goodwill amortization expense, net of
tax ........................................ -- 0.23 0.21 0.19 0.18
---------- --------- ---------- ---------- ----------
Adjusted diluted net earnings (loss)
per share .................................. $ (2.54) $ 0.02 $ 1.02 $ 0.77 $ 1.87
========== ========= ========== ========== ==========

(4) For the year ended December 31, 2002, we recorded an after tax charge of
$18.3 million as a loss from discontinued operations to account for
potential costs associated with our asbestos-related liability.

-19-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This Report on Form 10-K/A contains forward-looking statements. Forward-looking
statements in this report are indicated by words such as "anticipates,"
"expects," "believes," "intends," "plans," "estimates," "projects" and similar
expressions. These statements represent our expectations based on current
information and assumptions. Forward-looking statements 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 a number of factors, including
economic and market conditions; the performance of the aftermarket sector;
changes in business relationships with our major customers and in the timing,
size and continuation of our customers' programs; the ability of our customers
to achieve their projected sales; competitive product and pricing pressures;
increases in production or material costs that cannot be recouped in product
pricing; successful integration of acquired businesses; product liability
(including, without limitation, those related to estimates to asbestos-related
contingent liabilities) matters; as well as other risks and uncertainties, such
as those described under Quantitative and Qualitative Disclosures About Market
Risk and those detailed herein and from time to time in the filings of the
Company with the Securities and Exchange Commission. Those 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.

The following discussion should be read in conjunction with our financial
statements and the notes thereto. This discussion summarizes the significant
factors affecting our results of operations and the financial condition of our
business during each of the fiscal years in the three year period ended December
31, 2002.

BUSINESS OVERVIEW

We are a leading independent manufacturer and distributor of replacement parts
for motor vehicles in the automotive aftermarket industry. We are organized into
two major operating segments, each of which focuses on a specific segment of
replacement parts. Our Engine Management Segment manufactures ignition and
emission parts, on-board computers, ignition wires, battery cables and fuel
system parts. Our Temperature Control Segment manufactures and remanufactures
air conditioning compressors, and other air conditioning and heating parts. We
sell our products primarily in the United States, Canada and Latin America. We
also sell our products in Europe through our European Segment.

ACQUISITION. On February 7, 2003, we signed an agreement to purchase Dana's EMG
Business, for a purchase price equal to the closing net book value of the
business, subject to a maximum purchase price of $125 million. Dana's EMG
Business is a leading manufacturer of aftermarket parts in the automotive
industry focused exclusively on engine management. Dana's EMG Business
manufacturers ignition systems, emission parts, engine computers, ignition
wires, battery cables and fuel system parts. Customers of Dana's EMG Business
include NAPA Auto Parts, CSK Auto, O'Reilly Automotive and Pep Boys. We intend
to integrate Dana's EMG Business into our Engine Management Segment within 18
months from the closing of the acquisition. The closing of the acquisition is
subject to our financing of the purchase price. We intend to finance the
acquisition and the payment of related fees and expenses and restructuring and
integration costs by (a) drawing on our revolving credit facility, (b) issuing
shares of our common stock and (c) obtaining seller financing.

The acquisition is subject to our obtaining financing for the acquisition and
other customary closing conditions. We expect to close the acquisition during
the second quarter of 2003.

-20-

CUSTOMERS. We distribute our products through a variety of distribution
channels, including wholesale distributors, retail chains, service chains and
original equipment dealers. Our warehouse distribution channel represents 61% of
our consolidated net sales for the year ended December 31, 2002. Our retail
channel of distribution has grown significantly from approximately $41 million
in consolidated net sales to retailers in 1993 (representing 7% of consolidated
net sales) to approximately $138 million in 1997 (representing 26% of
consolidated net sales), and to approximately $169 million in 2002 (representing
28% of consolidated net sales). In 1997, we commenced distributing our products
through the original equipment service supplier channel, and sold approximately
$3 million in consolidated net sales to original equipment service suppliers
(representing 0.6% of consolidated net sales), which increased to approximately
$23 million in 2002 (representing 3.8% of consolidated net sales).

SEASONALITY. Historically, our operating results have fluctuated by quarter,
with the greatest sales occurring in the second and third quarters of the year
and revenues generally being recognized at the time of shipment. It is in these
quarters that demand for our products is typically the highest, specifically in
the Temperature Control Segment of our business. In addition to this
seasonality, the demand for our Temperature Control products during the second
and third quarters of the year may vary significantly with the summer weather.
For example, a cool summer may lessen the demand for our Temperature Control
products, while a hot summer may increase such demand. As a result of this
seasonality and variability in demand of our Temperature Control products, our
working capital requirements peak near the end of the second quarter, as the
inventory build-up of air conditioning products is converted to sales and
payments on the receivables associated with such sales have yet to be received.
During this period, our working capital requirements are typically funded by
borrowing from our revolving credit facility.

The seasonality of our business offers significant operational challenges in our
manufacturing and distribution functions. To limit these challenges and to
provide a rapid turnaround time of customer orders, we traditionally offer a
pre-season selling program, known as our "Spring Promotion", in which customers
are offered a choice of a price discount or longer payment terms.

INVENTORY MANAGEMENT. We instituted an aggressive inventory reduction campaign
initiated in 2001. We targeted a minimum $30 million inventory reduction in
2001, but exceeded our goal by reducing inventory by $57 million that year.
Importantly, while reducing inventory levels, we maintained customer service
fill rate levels of approximately 93%. In 2002, we further reduced inventory by
additional $8 million.

COMPARISON OF FISCAL YEARS 2002 AND 2001

SALES. On a consolidated basis, net sales for 2002 increased by $6.8 million
over 2001 to $598.4 million. This net increase was driven by a $17.6 million
increase in Engine Management, year over year. New business was the primary
contributor with gains achieved in the retail business where certain customers
expanded their own business; new wire and cable business acquired from an
existing customer; and new original equipment customers acquired through our
acquisition of Sagem Inc. in May of 2002.

-21-

With respect to Temperature Control, net sales for 2002 decreased by $14.8
million to $255.1 million. Net sales were unfavorable due to a combination of
factors including a partial loss in business with a significant retail customer
in 2002; 2001 net sales including approximately $7 million of "pipeline" orders
for a new customer which did not repeat in 2002; and distributors "working off
"inventory left over from previous mild summer seasons.

GROSS MARGINS. Gross margins, as a percentage of consolidated net sales,
increased to 26.3% in 2002 from 23.5% in 2001. The improvement in gross margins
reflects the return in 2002 to more normal production levels, as the aggressive
and successful inventory reduction campaign in 2001 benefited 2002, in both of
our major segments. Engine Management gross margins improved approximately 4
percentage points, while Temperature Control improved approximately 3.7
percentage points. 2002 gross margins also benefited from a decrease in warranty
returns in both Engine Management and Temperature Control. Overall, warranty
returns improved by approximately 1 percentage point, as a percentage of net
sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling general and administrative
expenses increased to $129.1 million or 21.6% of net sales in 2002, from $123.9
million or 20.9% of net sales in 2001. Contributing to the increase was
approximately $2 million of restructuring costs related to the consolidation of
certain manufacturing and distribution facilities within the Temperature Control
Segment. Also contributing to the overall increase was higher insurance and
employee benefit costs.

GOODWILL. Effective January 1, 2002, we adopted the provisions of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS No. 142"). In accordance with SFAS No. 142, goodwill will no longer be
amortized, but instead, will be subject to an annual review for potential
impairment. Using the discounted cash flows method, based on our weighted
average cost of capital and market multiples, we reviewed the fair values of
each of our reporting units. The decline in economic and market conditions,
higher integration costs than anticipated and the general softness in the
automotive aftermarket caused a decrease in the fair values of certain of our
reporting units. As a result, we recorded an impairment loss on goodwill as a
cumulative effect of accounting change of $18.3 million, net of tax, or $1.55
per diluted share during the first quarter of 2002. The impairment loss relates
to goodwill pertaining to certain of our reporting units within our European
Segment and our Temperature Control Segment for which we recorded charges of
$10.9 million and $7.4 million, respectively.

During the fourth quarter of 2002, the Company completed its review of goodwill
for potential impairment. After giving consideration to 2002 losses in Europe
and budgeted 2003 losses, the Company wrote-off the remaining goodwill
associated with the Engine Management reporting unit of the European Segment.
With respect to the European Segment, approximately $1.4 million of goodwill
remains on the December 31, 2002 balance sheet, all of which pertains to the
Temperature Control reporting unit.

OTHER INCOME. Other income, net increased approximately $0.4 million over 2001.
Contributing to the increase was the elimination of fees related to an accounts
receivable sales arrangement eliminated in April of 2001.

INTEREST EXPENSE. Interest expense decreased by approximately $7 million, as
compared to 2001. Contributing to overall decrease was lower borrowings (during
2002 total debt was reduced approximately $29 million) and lower interest rates.
Effective January 1, 2003, we adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 145, Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13 and Technical Corrections ("Statement
No. 145"). Statement No. 145 eliminates the automatic classification of gain or
loss on extinguishment of debt as an extraordinary item of income and requires
that such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board ("APB") No. 30, Reporting Results of
Operations ("APB No. 30"). As a result, we reclassified the $2.8 million
extraordinary loss on the early extinguishment of debt recorded in 2001 to
interest expense.

-22-

INCOME TAXES. The overall effective tax rate increased from 25% in 2001 to 57%
in 2002. The significant increase is primarily the result of the operating
losses in our European Segment, for which no income tax benefit has been
recorded because it is more likely than not that such losses will not be
realized in the near future. Supplementing the effect Europe had on the
effective rate is the increase in the Company's domestic earnings as a
percentage of overall earnings before taxes.

LOSS ON DISCONTINUED OPERATIONS. Loss on discontinued operations reflect the
charges associated with asbestos, including legal expenses. As discussed in Note
18 of the notes to the consolidated financial statements, the Company is
responsible for certain future liabilities relating to alleged exposure to
asbestos containing products. Based on the information contained in the
September 2002 actuarial study, which estimated an undiscounted liability for
settlement payments ranging from $27.3 million to $58 million, and all other
available information considered by the Company, and as further set forth in
such Note 18, the Company recorded an after tax charge of $16.9 million as a
loss from discontinued operation during the third quarter of 2002 to reflect
such liability. The Company concluded that no amount within the range of
settlement payments was more likely than any other and, therefore, recorded the
low end of the range as the liability associated with future settlement payments
through 2052 in the Company's consolidated financial statements, in accordance
with generally accepted accounting principles. Total legal expenses associated
with asbestos related matters totaled $0.9 million in 2002.

COMPARISON OF FISCAL YEARS 2001 AND 2000

SALES. After giving consideration to the adoption of Emerging Issues Task Force
guidelines entitled "Accounting for Certain Sales Incentives" and "Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products", consolidated net sales in 2001 were $591.7 million, a decrease of
$9.7 million compared to consolidated net sales of $601.4 million in 2000. The
decrease in consolidated net sales was a result of decreases in our existing
traditional business lines and higher costs for adding a new customer. The
decrease was mitigated by the Engine Management Segment, which benefited from a
full year of sales to a new major customer added during the third quarter of
2000 (with incremental sales of approximately $6 million in 2001), along with
additional wire set business from a major group of warehouse distributors. The
Temperature Control Segment regained a major retail customer we had lost in
early 2000 (this customer accounted for consolidated net sales of approximately
$30 million in 2001, excluding filling the initial "pipeline" of orders from
such customer). Excluding this new business, sales to existing accounts
decreased, primarily a result of another cool summer for air conditioning, and
the continuing inventory reduction program on the part of many of our customers.

GROSS MARGINS. Gross margins, as a percentage of consolidated net sales,
decreased to 23.5% in 2001, from 27.1% in 2000. Gross margins in our Engine
Management Segment were 26.4% in 2001 compared to 29.4% in 2000. Gross margins
in our Temperature Control Segment were 18.2% in 2001 compared to 23.4% in 2000.
The decrease in gross margins was primarily due to our planned inventory
reduction programs. The reduction in gross margins was across all product lines
as we originally targeted a minimum $30 million inventory reduction in 2001.
Actual inventory reduction amounted to $57 million, while we maintained high
customer service fill levels. These changes reflect the impact of underabsorbed
overhead costs as a result of cutting production and temporarily closing
manufacturing facilities at both Engine Management and Temperature Control
facilities.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $8 million to $124 million in 2001,
compared to $132 million in 2000. This decrease reflected the focus on our cost
reduction efforts, with benefits primarily in the marketing and distribution
areas in our Temperature Control Division.

INCOME FROM OPERATIONS. Operating income decreased by $15.6 million compared to
2000, primarily due to the lower gross margins as discussed above.

OTHER INCOME (EXPENSES), NET. Other income, net increased by $2.3 million
compared to 2000. The increase was primarily due to the reduction of fees
related to the termination of the sale of accounts receivable agreement and an
increase in interest and dividend income.

-23-

INTEREST EXPENSE. Interest expense increased by $2.3 million in 2001 compared to
2000 as a result of fees incurred in connection with the early extinguishment of
debt. Effective January 1, 2003, we adopted the provisions of Statement No. 145.
Statement No. 145 eliminates the automatic classification of gain or loss on
extinguishment of debt as an extraordinary item of income and requires that such
gain or loss be evaluated for extraordinary classification under the criteria of
APB No. 30. As a result, the extraordinary loss on the early extinguishment of
debt of approximately $0.5 million and $2.8 million has been reclassified to
interest expense for December 31, 2000 and 2001, respectively.

INCOME TAX PROVISION. Income tax expense decreased $3.3 million in 2001 from
$2.5 million in 2000. The decrease was primarily due to losses incurred in 2001.
The effective tax rate increased from 21%% in 2000 to a 25% tax benefit in 2001.

IMPACT OF INFLATION

Although inflation is not a significant issue, management believes it will be
able to continue to minimize any adverse effect of inflation on earnings through
cost reduction programs, including the sale of manufactured products, and, where
competitive situations permit, selling price increases.

FUTURE RESULTS OF OPERATIONS

We continue to face competitive pressures. In order to sell at competitive
prices while maintaining profit margins we are continuing to focus on overhead
and cost reductions.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. During the year ended December 31, 2002, cash provided by
operations amounted to $60.2 million, compared to $40.2 million in 2001 and cash
used in operations of $1 million in 2000. The improvement in 2001 was primarily
attributable to our efforts to reduce inventory levels from their elevated
levels of December 31, 2000. The improvement in 2002 is primarily attributable
to improved earnings from continuing operations, higher accounts payable and
continued reductions in inventory.

For the year ended December 31, 2002, inventory decreased by an additional $8
million over the $57 million reduction in 2001, which resulted primarily from
reduced production and purchases, and where needed, the temporary closing of
manufacturing facilities. Reductions were realized in both the Engine Management
and Temperature Control Segments. Inventory turnover was 2.3 x in 2002, 2.1x in
2001, and 1.8x in 2000.

INVESTING ACTIVITIES. Cash used in investing activities was $26.9 million for
the year ended December 31, 2002, compared to $14.2 million in 2001 and $18.7
million in 2000. The increase was primarily due to acquisitions, partially
offset by decreases in capital expenditures. Assets acquired consist primarily
of property, plant and equipment, receivables and inventory. All acquisitions
were financed with funds provided under our revolving credit facility and seller
financing.

In January 2002, we acquired the assets of a temperature control business from
Hartle Industries for $4.8 million. The assets consist primarily of property,
plant and equipment, and inventory. In April 2002, we acquired Carol Cable
Limited, a manufacturer and distributor of wire sets based in the United
Kingdom, for approximately $1.7 million. The assets from this acquisition
consist primarily of property, plant and equipment, and inventory. In addition,
during 2002, the Company paid approximately an additional $2.8 million for the
remaining equity interest in SMP Holdings Limited. In May 2002, we purchased the
aftermarket fuel injector business of Sagem Inc., a subsidiary of Johnson
Controls, for $10.5 million. Sagem Inc. is a basic manufacturer of fuel
injectors and was our primary supplier prior to the acquisition. Assets acquired
from this acquisition consist primarily of property, plant and equipment, and
inventory. The purchase was partially financed by the seller ($5.4 million to be
paid over a two year period), with the remaining funds being provided under our
revolving credit facility.

Capital expenditures for the three most recent fiscal years ended December 31
totaled $7.6 million in 2002, $13.7 million in 2001 and $16.7 million in 2000.

FINANCING ACTIVITIES. Cash used in financing activities was $32.7 million for
the year ended December 31, 2002, compared to $25.4 million in 2001 and $11.5
million in 2000. The increase in cash used was primarily due to our focus on
reducing our borrowings. Dividends paid for the three most recent fiscal years
ended December 31 were $4.3 million in 2002, $4.2 million in 2001 and $4.3
million in 2000. The decreased borrowings reflect our focus on reducing capital
employed in the business.

-24-

Effective April 27, 2001 we entered into an agreement with General Electric
Capital Corporation, as agent, and a syndicate of lenders for a new secured
revolving credit facility. The term of the new credit agreement was for a period
of five years and provided for a line of credit up to $225 million. The Company
recorded an extraordinary loss of approximately $2.8 million, net of taxes, in
the second quarter of 2001, for a prepayment penalty and write-off of
unamortized fees for the retirement of the above related debt. This charge was
reclassified to interest expense as we adopted the provisions of Statement No.
145.

On February 7, 2003, we amended our revolving credit facility to provide for an
additional $80 million commitment, subject to the terms and conditions therein,
which will become effective upon the closing of our acquisition of Dana's EMG
Business. This additional commitment increases the total amount available for
borrowing under our revolving credit facility to $305 million. In addition, in
order to facilitate the aggregate financing of the acquisition, we are planning
on issuing approximately $59 million of common stock in a public offering which
will occur in connection with the closing of the acquisition. After applying all
of the net proceeds from the public offering of our common stock to repay a
portion of our outstanding indebtedness under our revolving credit facility, we
intend to borrow the entire cash portion of the purchase price of Dana's EMG
Business from our revolving credit facility upon the closing of the acquisition.
Availability under our revolving credit facility is based on a formula of
eligible accounts receivable, eligible inventory and eligible fixed assets, and
will include the purchased assets of Dana's EMG Business. We expect such
availability under the revolving credit facility, following the initial draw
down at the acquisition closing, to be sufficient to meet our ongoing operating
and integration costs.

Direct borrowings under our revolving credit facility bear interest at the prime
rate plus the applicable margin (as defined) or the LIBOR rate plus the
applicable margin (as defined), at our option. Borrowings are collateralized by
substantially all of our assets, including accounts receivable, inventory and
fixed assets, and those of our domestic and Canadian subsidiaries. Our credit
facility prior to the acquisition provides for certain financial covenants
limiting our capital expenditures and requiring us to maintain a certain
tangible net worth at the end of each fiscal quarter. As of December 31, 2002,
we were in compliance with our applicable financial covenants. Following our
acquisition of Dana's EMG Business, the terms of our revolving credit facility
provide for, among other provisions, new financial covenants requiring us, on a
consolidated basis, (1) to maintain specified levels of EBITDA at the end of
each fiscal quarter for the 12-month period then ended, through June 30, 2004,
(2) to fall within specified levels of a fixed charge coverage ratio at the end
of each fiscal quarter for the 12-month period then ended, and (3) to limit
capital expenditure levels for each fiscal year through 2007.

Our profitability and working capital requirements are more seasonal due to the
sales mix of our Temperature Control products. Our working capital requirements
usually peak near the end of the second quarter, as the inventory build-up of
air conditioning products is converted to sales, and payments on the receivables
associated with such sales have yet to be received. These increased working
capital requirements are funded by borrowings from our revolving credit
facility. We anticipate that our present sources of funds will continue to be
adequate to meet our needs for the next several years.

During the years 1998 through 2000, our board of directors authorized multiple
repurchase programs under which we could repurchase shares of our common stock.
During such years, an aggregate of $26.7 million of common stock was repurchased
to meet present and future requirements of our stock option programs and to fund
our employee stock option plan. As of December 31, 2002, we had board
authorization to repurchase additional shares at a maximum cost of $1.7 million.
During the years ended December 31, 2002 and 2001, we did not repurchase any
shares of our common stock.

In July 2001, we entered into interest rate swap agreements to manage our
exposure to interest rate changes. The swaps effectively convert a portion of
our variable rate debt under the revolving credit facility to a fixed rate,
without exchanging the notional principal amounts. At December 31, 2002, we had
two outstanding interest rate swap agreements (in an aggregate notional
principal amount of $75 million), one of which matured in January 2003 and one
of which is scheduled to mature in January 2004. Under these agreements, we
receive a floating rate based on the LIBOR interest rate, and pay a fixed rate
of 4.92% on a notional amount of $45 million and 4.37% on a notional amount of
$30 million. If, at any time, the swaps are determined to be ineffective, in
whole or in part, due to changes in the interest rate swap agreements, the fair
value of the portion of the interest rate swap determined to be ineffective will
be recognized as gain or loss in the statement of operations for the applicable
period.

-25-

On July 26, 1999, we issued our convertible debentures, payable semi-annually,
in the aggregate principal amount of $90 million. The debentures are convertible
into 2,796,120 shares of our common stock, and mature on July 15, 2009. The
proceeds from the sale of the debentures were used to prepay an 8.6% senior
note, reduce short term bank borrowings and repurchase a portion of our common
stock.

The following is a summary of our contractual commitments associated with our
long-term debt and lease obligations as of December 31, 2002 (As Restated):

YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
(IN THOUSANDS) 2003 2004 2005 2006 2007 THEREAFTER TOTAL
-------------- ---- ---- ---- ---- ---- ---------- -----

Principal payments of
long term debt .......... $ 4,108 $ 2,914 $ 75 $ 81 $ 88 $ 90,033 $ 97,299
Operating leases .......... 7,706 6,320 5,336 3,736 2,558 4,112 29,768
Interest rate swap
agreements .............. 113 1,792 -- -- -- -- 1,905
-------- -------- -------- -------- -------- -------- --------

Total commitments $ 11,927 $ 11,026 $ 5,411 $ 3,817 $ 2,646 $ 94,145 $128,972
======== ======== ======== ======== ======== ======== ========

CRITICAL ACCOUNTING POLICIES

We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout "Management's Discussion and Analysis of Financial Condition and
Results of Operations," where such policies affect our reported and expected
financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 1 of the notes to our consolidated annual
financial statements on this Annual Report on Form 10-K/A. Preparation of our
consolidated annual and quarterly financial statements requires us to make
estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting periods. We can give no assurance that actual results will not
differ from those estimates.

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 revenue from product sales upon shipment to
customers. As described below, significant management judgments and estimates
must be made and used in connection with the revenue recognized in any
accounting period.

INVENTORY VALUATION. Inventories are valued at the lower of cost or market. Cost
is generally determined on the first-in, first-out basis. Where appropriate,
standard cost systems are utilized for purposes of determining cost; the
standards are adjusted as necessary to ensure they approximate actual costs.
Estimates of lower of cost or market value of inventory are determined at the
reporting unit level and are based upon the inventory at that location taken as
a whole. These estimates are 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.

SALES RETURNS AND OTHER ALLOWANCES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS. The
preparation of financial statements requires our management to make estimates
and assumptions that affect the reported amount of assets and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Specifically, our management must make estimates of potential future product
returns related to current period product revenue. Management analyzes
historical returns, current economic trends, and changes in customer demand when
evaluating the adequacy of the sales returns and other allowances. Significant

-26-

management judgments and estimates must be made and used in connection with
establishing the sales returns and other allowances in any accounting period. At
December 31, 2002, the allowance for sales returns totaled $16.3 million.
Similarly, our management must make estimates of the uncollectability of our
accounts receivables. Management specifically analyzes accounts receivable and
analyzes historical bad debts, customer concentrations, customer
credit-worthiness, current economic trends and changes in our customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts. At
December 31, 2002 the allowance for doubtful accounts and for discounts totaled
$4.9 million.

ACCOUNTING FOR INCOME TAXES. As part of the process of preparing our
consolidated financial statements, we are required to estimate our income taxes
in each of the jurisdictions in which we operate. This process involves
estimating our actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax and accounting
purposes. These differences result in deferred tax assets and liabilities, which
are included within our consolidated balance sheet. We must then assess the
likelihood that our deferred tax assets will be recovered from future taxable
income, and to the extent we believe that recovery is not likely, we must
establish a valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we must include an expense
within the tax provision in the statement of operations.

Significant management judgment is required in determining our provision for
income taxes, our deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. At December 31, 2002, we
had a valuation allowance of $21.7 million, due to uncertainties related to our
ability to utilize some of our deferred tax assets. The 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, we may need to establish an additional valuation
allowance which could materially impact our business, financial condition and
results of operations.

VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS AND GOODWILL. We assess the
impairment of identifiable intangibles and long-lived assets whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. Factors we consider important, which could trigger an impairment
review, include the following: significant underperformance relative to expected
historical or projected future operating results; significant changes in the
manner of our use of the acquired assets or the strategy for our overall
business; and significant negative industry or economic trends. With respect to
goodwill, we test for potential impairment in the fourth quarter of each year as
part of our annual budgeting process. We review the fair values of each of our
reporting units using the discounted cash flows method and market multiples.

RETIREMENT AND POSTRETIREMENT MEDICAL BENEFITS. Each year we calculated the
costs of providing retiree benefits under the provisions of SFAS 87 and SFAS
106. The key assumptions used in making these calculations are disclosed in
Notes 12 and 13 to our consolidated financial statements. The most significant
of these assumptions are the discount rate used to value the future obligation,
expected return on plan assets and health care cost trend rates. We select
discount rates commensurate with current market interest rates on high-quality,
fixed rate debt securities. The expected return on assets is based on our
current review of the long-term returns on assets held by the plans, which is
influenced by historical averages. The medical cost trend rate is based on our
actual medical claims and future projections of medical cost trends.

ASBESTOS RESERVE. The Company is responsible for certain future liabilities
relating to alleged exposure to asbestos containing products. A September 2002
actuarial study estimated a liability for settlement payments ranging from $27.3
million to $58 million. The Company concluded that no amount within the range of
settlement payments was more likely than any other and, therefore, recorded the
low end of the range as the liability associated with future settlement payments
through 2052 in the Company's consolidated financial statements, in accordance
with generally accepted accounting principles. The Company plans on performing a
similar annual actuarial analysis during third quarter of each year for the
foreseeable future. Based on this analysis and all other available information,
the Company will reassess the recorded liability, and if deemed necessary,
record an adjustment to the reserve, which will be reflected as a loss or gain
from discontinued operations. Legal expenses associated with asbestos related
matters are expensed as incurred.

-27-

OTHER LOSS RESERVES. We have numerous other loss exposures, such as
environmental claims, product liability and litigation. Establishing loss
reserves for these matters requires the use of estimates and judgment of risk
exposure and ultimate liability. We estimate losses using consistent and
appropriate methods; however, changes to our assumptions could materially affect
our recorded liabilities for loss.

RECENTLY ISSUED ACCOUNTING ANNOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
No. 143, Accounting for Asset Retirement Obligations ("Statement No. 143"),
which addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. The standard applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and/or normal use of the asset.

Statement No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The fair value of the liability
is added to the carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset. The liability is
accreted at the end of each period through charges to operating expense. If the
obligation is settled for other than the carrying amount of the liability, we
will recognize a gain or loss on settlement.

We are required and plan to adopt the provisions of Statement No. 143 for the
quarter ending March 31, 2003. To accomplish this, we must identify all legal
obligations for asset retirement obligations, if any, and determine the fair
value of these obligations on the date of adoption. The determination of fair
value is complex and will require us to gather market information and develop
cash flow models. Additionally, we will be required to develop processes to
track and monitor these obligations. The adoption of Statement No. 143 is not
expected to have a material effect on our financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections
("Statement No. 145"). Statement No. 145 eliminates the automatic classification
of gain or loss on extinguishment of debt as an extraordinary item of income and
requires that such gain or loss be evaluated for extraordinary classification
under the criteria of Accounting Principles Board (APB) No. 30, Reporting
Results of Operations. Statement No. 145 also requires sales-leaseback
accounting for lease modifications that have economic effects that are similar
to sales-leaseback transactions, and makes various other technical corrections
to existing pronouncements. Effective January 1, 2003, we adopted Statement No.
145. As a result, we reclassified the extraordinary loss on the early
extinguishment of debt recorded in prior periods to interest expense.

In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associates
with Exit or Disposal Activities ("Statement No. 146"). Statement No. 146, which
is effective prospectively for exit or disposal activities initiated after
December 31, 2002, applies to costs associated with an exit activity, including
restructurings, or with a disposal of long-lived assets. Those activities can
include eliminating or reducing product lines, terminating employees and
contracts and relocating plant facilities or personnel. Statement No. 146
requires that exit or disposal costs are recorded as an operating expense when
the liability is incurred and can be measured at fair value. Commitment to an
exit plan or a plan of disposal by itself will not meet the requirement for
recognizing a liability and the related expense under Statement No. 146.
Statement No. 146 grandfathers the accounting for liabilities that were
previously recorded under EITF Issue 94-3. We do not believe the adoption of
Statement No. 146 will have a material effect on our financial statements.

In November 2002, the FASB issued interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("Interpretation"). This Interpretation elaborates on
the existing disclosure requirements for most guarantees, including loan
guarantees such as standby letters of credit. It also clarifies that at the time
a company issues a guarantee, the company must recognize an initial liability
for the fair market value of the obligations it assumes under that guarantee and

-28-

must disclose that information in its interim and annual financial statements.
The initial recognition and measurement provisions of the Interpretation apply
on a prospective basis to guarantees issued or modified after December 31, 2002.
We do not believe the adoption of this interpretation will have a material
effect on our financial statements. See Note 18 of Notes to our Consolidated
Financial Statements for discussion of product warranty claims. In December
2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure, an amendment of FASB Statement No. 123. This
Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements. Certain of the disclosure modifications are required for
fiscal years ending after December 15, 2002. We do not believe the adoption of
Statement No. 148 will have a material effect on our financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51. This Interpretation
addresses the consolidation by business enterprises of variable interest
entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities obtained after
January 31, 2003. For public enterprises with a variable interest in a variable
interest entity created before February 1, 2003, the Interpretation applies to
that enterprises no later than the beginning of the first interim or annual
reporting period beginning after June 15, 2003. The application of this
Interpretation is not expected to have a material effect on our financial
statements. The Interpretation requires certain disclosures in financial
statements issued after January 31, 2003 if it is reasonably possible that we
will consolidate or disclose information about variable interest entities when
the Interpretation becomes effective.

-29-

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

EXCHANGE RATE RISK

We have exchange rate exposure, primarily, with respect to the Canadian dollar
and the British pound. As of December 31, 2002, our financial instruments which
are subject to this exposure are immaterial, therefore the potential immediate
loss to us that would result from a hypothetical 10% change in foreign currency
exchange rates would not be expected to have a material impact on our earnings
or cash flows. This sensitivity analysis assumes an unfavorable 10% fluctuation
in both of the exchange rates affecting both of the foreign currencies in which
the indebtedness and the financial instruments described above are denominated
and does not take into account the offsetting effect of such a change on our
foreign-currency denominated revenues.

INTEREST RATE RISK

We manage our exposure to interest rate risk through the proportion of fixed
rate debt and variable rate debt in our debt portfolio. To manage a portion of
our exposure to interest rate changes, we have entered into interest rate swap
agreements. At December 31, 2002, we had approximately $176.9 million in loans
and financing outstanding, of which approximately $96.0 million bear interest at
fixed interest rates and approximately $80.9 million bear interest at variable
rates of interest. We invest our excess cash in highly liquid short-term
investments. As a result of our refinancing agreement during the second quarter
2001, as described in the notes to our consolidated annual financial statements,
our percentage of variable rate debt to total debt has increased from 32% at
December 31, 2000 to 56% at December 31, 2001 and decreased to 46% at December
31, 2002. Depending upon the level of borrowings under our revolving credit
facility, which may at times approach $200 million, the effect of a
hypothetical, instantaneous and unfavorable change of 100 basis points in the
interest rate may have approximately $0.9 million negative impact on our
earnings or cash flows.

-30-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NO.
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (Audited)

Independent Auditors' Report.................................................F-1

Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000........................................F-2

Consolidated Balance Sheets as of December 31, 2002 and 2001 (As Restated)...F-3

Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000........................................F-4

Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 2002, 2001 and 2000.......................................F-5

Notes to Consolidated Annual Financial Statements............................F-6

-31-

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Standard Motor Products, Inc.:

We have audited the accompanying consolidated balance sheets of Standard Motor
Products, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
2002. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Standard Motor
Products, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 1, the Company adopted Emerging Issues Task Force Issue No.
01-9, ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A
RESELLER OF THE VENDOR'S PRODUCTS) as of January 1, 2002. As described in Note
6, the Company adopted Statement of Financial Accounting Standards No. 142,
GOODWILL AND OTHER INTANGIBLE ASSETS as of January 1, 2002. Also as described in
Note 1, these consolidated financial statements have been revised to account for
the loss on early extinguishment of debt in accordance with Statement of
Financial Accounting Standards No. 145, RESCISSION OF FASB STATEMENTS NO. 4, 44,
AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL CORRECTIONS, which was
adopted by the Company as of January 1, 2003.

As described in Note 21, the Company's consolidated balance sheets as of
December 31, 2002 and 2001 have been restated to classify certain debt as
current.

/s/ KPMG LLP
------------

New York, New York
February 24, 2003, except as to note 21, which is as of November 17, 2003

F-1

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations
---------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
---------------------------------------------

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2002 2001 2000

Net sales (Note 7) $ 598,437 $ 591,652 $ 601,392
Cost of sales 440,893 452,597 438,691
---------------------------------------------------------------------------------------------------------------------
Gross profit 157,544 139,055 162,701
Selling, general and administrative expenses 129,142 123,932 131,990
Goodwill impairment charge (Note 6) 3,334 -- --
---------------------------------------------------------------------------------------------------------------------
Operating income 25,068 15,123 30,711
Other income (expense), net (Notes 3 and 14) 3,187 2,763 450
Interest expense 14,244 21,202 18,910
---------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations before taxes 14,011 (3,316) 12,251
Provision for income taxes (Note 15) 7,920 (831) 2,522
---------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 6,091 (2,485) 9,729
Loss from discontinued operation, net of tax of $6,099 (Note 18) (18,297) -- --
---------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of accounting change (12,206) (2,485) 9,729
Cumulative effect of accounting change, net of tax of $2,473 (Note 6) (18,350) -- --
---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (30,556) $ (2,485) $ 9,729
---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) Per Common Share - Basic:

Earnings (loss) from continuing operations $ 0.51 $ (0.21) $ 0.82
Discontinued operation (1.54) -- --
Cumulative effect of accounting change (1.54) -- --
---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) Per Common Share - Basic $ (2.57) $ (0.21) $ 0.82
---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) Per Common Share - Diluted:

Earnings (loss) from continuing operations $ 0.51 $ (0.21) $ 0.81
Discontinued operation (1.52) -- --
Cumulative effect of accounting change (1.53) -- --
---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) Per Common Share - Diluted $ (2.54) $ (0.21) $ 0.81
---------------------------------------------------------------------------------------------------------------------
Average number of common shares 11,914,968 11,774,591 11,933,774
Average number of common shares and dilutive common shares 12,008,496 11,774,591 11,974,341
---------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.

F-2

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (As Restated)
--------------------------------------------------------------------------------
December 31,
----------------------
(IN THOUSANDS) 2002 2001
------------------------------------------------------------------------------------
ASSETS Current assets:

Cash and cash equivalents $ 9,690 $ 7,496
Marketable securities 7,200 --
Accounts receivable, less allowances for discounts and
doubtful accounts of $4,882 and $4,362 in 2002 and 2001,
respectively (Notes 3 and 8) 117,644 117,965
Inventories (Notes 4 and 8) 174,785 177,291
Deferred income taxes (Note 15) 12,213 12,316
Prepaid expenses and other current assets 6,828 13,881
------------------------------------------------------------------------------------
Total current assets 328,360 328,949
------------------------------------------------------------------------------------
Property, plant and equipment, net (Notes 5 and 8) 103,822 101,646
------------------------------------------------------------------------------------
Goodwill, net (Note 6) 16,683 38,040

Other assets (Notes 7 and 12) 41,893 40,794
------------------------------------------------------------------------------------
Total assets $ 490,758 $ 509,429
LIABILITIES AND ------------------------------------------------------------------------------------
STOCKHOLDERS' Current liabilities:
EQUITY
Notes payable (Notes 8 and 21) $ 79,618 $ 110,865
Current portion of long-term debt (Note 8) 4,108 1,784
Accounts payable 35,744 26,110
Sundry payables and accrued expenses 39,723 41,968
Accrued customer returns 16,341 18,167
Payroll and commissions 12,143 8,489
------------------------------------------------------------------------------------
Total current liabilities 187,677 207,383
------------------------------------------------------------------------------------
Long-term debt (Notes 8, 9 and 21) 93,191 93,276
Postretirement medical benefits and
other accrued liabilities (Notes 12 and 13) 30,414 23,083
Accrued asbestos liabilities 25,595 --
------------------------------------------------------------------------------------
Total non-current liabilities 149,200 116,359
------------------------------------------------------------------------------------
Commitments and contingencies
(Notes 8, 10, 11, 12, 13 and 18)
Stockholders' equity (Notes 8, 9,10, 11 and 12):
Common Stock - par value $2.00 per share:
Authorized 30,000,000 shares, issued and
outstanding 11,957,009 and 11,823,650 shares
in 2002 and 2001, respectively 26,649 26,649
Capital in excess of par value 1,764 1,877
Retained earnings 148,686 183,532
Accumulated other comprehensive loss (2,581) (3,722)
------------------------------------------------------------------------------------
174,518 208,336
Less:Treasury stock - at cost (1,367,467 and
1,500,826 shares in 2002 and 2001, respectively) 20,637 22,649
------------------------------------------------------------------------------------
Total stockholders' equity 153,881 185,687
------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 490,758 $ 509,429
------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

F-3

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
-----------------------------------------------------------------------------------------------------------------------

(IN THOUSANDS) 2002 2001 2000
-----------------------------------------------------------------------------------------------------

CASH FLOWS Net earnings (loss) $(30,556) $ (2,485) $ 9,729
FROM Adjustments to reconcile net earnings
OPERATING (loss) to net cash
ACTIVITIES provided by (used in) operating activities:
Depreciation and amortization 16,128 18,909 18,922

Gain on disposal of property, plant & equipment (97) (265) (99)
Equity income from joint ventures (352) (844) (702)
Employee stock ownership plan allocation 1,230 713 1,032
Tax benefit related to employee stock options 80 48 --
Increase (decrease) in deferred income taxes 2,550 (3,628) (897)
Cumulative effect of accounting change 18,350 -- --
Loss from discontinued operation 18,297 -- --
Goodwill impairment charge 3,334 -- --
Change in assets and liabilities, net of
effects from acquisitions:
Decrease in accounts receivable, net 1,302 13,296 14,793
(Increase) decrease in inventories 7,996 56,966 (44,666)
(Increase) decrease in prepaid expenses
and other current assets 7,485 (1,821) 388
(Increase) decrease in other assets (4,307) (4,948) 4,312
Increase (decrease) in accounts payable 9,152 (30,502) 14,413
Decrease in sundry payables and accrued expenses (3,215) (8,774) (16,360)
Increase (decrease) in other liabilities 12,806 3,524 (1,818)
-----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 60,183 40,189 (953)
-----------------------------------------------------------------------------------------------------
Proceeds from the sale of property, plant and equipment 520 652 657
CASH FLOWS Capital expenditures, net of effects from acquisitions (7,598) (13,740) (16,652)
FROM Payments for acquisitions, net of cash acquired (19,855) (1,069) (2,718)
INVESTING -----------------------------------------------------------------------------------------------------
ACTIVITIES Net cash used in investing activities (26,933) (14,157) (18,713)
-----------------------------------------------------------------------------------------------------
Net borrowings (repayments) under
line-of-credit agreements (31,246) 71,935 36,285
CASH FLOWS Payments of other long-term debt (3,181) (93,601) (29,119)
FROM Issuance of long-term debt 5,419 -- --
FINANCING Proceeds from exercise of employee stock options 589 473 --
ACTIVITIES Purchase of treasury stock -- -- (14,345)
Dividends paid (4,290) (4,236) (4,324)
-----------------------------------------------------------------------------------------------------
Net cash used in financing activities (32,709) (25,429) (11,503)
-----------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1,653 (806) (1,512)
-----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,194 (203) (32,681)
Cash and cash equivalents at beginning of year 7,496 7,699 40,380

Cash and cash equivalents at end of year $ 9,690 $ 7,496 $ 7,699
-----------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 14,362 $ 17,403 $ 18,943
Income taxes $ 1,549 $ 2,792 $ 2,776
-----------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.

F-4

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

---------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2002, 2001 and 2000
---------------------------------------------------------------------------------------------------------------
ACCUMULATED
CAPITAL IN OTHER
COMMON EXCESS OF RETAINED COMPREHENSIVE TREASURY
(IN THOUSANDS) STOCK PAR VALUE EARNINGS INCOME (LOSS) STOCK TOTAL
---------------------------------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1999 $ 26,649 $ 2,957 $184,848 $ 714 $(11,650) $203,518
Comprehensive Income:
Net earnings 9,729 9,729
Foreign currency translation adjustment (1,305) (1,305)
--------
Total comprehensive income 8,424
Cash dividends paid (4,324) (4,324)
Employee Stock Ownership Plan (416) 1,448 1,032
Purchase of treasury stock (14,345) (14,345)
---------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2000 26,649 2,541 190,253 (591) (24,547) 194,305
Comprehensive Loss:
Net loss (2,485) (2,485)
Foreign currency translation adjustment (1,086) (1,086)
Unrealized loss on interest rate
swap agreements (2,045) (2,045)
--------
Total comprehensive loss (5,616)
Cash dividends paid (4,236) (4,236)
Exercise of employee stock options (295) 768 473
Tax benefits applicable to
the exercise of employee stock options 48 48
Employee Stock Ownership Plan (417) 1,130 713
---------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 26,649 1,877 183,532 (3,722) (22,649) 185,687
Comprehensive Loss:
Net loss (30,556) (30,556)
Foreign currency translation adjustment 1,295 1,295
Unrealized loss on interest rate
swap agreements, net of tax of $205 617 617
Minimum pension liability adjustment (771) (771)
--------
Total comprehensive loss (29,415)
Cash dividends paid (4,290) (4,290)
Exercise of employee stock options (291) 880 589
Tax benefits applicable to the exercise
of employee stock options 80 80
Employee Stock Ownership Plan 98 1,132 1,230
---------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2002 $ 26,649 $ 1,764 $148,686 $ (2,581) $(20,637) $153,881
---------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

F-5

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

Standard Motor Products, Inc. (the "Company") is engaged in the manufacture and
sale of automotive replacement parts. The consolidated financial statements
include the accounts of the Company and all subsidiaries in which the Company
has more than a 50% equity ownership. The Company's investments in
unconsolidated affiliates are accounted for on the equity method. All
significant intercompany items have been eliminated.

USE OF ESTIMATES

In conformity with generally accepted accounting principles, management of the
Company has 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,
inventory valuation reserves, depreciation and amortization of long-lived
assets, product liability, asbestos and litigation matters, deferred tax asset
valuation allowance and sales return allowances. Actual results could differ
from those estimates.

RECLASSIFICATIONS

Where appropriate, certain amounts in 2001 and 2000 have been reclassified to
conform with the 2002 presentation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.

MARKETABLE SECURITIES

At December 31, 2002 and 2001, held-to-maturity securities amounted to $7.2
million. Held-to-maturity securities consist primarily of U.S. Treasury Bills
and corporate debt securities which are reported at amortized cost which
approximates fair value. As of December 31, 2002, the held-to-maturity
securities mature within one year.

INVENTORIES

Inventories are stated at the lower of cost (determined by means of the
first-in, first-out method) or market.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Derivative Instruments are accounted for in accordance with SFAS No.133,
"Accounting for Derivative Instruments and Hedging Activities" and SFAS No.138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities."
These statements establish accounting and reporting standards requiring that
every derivative instrument be recorded on the balance sheet as either an asset
or liability measured at its fair value. For derivatives that have been formally
designated as a cash flow hedge (interest rate swap agreements), the effective
portion of changes in the fair value of the derivatives are recorded in "other
comprehensive income (loss)." Payment or receipts on interest rate swap
agreements are recorded in the "interest expense" caption in the statement of
operations.

PROPERTY, PLANT AND EQUIPMENT

These assets are recorded at cost and are depreciated using the straight-line
method of depreciation over the estimated useful lives as follows:

Estimated Life
--------------
Buildings and Improvements 10 to 33-1/2 years
Machinery and equipment 7 to 12 years
Tools, dies and auxiliary equipment 3 to 8 years
Furniture and fixtures 3 to 12 years
Computer software 3 to 10 years
Leasehold improvements 10 years or life of lease

GOODWILL, OTHER INTANGIBLE AND LONG-LIVED ASSETS

Goodwill is the excess of the purchase price over the fair value of identifiable
net assets acquired in business combinations accounted for as purchases. The
Company adopted Statement of Financial Accounting Standards ("SFAS 142") in
January 2002. Goodwill and certain other intangible assets having indefinite
lives, which were previously amortized on a straight-line basis over the periods
benefited, are no longer being 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.

Goodwill of a reporting unit is tested for impairment on an annual basis or
between annual tests if an event occurs or circumstances change that would
reduce the fair value of a reporting unit below its carrying amount. To the
extent the carrying amount of a reporting unit exceeds the fair value of the
reporting unit, the Company is required to perform a second step, as this is an
indication that the reporting unit goodwill may be impaired. In this step, the
Company compares the implied fair value of the reporting unit goodwill with the
carrying amount of the reporting unit goodwill.

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, in accordance with SFAS No. 141, "Business Combinations." The
residual fair value after this allocation is the implied fair value of the
reporting unit goodwill. Intangible 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, the Company
compares 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. Prior to the adoption of SFAS No.
142, goodwill was assessed for recoverability by determining whether the
amortization of the goodwill balance over its remaining

F-6

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

life could be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill and other intangible asset
impairment, if any, was measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of funds.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities are translated into U.S. dollars at year end exchange
rates and revenues and expenses are translated at average exchange rates 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.

REVENUE RECOGNITION

The Company recognizes revenues from product sales upon shipment to customers.
The Company estimates and records provisions for cash discounts, quantity
rebates, sales returns and warranties, in the period the sale is recorded, based
upon its prior experience.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The annual net postretirement benefit liability and related expense under the
Company's benefit plans are determined on an actuarial basis. Benefits are
determined primarily based upon employees' length of service.

INCOME TAXES

Income taxes are calculated using the asset and liability method in accordance
with the provisions of Statement of Financial Accounting Standards ("SFAS")
No.109, "Accounting for Income Taxes." 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. Deferred tax expense
(benefit) is the result of changes in the deferred tax asset and liability.

NET EARNINGS PER COMMON SHARE

The Company presents 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.

(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
Weighted average
common shares 11,915 11,775 11,934
Effect of stock options 93 -- 40
--------------------------------------------------------------------------------
Weighted average common
equivalent shares outstanding
assuming dilution 12,008 11,775 11,974
--------------------------------------------------------------------------------

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.

(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
Stock options 574 625 861
Convertible debentures 2,796 2,796 2,796
--------------------------------------------------------------------------------

STOCK OPTION PLANS

The Company accounts for its stock option plans in accordance with the
provisions of SFAS No.123 "Accounting for Stock Based Compensation." As
permitted by this statement, the Company has chosen to continue to apply the
intrinsic value-based method of accounting as prescribed by Accounting
Principles Board Opinion No.25, "Accounting for Stock Issued to Employees" and
related interpretations including SFAS interpretation No.44, "Accounting for
certain transactions involving stock compensation and interpretation of APB
No.25," issued in March 2001. Accordingly, no compensation expense has been
recognized for options granted because the exercise price is equal to the fair
value of the stock at the date of grant. As required, the Company provides pro
forma net income and pro forma earnings per share disclosures for stock option
grants, as if the fair value based method defined in SFAS No.123 had been
applied.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company places its cash investments with high quality
financial institutions and limits the amount of credit exposure to any one
institution. With respect to accounts receivable, such receivables are primarily
from warehouse distributors and major retailers in the automotive aftermarket
industry located in the United States. The Company performs ongoing credit
evaluations of its customers' financial conditions. Members of one marketing
group represent the Company's largest group of customers and accounted for
approximately 15%, 15% and 15% of consolidated net sales for the years ended
December 31, 2002, 2001 and 2000, respectively. One individual member of this
marketing group accounted for 13%, 10%, and 10% of net sales for the years ended
December 31, 2002, 2001 and 2000, respectively. The Company's five largest
individual customers, including members of this marketing group, accounted for
46%, 44% and 33% of net sales in 2002, 2001 and 2000, respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 1, 2002, the Company adopted the guidelines of the Emerging Issues
Task Force Issue No. 01-09, Accounting Consideration Given by a Vendor to a
Customer (Including Reseller of the Vendor's Products) ("EITF 01-09"). These
guidelines address when sales incentives and discounts should be recognized and
the accounting for certain costs incurred by a vendor on behalf of a customer,
as well as where the related revenues and expenses should be classified in the
financial statements. Historically, the Company has provided certain
consideration, including rebates, product and discounts to customers and treated
such costs as advertising, marketing and sales force expenses. Such costs are
now treated as a

F-7

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

reduction of revenues or as costs of sales. As a result, certain costs of
approximately $30.4 million and $25.4 million, have been reclassified from
selling, general and administrative expenses for the two years ended December
31, 2001 and 2000, respectively. These reclassifications had no effect on net
earnings.

SFAS 143

SFAS 145

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections
("Statement No. 145"). Statement No. 145 eliminates the automatic classification
of gain or loss on extinguishment of debt as an extraordinary item of income and
requires that such gain or loss be evaluated for extraordinary classification
under the criteria of Accounting Principles Board (APB)No. 30, Reporting Results
of Operations. Statement No. 145 also requires sales-lease-back accounting for
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and make various other technical corrections to
existing pronouncements. Statement No. 145 will be effective for the year ending
December 31, 2003. Effective January 1, 2003, we adopted the provisions of
Statement No. 145. As a result, the extraordinary loss on the early
extinguishment of debt of approximately $0.5 million and $2.8 million has been
reclassified to interest expense for December 2000 and 2001, respectively.

SFAS 146

FASB INTERPRETATION NO. 45

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("Interpretation"). This Interpretation elaborates on
the existing disclosure requirements for most guarantees, including loan
guarantees such as standby letters of credit. It also clarifies that at the time
a company issues a guarantee, the company must recognize an initial liability
for the fair market value of the obligations it assumes under that guarantee and
must disclose that information in its interim and annual financial statements.
The initial recognition and measurement provisions of the Interpretation apply
on a prospective basis to guarantees issued or modified after December 31, 2002.
We do not believe the adoption of this interpretation will have a material
effect on our financial statements.

SFAS 148

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements. Certain of the disclosure modifications are required for
fiscal years ending after December 15, 2002. We do not believe the adoption of
Statement No.148 will have a material effect on our financial statements.

FASB INTERPRETATION NO. 46

F-8

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

variable interests in variable interest entities created after January 31, 2003,
and to variable interests in variable interest entities obtained after January
31, 2003. The application of this Interpretation is not expected to have a
material effect on the Company's financial statements. The Interpretation
requires certain disclosures in financial statements issued after January 31,
2003 if it is reasonably possible that the Company will consolidate or disclose
information about variable interest entities when the Interpretation becomes
effective.

2. ACQUISITIONS

In January 2000, the Company completed the purchase of Vehicle Air Conditioning
Parts, located in England, which has subsequently been named "Four Seasons UK,
LTD." In July 2000, the Company completed the purchase of Automotive Heater
Exchange SRL in Massa, Italy. Such 2000 acquisitions had an immaterial effect on
net earnings.

In January 2002, the Company acquired the assets of a Temperature Control
business from Hartle Industries for $4.8 million. The assets acquired consist
primarily of property, plant and equipment, and inventory.

In April 2002, the Company acquired Carol Cable Limited, a manufacturer and
distributor of wire sets, based in England, for $1.7 million. The assets
acquired consist primarily of property, plant and equipment, and inventory. In
addition, during 2002 the Company acquired the remaining equity interest in SMP
Holdings Limited resulting in a $2.8 million increase in goodwill.

In May 2002, the Company purchased the aftermarket fuel injector business of
Sagem Inc., a subsidiary of Johnson Controls, for $10.5 million. Sagem Inc. is a
basic manufacturer of fuel injectors, and was the primary supplier to the
Company prior to its acquisition. The assets acquired consist primarily of
property, plant and equipment, and inventory. The purchase was partially
financed by the seller ($5.4 million to be paid over a two-year period), with
the remaining funds being provided under the Company's revolving credit
facility.

Such 2002 acquisitions had an immaterial effect on net earnings.

3. SALE OF ACCOUNTS RECEIVABLE

The Company sold certain accounts receivable through its wholly-owned
subsidiary, SMP Credit Corp., a qualifying special-purpose corporation. In May
1999 SMP Credit Corp. and an independent financial institution entered into a
three year agreement whereby SMP Credit Corp. could sell up to a $25 million
undivided ownership interest in a designated pool of certain of these eligible
receivables. This agreement was terminated in 2001 as part of the new credit
facility described in Note 8. At December 31, 2000, net accounts receivables
amounting to $25 million had been sold under this agreement. These sales were
reflected as reductions of trade accounts receivable and the related fees and
discounting expense were recorded as other expense (Note 14).

4. INVENTORIES
December 31,
---------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Finished goods $141,487 $141,799
Work in process 2,417 3,155
Raw materials 30,881 32,337
--------------------------------------------------------------------------------
Total inventories $174,785 $177,291
--------------------------------------------------------------------------------

5. PROPERTY, PLANT AND EQUIPMENT
December 31,
----------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Land, buildings and improvements $ 66,200 $ 60,665
Machinery and equipment 120,655 109,617
Tools, dies and auxiliary equipment 19,962 17,815
Furniture and fixtures 25,831 26,211
Computer software 12,120 11,663
Leasehold improvements 7,164 7,450
Construction in progress 4,169 6,440
-------- ---------
256,101 239,861
Less accumulated depreciation
and amortization 152,279 138,215
--------------------------------------------------------------------------------
Total property, plant and
equipment, net $103,822 $101,646
--------------------------------------------------------------------------------

Depreciation expense was $16.1 million, $15.3 million and $15.4 million for
2002, 2001 and 2000, respectively.

6. GOODWILL

Effective January 1, 2002, the company adopted the provisions of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS No. 142"). In accordance with SFAS No. 142, goodwill is no longer being
amortized, but instead, is subject to an annual review for potential impairment.
Using the discounted cash flows method, based on our weighted average cost of
capital, and market multiples, the company reviewed the fair values of each
reporting unit. The decline in economic and market conditions, higher
integration costs than anticipated and the general softness in the automotive
aftermarket caused a decrease in the fair values of certain reporting units. As
a result, we recorded an impairment loss on goodwill as a cumulative effect of
accounting change of $18.3 million, net of tax, or $1.55 per diluted share
during the first quarter of 2002. The impairment loss relates to the European
and Temperature Control Segments for which charges of $10.9 million and $7.4
million, were recorded, respectively.

During the fourth quarter of 2002, the Company completed its review of goodwill
for potential impairment. After giving consideration to 2002 losses and budgeted
2003 losses, the Company wrote-off the remaining goodwill associated with Engine
Management reporting unit of the European Segment. With respect to the European
Segment, approximately $1.4 million of goodwill remains on the December 31, 2002
balance sheet, all of which pertains to the Temperature Control reporting unit.

F-9

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

Engine Temperature
(IN THOUSANDS) Management Control Europe Total
--------------------------------------------------------------------------------
Balance as of
December 31,2001 $ 10,490 $ 14,713 $ 12,837 $ 38,040
Goodwill acquired -- -- 2,800 2,800
Change in accounting
principle -- (9,891) (10,932) (20,823)
Impairment loss -- -- (3,334) (3,334)
--------------------------------------------------------------------------------
Balance as of
December 31,2002 $ 10,490 $ 4,822 $ 1,371 $ 16,683
--------------------------------------------------------------------------------

Upon adoption of SFAS No. 142, our earnings before cumulative effect of
accounting change and net earnings for basic and diluted earnings per share
adjusted to exclude goodwill amortization expense (net of taxes) were as
follows:

Year Ended
December 31,
-------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2002 2001 2000
--------------------------------------------------------------------------------
Reported earnings (loss) before
cumulative effect of accounting
change $ (12,206) $ (2,485) $ 9,729
Add back: goodwill amortization
expense, net of tax -- 2,727 2,574
--------------------------------------------------------------------------------
Adjusted earnings (loss) before
cumulative effect of accounting
change $ (12,206) $ 242 $ 12,303
--------------------------------------------------------------------------------
Basic earnings per share:
Reported basic earnings per share
before cumulative effect of
accounting change $ (1.03) $ (0.21) $ 0.82
Add back: goodwill amortization
expense, net of tax -- 0.23 0.22
--------------------------------------------------------------------------------
Adjusted basic earnings (loss)
per share before cumulative effect
of accounting change $ (1.03) $ 0.02 $ 1.04
--------------------------------------------------------------------------------
Diluted earnings (loss) per share:
Reported diluted earnings (loss)
per share before cumulative effect
of accounting change $ (1.01) $ (0.21) $ 0.81
Add back: goodwill amortization
expense, net of tax -- 0.23 0.21
--------------------------------------------------------------------------------
Adjusted diluted earnings (loss)
per share before cumulative effect
of accounting change $ (1.01) $ 0.02 $ 1.02
--------------------------------------------------------------------------------
Reported net earnings (loss) $ (30,556) $ (2,485) $ 9,729
Add back: goodwill amortization
expense, net of tax -- 2,727 2,574
--------------------------------------------------------------------------------
Adjusted net earnings (loss) $ (30,556) $ 242 $ 12,303
--------------------------------------------------------------------------------
Basic net earnings (loss) per share:
Reported basic net earnings
(loss) per share $ (2.57) $ (0.21) $ 0.82
Add back: goodwill amortization
expense, net of tax -- 0.23 0.22
--------------------------------------------------------------------------------
Adjusted basic net earnings (loss)
per share $ (2.57) $ 0.02 $ 1.04
--------------------------------------------------------------------------------
Diluted net earnings (loss)
per share:
Reported diluted net earnings
(loss) per share $ (2.54) $ (0.21) $ 0.81
Add back: goodwill amortization
expense, net of tax -- 0.23 0.21
--------------------------------------------------------------------------------
Adjusted diluted net earnings
(loss) per share $ (2.54) $ 0.02 $ 1.02
--------------------------------------------------------------------------------

7. OTHER ASSETS
December 31,
------------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Marketable securities $ -- $ 7,200
Unamortized customer supply agreements 1,419 1,892
Equity in joint ventures 2,202 2,149
Deferred income taxes 18,692 12,653
Deferred loan costs 4,472 5,389
Other 15,108 11,511
--------------------------------------------------------------------------------
Total other assets $ 41,893 $ 40,794
--------------------------------------------------------------------------------

Included in Other is a preferred stock investment in a customer of the Company.
Net sales to such customer amounted to $76.1 million, $57.9 million and $57.4
million in 2002, 2001 and 2000, respectively.

8. CREDIT FACILITIES AND LONG-TERM DEBT (AS RESTATED)

The Company, effective April 27, 2001 entered into an agreement with GE Capital
Corp. and a syndicate of lenders for a new secured revolving credit facility.
The former unsecured revolving credit facility was set to expire on November 30,
2001. The term of the new credit agreement is for a period of five years and
provides for a line of credit up to $225 million. The initial proceeds were used
to refinance approximately $97 million of the outstanding indebtedness under the
Company's former bank line of credit, a 7.56% senior note of $52 million, a $25
million accounts receivable sales arrangement and a Canadian Credit Facility of
$5 million. Availability under the new credit facility is based on a formula of
eligible accounts receivable, eligible inventory and eligible fixed assets.
Direct borrowings bear interest at the Prime Rate plus the applicable margin (as
defined) or the LIBOR Rate plus the applicable margin (as defined), at the
option of the Company. At December 31, 2002 and 2001, the interest rate on the
Company's revolving credit facilities was 3.4% and 4.3%, respectively.
Outstanding borrowings under this revolving credit facility, classified as
current liabilities, was $76.2 million and $106.8 million at December 31, 2002
and 2001, respectively. Borrowings are collateralized by accounts receivable,
inventory and fixed assets of the Company and its subsidiaries. The terms of the
new revolving credit facility contain, among other provisions, requirements of
maintaining defined levels of tangible net worth and specific limits or
restrictions on additional indebtedness, capital expeditures, liens and
acquisitions. The Company was in compliance with the covenants at December 31,
2002.

In addition, a foreign subsidiary of the Company has a revolving credit
facility. The amount of short-term bank borrowings outstanding under that
facility was $3.4 million and $4.1 million at December 31, 2002 and 2001,
respectively. At December 31, 2002, the foreign subsidiary was not in compliance
with certain covenants, for which it received a waiver. The weighted average
interest rates on these borrowings at December 31, 2002 and 2001 were 6.5% and
6.4%, respectively.

On July 26, 1999, the Company completed a public offering of convertible
subordinated debentures amounting to $90 million. The Convertible Debentures
carry an interest rate of 6.75%, payable semi-annually, and will mature on July
15, 2009. The Debentures are convertible into approximately 2,796,000 shares of
the Company's common stock. The Company may, at its option, redeem some or all
of the Debentures at any time on or after July 15, 2004, for a redemption price
equal to the issuance price plus accrued interest. In addition, if a change in
control, as defined, occurs at the Company, the Company will be required to make
an offer to purchase the convertible debentures at a purchase price equal to
101% of their aggregate principal amount, plus accrued interest.

Long-term debt consists of:
December 31,
----------------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
6.75% convertible
subordinated debentures $ 90,000 $ 90,000
Other 7,299 5,060
--------------------------------------------------------------------------------
97,299 95,060
Less current portion 4,108 1,784
--------------------------------------------------------------------------------
Total non-current portion of
long-term debt $ 93,191 $ 93,276
--------------------------------------------------------------------------------

F-10

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

Maturities of long-term debt during the five years ending December 31, 2003
through 2007 are $4.1 million, $2.9 million, $0.1 million, $0.1 million and $0.1
million, respectively.

9. INTEREST RATE SWAP AGREEMENTS

The Company does not enter into financial instruments for trading or speculative
purposes. The principal financial instruments used for cash flow hedging
purposes are interest rate swaps.

In July 2001, the Company entered into interest rate swap agreements to manage
its exposure to interest rate changes. The swaps effectively convert a portion
of the Company's variable rate debt under the revolving credit facility to a
fixed rate, without exchanging the notional principal amounts. At December 31,
2002, the Company had two outstanding interest rate swap agreements (in an
aggregate notional pricipal amount of $75 million), one of which matured in
January 2003 and the other is scheduled to mature in January 2004. Under these
agreements the Company receives a floating rate based on the LIBOR interest
rate, and pays a fixed rate of 4.92% on a notional amount of $45 million and
4.37% on a notional amount of $30 million. If, at any time, the swaps are
determined to be ineffective, in all or in part, due to changes in the interest
rate swap agreements, the fair value of the portion of the interest rate swap
determined to be ineffective will be recognized as gain or loss in the statement
of operations in the period. It is not expected that any gain or loss will be
reported in the statement of operations during the year ending December 31, 2003
nor was any recorded in 2002 or 2001.

10. STOCKHOLDERS' EQUITY

The Company has authority to issue 500,000 shares of preferred stock, $20 par
value, and the Board of Directors is vested with the authority to establish and
designate series of preferred, to fix the number of shares therein and the
variations in relative rights as between series. On December 18, 1995, the 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 the Company's 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, 2002.

On January 17, 1996, the Board of Directors adopted a Shareholder Rights Plan
(Plan). Under the Plan, the Board declared a dividend of one Preferred Share
Purchase Right (Right) for each outstanding common share of the Company. The
dividend was payable on March 1, 1996, to the shareholders of record as of
February 15, 1996. The Rights are attached to and automatically trade with the
outstanding shares of the Company's common stock.

The Rights will become exercisable only in the event that any person or group of
affiliated persons becomes a holder of 20% or more of the Company's outstanding
common shares, or commences a tender or exchange offer which, if consummated,
would result in that person or group of affiliated persons owning at least 20%
of the Company's outstanding common shares. Once the rights become exercisable
they entitle all other shareholders to purchase, by payment of an $80.00
exercise price, one one-thousandth of a share of Series A Participating
Preferred Stock, subject to adjustment, with a value of twice the exercise
price. In addition, at any time after a 20% position is acquired and prior to
the acquisition of a 50% position, the Board of Directors may require, in whole
or in part, each outstanding Right (other than Rights held by the acquiring
person or group of affiliated persons) to be exchanged for one share of common
stock or one one-thousandth of a share of Series A Preferred Stock. The Rights
may be redeemed at a price of $0.001 per Right at any time prior to their
expiration on February 28, 2006.

During the years 1998 through 2000, the Board of Directors authorized multiple
repurchase programs under which the Company could repurchase shares of its
common stock. During such years, $26.7 million (in aggregate) of common stock
has been repurchased to meet present and future requirements of the Company's
stock option programs and to fund the Company's ESOP. As of December 31, 2002,
the Company has Board authorization to repurchase additional shares at a maximum
cost of $1.7 million. During 2002 and 2001, the Company did not repurchase any
shares of its common stock.

11. STOCK OPTIONS

The Company has principally two fixed stock-based compensation plans. Under the
1994 Omnibus Stock Option Plan, as amended, the Company is authorized to issue
1,500,000 stock options. The options become exercisable over a three to five
year period and expire at the end of five years following the date they become
exercisable. Under the 1996 Independent Directors' Stock Option Plan, the
Company is authorized to issue 50,000 stock options. The options become
exercisable one year after the date of grant and expire at the end of ten years
following the date of grant. At December 31, 2002, in aggregate 1,266,441 shares
of authorized but unissued common stock were reserved for issuance under the
Company's stock option plans.

As permitted under SFAS No.123, the Company continues to apply the provisions of
APB Opinion No. 25 for stock-based awards granted to employees. Accordingly, no
compensation cost has been recognized for the fixed stock option plans. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value method of SFAS No.123, the Company's net
earnings (loss) per share would have changed to the pro forma amounts as
follows:

(DOLLARS IN THOUSANDS EXCEPT PER SHARE 2002 2001 2000
--------------------------------------------------------------------------------
Net earnings(loss) As reported $(30,556) $(2,485) $9,729
Pro forma $(30,791) $(2,697) $8,708
Basic earnings(loss) As reported $ (2.57) $ (0.21) $ 0.82
per share Pro forma $ (2.59) $ (0.23) $ 0.73
Diluted earnings As reported $ (2.54) $ (0.21) $ 0.81
(loss) per share Pro forma $ (2.56) $ (0.23) $ 0.72

F-11

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

The fair value of each option was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
--------------------------------------------------------------------------------
2002 2001 2000
--------------------------------------------------------------------------------
Expected option life 3.9 YEARS 4.0 years 4.3 years
Expected stock volatility 38.7% 38.6% 39.1%
Expected dividend yield 2.6% 2.8% 3.8%
Risk-free interest rate 1.8% 4.2% 4.6%
Fair value of option $4.07 $3.71 $2.53
--------------------------------------------------------------------------------

A summary of the status of the Company's stock option plans follow:

2002 2001 2000
--------------------------------------------------------------------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
(SHARES IN THOUSANDS) SHARES PRICE Shares Price Shares Price
--------------------------------------------------------------------------------
Outstanding at
beginning of year 1,011 $ 16.76 1,189 $16.60 808 $20.40
Granted 10 14.43 10 13.05 498 10.73
Exercised (54) 9.74 (55) 9.29 -- --
Forfeited (57) 16.91 (133) 18.18 (117) 17.78
--------------------------------------------------------------------------------
Outstanding at
end of year 910 $ 17.14 1,011 $16.76 1,189 $16.60
--------------------------------------------------------------------------------
Options exercisable at
end of year 748 671 526
--------------------------------------------------------------------------------
STOCK OPTIONS OUTSTANDING
--------------------------------------------------------------------------------
Shares Weighted-Average
Range of Outstanding Remaining Weighted-Average
Exercise Prices at 12/31/02 Contractual Life (Years) Exercise Price
--------------------------------------------------------------------------------
$ 6.56 - $11.29 325 5.3 $ 9.93
$13.05 - $16.94 115 2.3 $15.83
$20.50 - $24.84 470 2.5 $22.43
--------------------------------------------------------------------------------
STOCK OPTIONS EXERCISABLE
--------------------------------------------------------------------------------
Range of Shares Exercisable Weighted-Average
Exercise Prices at 12/31/02 Exercise Price
$ 6.56 - $24.84 748 $18.55
--------------------------------------------------------------------------------

12. RETIREMENT BENEFIT PLANS

The Company had a defined benefit pension plan covering certain former employees
of the Company's former Brake business. During 2002, the Company settled its
benefit obligation by purchasing non-participating annuity contracts. The
following table represents a reconciliation of the beginning and ending benefit
obligation, the fair value of plan assets and the funded status of the plan:

December 31,
----------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 8,813 $ 8,957
Interest cost 368 629
Actuarial loss 1,096 93
Settlement (9,793) --
Benefits paid (484) (866)
--------------------------------------------------------------------------------
Benefit obligation at end of year $ -- $ 8,813
--------------------------------------------------------------------------------
Fair value of plan assets at
beginning of year $ 11,062 $ 12,063
Settlement (9,793) --
Actual return on plan assets (39) (135)
Benefits paid (484) (866)
--------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 746 $ 11,062
--------------------------------------------------------------------------------
Funded status $ 746 $ 2,249
Unrecognized net actuarial gain (loss) 56 (1,386)
--------------------------------------------------------------------------------
Prepaid benefit cost $ 802 $ 863
--------------------------------------------------------------------------------

Weighted average assumptions are as follows:

December 31,
-------------------------------------
2002 2001 2000
--------------------------------------------------------------------------------
Discount rates 6.50% 7.25% 7.50%
Expected long-term rate
of return on assets 8.00% 8.00% 8.00%
--------------------------------------------------------------------------------

Components of net periodic (benefit) cost follow:

December 31,
-------------------------------------
(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
Interest cost $368 $ 629 $ 658
Return on assets (530) (928) (988)
Settlement 228 -- --
Recognized actuarial (gain) loss (5) (112) (127)
--------------------------------------------------------------------------------
Net periodic (benefit) cost $ 61 $(411) $(457)
--------------------------------------------------------------------------------

In addition, the Company participates in several multi employer plans which
provide defined benefits to substantially all unionized workers. The Multi
employer Pension Plan Amendments Act of 1980 imposes certain liabilities upon
employers associated with multi employer plans. The Company has not received
information from the plans' administrators to determine its share, if any, of
unfunded vested benefits.

The Company and certain of its subsidiaries also maintain various defined
contribution plans, which include profit sharing and provide retirement benefits
for other eligible employees.

The provisions for retirement expense in connection with the plans are as
follows:

Multi- Defined Contribution
employer Plans and Other Plans
--------------------------------------------------------------------------------
Years ended December 31,
2002 $306,000 $2,553,000
2001 299,000 2,449,000
2000 344,000 2,319,000

The
Company has an Employee Stock Ownership Plan and Trust for employees who are not
covered by a collective bargaining agreement. 75,000 shares each were granted to
employees during 2002, 2001 and 2000, under the terms of the ESOP. These shares
were funded directly from treasury stock.

In fiscal 2000, the Company created an employee benefits trust to which it
contributed 750,000 shares of treasury stock. The Company is authorized to
instruct the trustees to distribute such shares toward the satisfaction of the
Company's future obligations under employee benefit plans. The shares heldin
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.

The provision for expense in connection with the ESOP was approximately $1.2
million in 2002, $0.7 million in 2001 and $1.0 million in 2000.

In August 1994 the Company established an unfunded Supplemental Executive
Retirement Plan (SERP) for key employees of the Company. Under the plan, these
employees may elect to defer a portion of their compensation and, in addition,
the Company may at its discretion make contributions to the plan on behalf of
the employees. Such contributions

F-12

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

were $46,000, $37,000 and $24,000 in 2002, 2001, and 2000, respectively.

On October 1, 2001, the Company adopted a second unfunded SERP. The SERP is a
defined benefit plan pursuant to which the Company will pay supplemental pension
benefits to certain key employees upon retirement based upon the employees'
years of service and compensation.

December 31,
-----------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 1,342 $ --
Initial unrecognized prior service cost -- 1,270
Service cost 211 49
Interest cost 140 23
Actuarial loss 582 --
--------------------------------------------------------------------------------
Benefit obligation at end of year $ 2,275 $ 1,342
--------------------------------------------------------------------------------

Funded status $(2,275) $(1,342)
Unrecognized prior service cost 1,132 1,242
Minimum pension liability (1,298) (830)
Unrecognized net actuarial gain 538
--------------------------------------------------------------------------------
Accrued benefit cost $(1,903) $ (930)
--------------------------------------------------------------------------------

Components of net periodic benefit cost follow:

December 31,
------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Service cost $211 $ 49
Interest cost 140 23
Amortization of prior service cost 110 27
Amortization of unrecognized loss 44 --
--------------------------------------------------------------------------------
Net periodic benefit cost $505 $ 99
--------------------------------------------------------------------------------

Actuarial assumptions used to determine costs and benefit obligations are as
follows:

December 31,
-------------------------------
2002 2001
--------------------------------------------------------------------------------
Discount rates 6.50% 7.25%
Salary increase 4% 4%
--------------------------------------------------------------------------------

13. POSTRETIREMENT MEDICAL BENEFITS

The Company provides certain medical and dental care benefits to eligible
retired employees. The Company's current policy is to fund the cost of the
health care plans on a pay-as-you-go basis.

The following table represents a reconciliation of the beginning and ending
benefit obligation and the funded status of the plan:

December 31,
------------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 20,484 $ 17,447
Service cost 1,765 1,500
Interest cost 1,517 1,314
Actuarial (gain) loss 3,375 1,180
Benefits paid (953) (957)
--------------------------------------------------------------------------------
Benefit obligation at end of year $ 26,188 $ 20,484
--------------------------------------------------------------------------------
Funded status $(26,188) $(20,484)
Unrecognized prior service cost 790 914
Unrecognized net actuarial gain 846 (2,582)
--------------------------------------------------------------------------------
Accrued benefit cost $(24,552) $(22,152)
--------------------------------------------------------------------------------

Components of net periodic benefit cost follow:

December 31,
----------------------------------
(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
Service cost $ 1,765 $ 1,500 $ 1,377
Interest cost 1,517 1,314 1,152
Amortization of prior service cost 124 124 124
Recognized actuarial gain (53) (232) (275)
--------------------------------------------------------------------------------
Net periodic benefit cost $ 3,353 $ 2,706 $ 2,378
--------------------------------------------------------------------------------

Actuarial assumptions used to determine costs and benefit obligations are as
follows:
2002 2001 2000
--------------------------------------------------------------------------------
Discount Rate 6.5% 7.25% 7.50%
Current medical cost trend rate 12% 9% 10%
Current dental cost trend rate 5% 5% 5.5%
Ultimate medical cost trend rate 5% 5% 5%
Year trend rate declines to ultimate 2005 2005 2005
--------------------------------------------------------------------------------

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 2002:

1-Percentage- 1-Percentage-
(IN THOUSANDS) Point Increase Point Decrease
--------------------------------------------------------------------------------
Effect on total of service and
interest cost components $ 345 $ (277)
Effect on post retirement
benefit obligation $ 2,154 $ (1,787)
--------------------------------------------------------------------------------

14. OTHER INCOME (EXPENSE), NET

(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
Interest and dividend income $ 1,338 $ 1,336 $ 1,038
Loss on sale of accounts
receivable (Note 3) -- (484) (1,567)
Income from joint ventures 352 844 702
Gain on disposal of property,
plant and equipment 97 265 99
Other - net 1,400 802 178
--------------------------------------------------------------------------------
Total other income (expense), net $ 3,187 $ 2,763 $ 450
--------------------------------------------------------------------------------

15. INCOME TAXES

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

(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
Current:
Domestic $ 2,422 $ 1,124 $ 896
Foreign 2,948 1,673 2,523
--------------------------------------------------------------------------------
Total Current 5,370 2,797 3,419
--------------------------------------------------------------------------------
Deferred:
Domestic 3,350 (3,408) (1,103)
Foreign (800) (220) 206
--------------------------------------------------------------------------------
Total Deferred 2,550 (3,628) (897)
--------------------------------------------------------------------------------
Total income tax provision $ 7,920 $ (831) $ 2,522
--------------------------------------------------------------------------------

The Company has not provided for federal income taxes on the undistributed
income of its foreign subsidiaries because of the availability of foreign tax
credits and/or the Company's intention to permanently reinvest such
undistributed income. Cumulative undistributed earnings of foreign subsidiaries
on which no United States income tax has been provided were $10.7 million at the
end of 2002, $28.2 million

F-13

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

at the end of 2001 and $27.5 million at the end of 2000.

Earnings (loss) before income taxes for foreign operations (excluding Puerto
Rico) amounted to approximately ($5) million, $3 million, and $4 million, in
2002, 2001, and 2000, respectively. U.S. taxes on the earnings of the Puerto
Rican subsidiary are largely eligible for tax credits against U.S. income taxes
(phased out effective 2005) and are partially exempt from Puerto Rican income
taxes under a tax exemption grant currently being renewed and expected to expire
in 2016. The tax benefits of the exemption, reduced by a minimum tollgate tax
instituted in 1993, amounted to $0.13 per share share in 2002 (2001 -$0.12; 2000
- $0.23).

Reconciliations between the U.S. federal income tax rate and the Company's
effective income tax rate as a percentage of earnings from continuing operations
before income taxes are as follows:

2002 2001 2000
--------------------------------------------------------------------------------
U.S. federal income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate
resulting from:
State and local income taxes, net
of federal income tax benefit 4.1 21.4 1.2
Non-deductible items, net 3.4 60.5 0.1
Foreign tax rate differential (2.4) (91.9) (15.3)
Change in foreign valuation allowance 16.4 -- --
--------------------------------------------------------------------------------
Effective tax rate 56.5% 25.0% 21.0%
--------------------------------------------------------------------------------

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

December 31,
-------------------------
(IN THOUSANDS) 2002 2001
--------------------------------------------------------------------------------
Deferred tax assets:
Inventories $ 6,025 $ 6,044
Allowance for customer returns 6,152 7,069
Postretirement benefits 10,390 8,751
Allowance for doubtful accounts 1,442 1,587
Accrued salaries and benefits 3,339 2,938
Net operating loss and tax credit
carry forwards 14,084 15,390
Goodwill 3,578 --
Accrued asbestos liabilities 10,765 1,497
Other 5,580 5,054
--------------------------------------------------------------------------------
61,355 48,330
--------------------------------------------------------------------------------
Valuation allowance (21,698) (14,571)
--------------------------------------------------------------------------------
Total $ 39,657 $ 33,759
--------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ 7,565 $ 6,702
Promotional costs 1,106 1,036
Other 81 1,052
--------------------------------------------------------------------------------
Total 8,752 8,790
--------------------------------------------------------------------------------
Net deferred tax assets $ 30,905 $ 24,969
--------------------------------------------------------------------------------

During 2002 the Company increased the valuation allowance by $7.1 million. At
December 31, 2002, the Company has approximately $15.8 million of domestic and
foreign net operating loss carry forwards of which $6.8 million will expire in
2021 and the remainder (foreign) have an indefinite carry forward period. The
Company also has foreign tax credit carry forwards of approximately $2.1 million
which expire between 2003 and 2007. The Company also has alternative minimum tax
credit carry forwards of approximately $6.6 million for which there is no
expiration date.

The Company believes that it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the net deferred
tax assets. However, if the Company is unable to generate sufficient taxable
income in the future through its operations, increases in the valuation
allowance may be required.

16. INDUSTRY SEGMENT AND GEOGRAPHIC DATA

Under the provisions of SFAS No. 131, the Company has three reportable operating
segments which are the major product areas of the automotive aftermarket in
which the Company competes. Engine Management consists primarily of ignition and
emission parts, wire and cable, and fuel system parts. Temperature Control
consists primarily of compressors, other air conditioning parts and heater
parts. The third reportable operating segment is Europe which consists of both
Engine Management and Temperature Control reporting units. 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:

For the year ended December 31, 2002
-------------------------------------------------------
Engine Temperature European Other Consoli-
(IN THOUSANDS) Management Control Group Adjustments dated
--------------------------------------------------------------------------------

Net Sales $303,112 $255,088 $ 36,028 $ 4,209 $598,437
--------------------------------------------------------------------------------
Depreciation and
amortization 8,660 5,484 902 1,082 16,128
--------------------------------------------------------------------------------
Operating income 41,844 10,095 (10,464) (16,407) 25,068
--------------------------------------------------------------------------------
Investment in equity
affiliates -- -- 185 2,017 2,202
--------------------------------------------------------------------------------
Capital expenditures 3,465 2,066 1,831 236 7,598
--------------------------------------------------------------------------------
Total Assets $247,318 $157,343 $ 30,728 $ 55,369 $490,758
--------------------------------------------------------------------------------

For the year ended December 31, 2001
-------------------------------------------------------
Engine Temperature European Other Consoli-
(IN THOUSANDS) Management Control Group Adjustments dated
--------------------------------------------------------------------------------

Net Sales $285,498 $269,856 $33,449 $ 2,849 $591,652
--------------------------------------------------------------------------------
Depreciation and
amortization 9,649 6,462 1,961 837 18,909
--------------------------------------------------------------------------------
Operating income 26,432 3,624 (1,718) (13,215) 15,123
--------------------------------------------------------------------------------
Investment in equity
affiliates 105 -- 166 1,878 2,149
--------------------------------------------------------------------------------
Capital expenditures 4,724 6,781 775 1,460 13,740
--------------------------------------------------------------------------------
Total Assets $233,564 $182,083 $40,407 $53,375 $509,429
--------------------------------------------------------------------------------

For the year ended December 31, 2000
-------------------------------------------------------
Engine Temperature European Other Consoli-
(IN THOUSANDS) Management Control Group Adjustments dated
--------------------------------------------------------------------------------

Net Sales $288,240 $270,848 $38,310 $ 3,994 $601,392
--------------------------------------------------------------------------------
Depreciation and
amortization 10,293 6,116 1,902 611 18,922
--------------------------------------------------------------------------------
Operating income 37,974 11,513 517 (19,293) 30,711
--------------------------------------------------------------------------------
Investment in equity
affiliates 105 -- 96 1,755 1,956
--------------------------------------------------------------------------------
Capital expenditures1 8,914 6,454 380 904 16,652
--------------------------------------------------------------------------------
Total Assets $265,336 $224,410 $39,321 $20,329 $549,396
--------------------------------------------------------------------------------

F-14

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

Other Adjustments consist of items pertaining to the corporate headquarters
function, as well as our Canadian business unit that does not meet the criteria
of a reportable operating segment under SFAS No.131.

(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
United States $512,055 $515,322 $521,593
Europe 36,028 33,449 38,310
Canada 32,188 28,811 27,942
Other Foreign 18,166 14,070 13,547
--------------------------------------------------------------------------------
Total $598,437 $591,652 $601,392
--------------------------------------------------------------------------------

LONG LIVED ASSETS
------------------------------
(IN THOUSANDS) 2002 2001 2000
--------------------------------------------------------------------------------
United States $109,778 $118,455 $122,825
Europe 7,153 17,301 17,573
Canada 2,450 2,829 3,511
Other Foreign 1,124 1,101 1,312
--------------------------------------------------------------------------------
Total $120,505 $139,686 $145,221
--------------------------------------------------------------------------------

Revenues are attributed to countries based upon the location of the customer.

17. FAIR VALUE OF FINANCIAL INSTRUMENTS
(AS RESTATED)

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

CASH AND CASH EQUIVALENTS

The carrying amount approximates fair value because of the short maturity of
those instruments.

MARKETABLE SECURITIES

The fair values of investments are estimated based on quoted market prices for
these or similar instruments.

LONG-TERM DEBT

The fair value of the Company's long-term debt is estimated based on quoted
market prices or current rates offered to the Company for debt of the same
remaining maturities.

INTEREST RATE SWAPS

The fair value of the Company's financial instruments are based on market quotes
and represents the net amount required to terminate the position, taking into
consideration market rates and counterparty credit risk. The estimated fair
values of the Company's financial instruments are as follows:

DECEMBER 31, 2002 CARRYING FAIR
(IN THOUSANDS) AMOUNT VALUE
--------------------------------------------------------------------------------
Cash and cash equivalents $ 9,690 $ 9,690
Marketable securities 7,200 7,200
Long-term debt (97,299) (80,188)
Interest rate swaps (1,905) (1,905)
--------------------------------------------------------------------------------

DECEMBER 31, 2001 CARRYING FAIR
(IN THOUSANDS) AMOUNT VALUE
--------------------------------------------------------------------------------
Cash and cash equivalents $ 7,496 $ 7,496
Marketable securities 7,200 7,200
Long-term debt (95,060) (70,730)
Interest rate swaps (2,045) (2,045)
--------------------------------------------------------------------------------

18. COMMITMENTS AND CONTINGENCIES

Total rent expense for the three-years ended December 31, 2002 was as follows:
REAL
(IN THOUSANDS) TOTAL ESTATE OTHER
--------------------------------------------------------------------------------
2002 $8,434 $6,282 $2,152
2001 8,673 6,508 2,165
2000 9,797 7,217 2,580
--------------------------------------------------------------------------------

At December 31, 2002, the Company is obligated to make
minimum rental payments through 2011, under operating
leases which are as follows :

(IN THOUSANDS)
--------------------------------------------------------------------------------
2003 ....................$7,706 2006 .............. 3,736
2004 .................... 6,320 2007 .............. 2,558
2005 .................... 5,336 Thereafter .............. 4,112
--------------------------------------------------------------------------------
Total ..................$29,768
--------------------------------------------------------------------------------

The Company also has lease and sub-lease agreements in place for various
properties under its control. The Company expects to receive operating lease
payments from lessees during the five years ending December 31, 2003 through
2007 of $1.0 million, $0.6 million, $0.6 million, $0.6 million, and $0.6
million, respectively.

The Company generally warrants its products against certain manufacturing and
other defects. These product warranties are provided for specific periods of
time of the product depending on the nature of the product. As of December 31,
2002 and 2001, the Company has accrued $10.4 million and $12.7 million,
respectively, for estimated product warranty claims. The accrued product
warranty costs are based primarily on historical experience of actual warranty
claims. Warranty claims expense for each of the years 2002, 2001, and 2000 were:
$46.7 million, $52.2 million, and $55.1 million, respectively.

The following table provides the changes in the Company's product warranties:

(IN THOUSANDS)
--------------------------------------------------------------------------------
January 1, 2002 $12,743
Liabilities accrued for current year sales 46,671
Settlements of warranty claims (49,054)
--------------------------------------------------------------------------------
December 31, 2002 $10,360
--------------------------------------------------------------------------------

At December 31, 2002, the Company had outstanding letters of credit aggregating
approximately $3.5 million. 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.

The Company has entered into Change in Control arrangements with two key
officers of the Company. In the event of a Change of Control (as defined), each
executive will receive severance payments, (as defined), and certain other
benefits.

On January 28, 2000, a former significant customer of the Company currently
undergoing a Chapter 7 liquidation in U.S. Bankruptcy Court, filed claims
against a number of its former suppliers, including the Company. The claim
against the Company alleges $0.5 million of preferential payments in the 90 days
prior to the related bankruptcy petition. The claim pertaining to the
preferential payments was settled for an immaterial amount during the second
quarter of 2002.

F-15

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

In addition, this former customer seeks $9.4 million from the Company for a
variety of claims including antitrust, breach of contract, breach of warranty
and conversion. These latter claims arise out of allegations that this customer
was entitled to various discounts, rebates and credits after it filed for
bankruptcy. The Company has purchased insurance with respect to the actions. On
August 22, 2002, the court dismissed the antitrust claims. The Company believes
that these remaining matters will not have a material adverse effect on the
Company's consolidated financial statements taken as a whole.

In 1986, the Company acquired a brake business, which it subsequently sold in
March 1998 and which is accounted for as a discontinued operation in the
accompanying consolidated financial statements. When the Company originally
acquired this brake business, the Company 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, the Company agreed to assume the liabilities for all new claims filed
on or after September 1, 2001. The ultimate exposure to the Company will depend
upon the number of claims filed against the Company on or after September 1,
2001 and the amounts paid for indemnity and defense thereof. At December 31,
2001, approximately 100 cases were outstanding for which the Company was
responsible for any related liabilities. At December 31, 2002, the number of
cases outstanding for which the Company was responsible for related liabilities
increased to approximately 2,500, which include approximately 1,600 cases filed
in December 2002 in Mississippi. The Company believes that these Mississippi
cases filed against the Company in December 2002 were due in large part to
potential plaintiffs accelerating the filing of their claims prior to the
effective date of Mississippi's tort reform statute in January 2003, which
statute eliminated the ability of plaintiffs to file consolidated cases. To
date, the amounts paid for settled claims have been immaterial. The Company does
not have insurance coverage for the defense and indemnity costs associated with
these claims.

In evaluating its potential asbestos-related liability, the Company has
considered various factors including, among other things, an actuarial study
performed by a leading actuarial firm with expertise in assessing
asbestos-related liabilities, settlement amounts of the Company and whether
there are any co-defendants, the jurisdiction in which lawsuits are filed, and
the status and results of settlement discussions. Actuarial consultants with
experience in assessing asbestos-related liabilities completed a study in
September 2002 to estimate the Company's potential claim liability. The
methodology used to project asbestos-related liabilities and costs in the study
considered: (1) historical data available from publicly available studies; (2)
an analysis of the Company's recent claims history to estimate likely filing
rates for the remainder of 2002 through 2052; (3) an analysis of the Company's
currently pending claims; and (4) an analysis of the Company's settlements to
date in order to develop average settlement values. Based upon all the
information considered by the actuarial firm, the actuarial study estimated an
undiscounted liability for settlement payments ranging from $27.3 million to $58
million for the period through 2052.

Accordingly, based on the information contained in the actuarial study and all
other available information considered by the Company, the Company recorded an
after tax charge of $16.9 million as a loss from discontinued operation during
the third quarter of 2002 to reflect such liability. The Company concluded that
no amount within the range of settlement payments was more likely than any other
and, therefore, recorded the low end of the range as the liability associated
with future settlement payments through 2052 in the Company's consolidated
financial statements, in accordance with generally accepted accounting
principles. Given the uncertainties associated with projecting such matters into
the future, the short period of time that the Company has been responsible for
defending these claims, and other factors outside the control of the Company,
the Company can give no assurance that additional provisions will not be
required. Management will continue to monitor the circumstances surrounding
these potential liabilities in determining whether additional provisions may be
necessary. At the present time, however, the Company does not believe that any
additional provisions would be reasonably likely to have a material adverse
effect on the Company's liquidity or consolidated financial position.

The Company is involved in various other litigation and product liability
matters arising in the ordinary course of business. Although the final outcome
of these matters cannot be determined, it is management's opinion that the final
resolution of these matters will not have a material effect on the Company's
financial statements taken as a whole.

19. SUBSEQUENT EVENTS (UNAUDITED)

On February 7, 2003, the Company signed an agreement to purchase Dana
Corporation's Engine Management Group (EMG), for a purchase price equal to the
closing net book value of the business, subject to a maximum purchase price of
$125 million. Dana's EMG is a leading manufacturer of aftermarket parts in the
automotive industry focused exclusively on engine management. The Company
intends to finance the acquisition and the closing payment of related fees and
expenses and restructuring and integration costs by (a) drawing on the revolving
credit facility, as amended, (b) issuing shares of common stock and (c)
obtaining seller financing.

The acquisition is subject to obtaining financing for the acquisition and other
customary closing conditions. The Company expects to close the acquisition
during the second quarter of 2003.

F-16

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued
--------------------------------------------------------------------------------

20. QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Dec. 31, Sept. 30, June 30, Mar. 31,
Quarter Ended 2002 2002 2002 2002
--------------------------------------------------------------------------------
Net Sales $107,856 $183,631 $180,629 $ 126,321
--------------------------------------------------------------------------------
Gross Profit 29,127 50,608 46,833 30,976
--------------------------------------------------------------------------------
Earnings (loss) from continuing
operations (8,087) 9,832 6,267 (1,921)
--------------------------------------------------------------------------------
Loss from discontinued
operation, net of taxes (254) (16,918) (806) (319)
--------------------------------------------------------------------------------
Cumulative effect of accounting
change, net of taxes -- -- -- (18,350)
--------------------------------------------------------------------------------
Net Earnings (loss) $ (8,341) $ (7,086) $ 5,461 $ (20,590)
--------------------------------------------------------------------------------

Net Earnings (loss) from continuing operations per common share:
Basic $ (.68) $ .82 $ .53 $ (.16)
Diluted $ (.68) $ .72 $ .48 $ (.16)
--------------------------------------------------------------------------------
Net Earnings (loss) per common share:
Basic $ (.70) $ (.59) $ .46 $ (1.74)
Diluted $ (.70) $ (.42) $ .43 $ (1.74)
--------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Dec. 31, Sept. 30, June 30, Mar. 31,
Quarter Ended 2001 2001 2001 2001
--------------------------------------------------------------------------------
Net Sales $ 96,432 $157,590 $183,167 $ 154,463
--------------------------------------------------------------------------------
Gross Profit 18,642 41,151 41,831 37,431
--------------------------------------------------------------------------------
Earnings (loss) from
continuing operations (6,330) 3,748 (522) 619
--------------------------------------------------------------------------------
Net Earnings (loss) $ (6,330) $ 3,748 $ (522) $ 619
--------------------------------------------------------------------------------
Net Earnings (loss) from
continuing operations
per common share:
Basic $ (0.54) $ 0.32 $ (0.05) $ 0.05
Diluted $ (0.54) $ 0.32 $ (0.05) $ 0.05
--------------------------------------------------------------------------------
Net Earnings (loss)
per common share:
Basic $ (0.54) $ 0.32 $ (0.05) $ 0.05
Diluted $ (0.54) $ 0.32 $ (0.05) $ 0.05
--------------------------------------------------------------------------------

The fourth quarter of 2002 reflects unfavorable adjustments including
approximately $1.6 million of restructuring costs related to the consolidation
of certain manufacturing and distributing facilities within the Temperature
Control Segment; and a writeoff of approximately $3.3 million for the impairment
of goodwill associated with the Engine Management reporting unit of the Europe
Segment.

21. RESTATEMENT

During the third quarter of 2003, we re-examined the provisions of our revolving
credit facility. Based on the applicable accounting rules and certain provisions
in the Credit Agreement, we are required to reclassify our credit facility from
long-term to short-term debt,though the existing credit facility does not mature
until 2008. As a result, we reclassified $76,249 and $106,790 (in thousands) as
of December 31, 2002 and 2001, respectively, from long-term debt to notes
payable which is classified as current liabilities.

A summary of the effects of the restatement on our Consolidated Balance Sheets
as of December 31, 2002 and 2001 follows:

(IN THOUSANDS) December 31, 2002 December 31, 2001
------------------------------------------------------
As Previously As As Previously As
Reported Restated Reported Restated
--------------------------------------------------------------------------------
Notes payable $ 3,369 $ 79,618 $ 4,075 $ 110,865
Total current liabilities 111,428 187,677 100,593 207,383
Long-term debt 169,440 93,191 200,066 93,276
Total non-current
liabilities $ 225,449 $149,200 $ 223,149 $ 116,359

F-17

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated herein by
reference to our 2003 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by
reference to our 2003 Proxy Statement.

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 our 2003 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by
reference to our 2003 Proxy Statement under the caption
"Certain Transactions."

ITEM 14. CONTROLS AND PROCEDURES

(a) Under the supervision and with the participation of our
management, including our principal executive officer and
principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under
Rule 13a-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), within 90 days of the
filing date of this report. Based on their evaluation, our
principal executive officer and principal financial officer
concluded that the Company's disclosure and procedures are
effective.

(b) There have been no significant changes (including corrective
actions with regard to significant deficiencies or material
weaknesses) in our internal controls or in other factors that
could significantly affect these controls subsequent to the date
of the evaluation referenced in paragraph (a) above.

-32-

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K

15(A). DOCUMENT LIST
(1) Among the responses to this Item 15(a) are the following
financial statements.

Independent Auditors' Report

Financial Statements:

Consolidated Balance Sheets - December 31, 2002 and 2001

Consolidated Statements of Operations
- Years Ended December 31, 2002, 2001 and 2000

Consolidated Statements of Changes in Stockholders' Equity
- Years Ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows
- Years Ended December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

(2) The following financial schedule and related report for the years
2002, 2001 and 2000 is submitted herewith:

Independent Auditors' Report of Schedule II

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 required by Item 601 of Securities and Exchange
Commission Regulations S-K: See "Exhibit Index" beginning on page
34.

15(B). REPORTS ON FORM 8-K

No reports on Form 8-K were required to be filed for the
three-months ended December 31, 2002.

-33-

STANDARD MOTOR PRODUCTS, INC.
EXHIBIT INDEX

EXHIBIT
NUMBER

2.1 Asset Exchange Agreement dated as of March 28, 1998 among SMP Motor
Products, LTD., Standard Motor Products, Inc., Cooper Industries
(Canada) Inc., Moog Automotive Company and Moog Automotive Products,
Inc., filed as an Exhibit of Company's report on Form 8-K dated March
28, 1998.

2.2 Asset Purchase Agreement, dated as of February 7, 2003, by and among
Dana Corporation, Automotive Controls Corp., BWD Automotive
Corporation, Pacer Industries, Inc., Ristance Corporation, Engine
Controls Distribution Services, Inc., as Sellers, and Standard Motor
Products, Inc., as Buyer (incorporated by reference to Standard Motor
Products, Inc.'s Current Report on Form 8-K (File No. 001-04743),
Filed on February 10, 2003).

3.1 By-laws filed as an Exhibit of Company's annual report on Form 10-K
for the year ended December 31, 1986.

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

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

3.4 Restated By-Laws dated May 23, 1996, filed as an Exhibit of the
Company's annual report on Form 10-K for the year ended December 31,
1996.

4.1 Restated Certificate of Incorporation, dated July 31, 1990
(incorporated by reference to Exhibit 4.2 of Standard Motor Products,
Inc.'s Registration Statement on Form S-8 (Registration No.
333-51565), dated May 1, 1998).

4.2 Certificate of Amendment to the Restated Certificate of Incorporation,
dated July 31, 1990 (incorporated by reference to Exhibit 4.3 of
Standard Motor Products, Inc.'s Registration Statement on Form S-8
(Registration No. 333-51565), filed on May 1, 1998).

4.3 Restated By-Laws, dated May 23, 1996 (incorporated by reference to
Exhibit 3.4 of Standard Motor Products, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996).

-34-

STANDARD MOTOR PRODUCTS, INC.
EXHIBIT INDEX

EXHIBIT
NUMBER

4.4 Form of Subordinated Debenture Indenture (including form of
convertible debenture) (incorporated by reference to Exhibit 4.1 to
Standard Motor Products, Inc.'s Amendment No. 2 to its Registration
Statement on Form S-3 (Registration No. 333-79177), filed on July 20,
1999).

4.5 Rights Agreement, dated as of February 15, 1996, between Standard
Motor Products, Inc. and Registrar & Transfer Co., as rights agent
(incorporated by reference to Standard Motor Products, Inc.'s
Registration Statement on Form 8-A (File No. 001-04743), filed on
April 11, 1996).

4.6 Form of Share Ownership Agreement by and between Standard Motor
Products, Inc. and Dana Corporation (incorporated by reference to
Standard Motor Products, Inc.'s Current Report on Form 8-K (File No.
001-04743), filed on February 10, 2003).

10.1 Employee Stock Ownership Plan and Trust dated January 1, 1989 filed as
an Exhibit of Company's Annual Report on Form 10-K for the year ended
December 31, 1989.

10.2 Supplemental Executive Retirement Plan dated August 15, 1994 filed as
an Exhibit of Company's Annual Report on Form 10-K for the year ended
December 31, 1994.

10.3 1994 Omnibus Stock Option Plan of Standard Motor Products, Inc. is
filed as Exhibit 4.1 of the Company's Registration Statement on Form
S-8 (33-58655).

10.4 1996 Independent Outside Directors Stock Option Plan of Standard
Motors Products, Inc. filed as an Exhibit of Company's annual report
on Form 10-K for the year ended December 31, 1996.

10.5 1994 Omnibus Stock Option Plan of Standard Motor Products, Inc., as
amended, is filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-8 (333-51565), dated May 1, 1998.

10.6 Credit Agreement dated April 27, 2001 among Standard Motor Products,
Inc. and subsidiaries, as Borrowers and GE Capital Corp. as Agent and
Lender, GMAC Commercial Credit LLC, on Lender and Syndication Agent
and Bank of America, N.A., as Lender and Documentation Agent.

10.7 The 1994 Omnibus Stock Option Plan of Standard Motor Products, Inc. as
Amended and restated, is filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (33359524), dated April 25, 2001.

-35-

STANDARD MOTOR PRODUCTS, INC.
EXHIBIT INDEX

EXHIBIT
NUMBER

10.8 Supplemental Compensation Plan effective October 1, 2001.

10.9 Change of Control Agreement dated December 12, 2001 between Standard
Motor Products, Inc. and John Gethin.

10.10 Change of Control Agreement dated December 12, 2001 between Standard
Motor Products, Inc. and James Burke.

21. List of Subsidiaries of Standard Motor Products, Inc.

23 Consent of Independent Auditors - KPMG LLP

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.

-36-

SIGNATURES

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

STANDARD MOTOR PRODUCTS, INC.
(COMPANY)

/s/ LAWRENCE I. SILLS
-------------------------
Lawrence I. Sills
Chairman, Chief Executive Officer and Director

/s/ JAMES J. BURKE
-------------------------
James J. Burke
Vice President, Finance; Chief Financial Officer

New York, New York
November 19, 2003

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 Company and in
the capacities and on the dates indicated:

November 19, 2003 /s/ LAWRENCE I. SILLS
------------------------
Lawrence I. Sills
Chairman, Chief Executive Officer and Director

November 19, 2003 /s/ ARTHUR D. DAVIS
---------------
Arthur D. Davis, Vice Chairman and Director

November 19, 2003 /s/ MARILYN F. CRAGIN
-------------------------
Marilyn F. Cragin, Director

November 19, 2003 /s/ SUSAN F. DAVIS
--------------
Susan F. Davis, Director

November 19, 2003 /s/ ARTHUR S. SILLS
---------------
Arthur S. Sills, Director

November 19, 2003 /s/ PETER J. SILLS
--------------
Peter J. Sills, Director

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INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Standard Motor Products, Inc.:

Under date of February 24, 2003, except as to note 21, which is as of November
17, 2003, we reported on the consolidated balance sheets of Standard Motor
Products, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
2002, as contained in the annual report on Form 10-K/A for the year 2002. Our
report contains an explanatory paragraph that the Company adopted Emerging
Issues Task Force Issue No. 01-9, ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR
TO A CUSTOMER (INCLUDING A RESELLER OF THE VENDOR'S PRODUCTS) and Statement of
Financial Accounting Standards No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS as
of January 1, 2002. Our report also indicates that these consolidated financial
statements have been revised to account for the loss on early extinguishment of
debt in accordance with Statement of Financial Accounting Standards No. 145,
RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO.
13, AND TECHNICAL CORRECTIONS, which was adopted by the Company as of January 1,
2003. Our report also indicates that the Company's consolidated balance sheets
as of December 31, 2002 and 2001 have been restated to classify certain debt as
current. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule as listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

/s/ KPMG LLP
------------

New York, New York
February 24, 2003

-38-

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

Schedule II - Valuation and Qualifying Accounts

Years ended December 31, 2002, 2001 and 2000

ADDITIONS
---------
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES OTHER DEDUCTIONS END OF YEAR
----------- ------- -------- ----- ---------- -----------

YEAR ENDED DECEMBER 31, 2002:

Allowance for doubtful accounts $ 2,917,000 $ 489,000 $ 162,000 $ -- $ 3,568,000
Allowance for discounts ....... 1,445,000 -- -- 131,000 1,314,000
------------ ------------ ----------------- ------------ ------------
$ 4,362,000 $ 489,000 $ 162,000 $ 131,000 $ 4,882,000
============ ============ ================= ============ ============

Allowance for sales returns ..... $ 18,167,000 $ 73,030,000 $ -- $ 74,856,000 $ 16,341,000
============ ============ ================= ============ ============

Allowance for inventory valuation $ 13,895,000 $ 1,265,000 $ -- $ 869,000 $ 14,291,000
============ ============ ================= ============ ============

YEAR ENDED DECEMBER 31, 2001:
Allowance for doubtful accounts $ 2,979,000 $ 598,000 $ -- $ 660,000 $ 2,917,000
Allowance for discounts ....... 1,598,000 -- -- 153,000 1,445,000
------------ ------------ ----------------- ------------ ------------
$ 4,577,000 $ 598,000 $ -- $ 813,000 $ 4,362,000
============ ============ ================= ============ ============

Allowance for sales returns ..... $ 17,693,000 $ 94,122,000 $ -- $ 93,648,000 $ 18,167,000
============ ============ ================= ============ ============

Allowance for inventory valuation $ 12,930,000 $ 4,387,000 $ -- $ 3,422,000 $ 13,895,000
============ ============ ================= ============ ============

YEAR ENDED DECEMBER 31, 2000:
Allowance for doubtful accounts $ 2,619,000 $ 699,000 $ -- $ 339,000 $ 2,979,000
Allowance for discounts ....... 1,992,000 -- 394,000 1,598,000
------------ ------------ ----------------- ------------ ------------
$ 4,611,000 $ 699,000 $ -- $ 733,000 $ 4,577,000
============ ============ ================= ============ ============

Allowance for sales returns ..... $ 22,698,000 $100,403,000 $ -- $105,408,000 $ 17,693,000
============ ============ ================= ============ ============

Allowance for inventory valuation $ 13,766,000 $ 3,165,000 $ -- $ 4,001,000 $ 12,930,000
============ ============ ================= ============ ============

-39-