##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 333-107219
 UNITED COMPONENTS, INC.
  Delaware
(State or Other Jurisdiction of Incorporation or Organization)
    
    04-3759857
(I.R.S. Employer Identification No.)14601 Highway 41 NorthEvansville, Indiana
    
    47725(Address of Principal Executive Offices)
    
    (Zip Code)
 (812) 867-4156
 
  o þ
  o o þ
  o þ
    1




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##### 



United Components, Inc.
 IndexPart I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheets  June 30, 2007 and December 31, 2006Condensed consolidated income statements  Three and six months ended June 30, 2007 and
2006Condensed consolidated statements of cash flows  Six months ended June 30, 2007 and 2006Condensed consolidated statements of changes in shareholders equity  Six months ended
June 30, 2007 and 2006Notes to condensed consolidated financial statementsItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures About Market RiskItem 4.
    
    Controls and ProceduresPart II
    
    OTHER INFORMATIONItem 1.
    
    Legal ProceedingsItem 1A.
    
    Risk FactorsItem 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsItem 3.
    
    Default Upon Senior SecuritiesItem 4.
    
    Submission of Matters to Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    ExhibitsSignaturesExhibits
 2




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##### 



PART I
FINANCIAL INFORMATION
 Item 1. Financial Statements
 United Components, Inc.
 Condensed Consolidated Balance Sheets  (in thousands)
 June 30,
    
    
    December 31,2007
    
    
    2006AssetsCurrent assetsCash and cash equivalents
    
    $
    4,220
    
    
    $
    31,523Accounts receivable, net
    
    
    277,222
    
    
    
    228,996Inventories, net
    
    
    149,725
    
    
    
    158,024Deferred tax assets
    
    
    30,638
    
    
    
    33,920Other current assets
    
    
    26,035
    
    
    
    29,389Total current assets
    
    
    487,840
    
    
    
    481,852Property, plant and equipment, net
    
    
    164,868
    
    
    
    164,621Goodwill
    
    
    241,461
    
    
    
    239,835Other intangible assets, net
    
    
    88,047
    
    
    
    95,354Deferred financing costs, net
    
    
    4,413
    
    
    
    5,310Pension and other assets
    
    
    9,714
    
    
    
    9,452Assets held for sale
    
    
    1,600
    
    
    
    6,077Total assets
    
    $
    997,943
    
    
    $
    1,002,501Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    103,635
    
    
    $
    92,720Short-term borrowings
    
    
    12,762
    
    
    
    8,657Current maturities of long-term debt
    
    
    593
    
    
    
    462Accrued expenses and other current liabilities
    
    
    98,324
    
    
    
    99,039Total current liabilities
    
    
    215,314
    
    
    
    200,878Long-term debt, less current maturities
    
    
    452,404
    
    
    
    491,478Pension and other postretirement liabilities
    
    
    38,609
    
    
    
    40,430Deferred tax liabilities
    
    
    17,895
    
    
    
    17,350Due to Holdco
    
    
    4,690
    
    
    
    Minority interest
    
    
    3,260
    
    
    
    3,738Other long-term liabilities
    
    
    4,459
    
    
    
    3,845Total liabilities
    
    
    736,631
    
    
    
    757,719Contingencies  Note NShareholders equityCommon stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    276,460
    
    
    
    273,749Retained earnings (deficit)
    
    
    (12,238
    )
    
    
    (26,433
    )Accumulated other comprehensive income (loss)
    
    
    (2,910
    )
    
    
    (2,534
    )Total shareholders equity
    
    
    261,312
    
    
    
    244,782Total liabilities and shareholders equity
    
    $
    997,943
    
    
    $
    1,002,501
 The accompanying notes are an integral part of these statements.
 3




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##### 



United Components, Inc.
 Condensed Consolidated Income Statements  (in thousands)
 Three Months ended June 30,
    
    
    Six Months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    259,569
    
    
    $
    230,482
    
    
    $
    498,417
    
    
    $
    445,073Cost of sales
    
    
    200,190
    
    
    
    183,670
    
    
    
    389,481
    
    
    
    353,148Gross profit
    
    
    59,379
    
    
    
    46,812
    
    
    
    108,936
    
    
    
    91,925Operating (expense) incomeSelling and warehousing
    
    
    (14,903
    )
    
    
    (14,966
    )
    
    
    (30,955
    )
    
    
    (30,455
    )General and administrative
    
    
    (11,818
    )
    
    
    (9,729
    )
    
    
    (26,110
    )
    
    
    (21,534
    )Amortization of acquired intangible assets
    
    
    (1,831
    )
    
    
    (1,745
    )
    
    
    (3,609
    )
    
    
    (2,929
    )Costs of integration of water pump
operations and resulting asset impairment
losses (Note C)
    
    
    256
    
    
    
    (4,600
    )
    
    
    (474
    )
    
    
    (4,600
    )Costs of closing facilities and
consolidating operations and gain from
sale of assets (Note E)
    
    
    (101
    )
    
    
    (4,069
    )
    
    
    1,546
    
    
    
    (5,462
    )Trademark impairment loss (Note F)
    
    
    (3,600
    )
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income
    
    
    27,382
    
    
    
    11,703
    
    
    
    45,734
    
    
    
    26,945Other (expense) incomeInterest expense, net
    
    
    (10,177
    )
    
    
    (10,635
    )
    
    
    (20,863
    )
    
    
    (19,939
    )Write-off of deferred financing costs
(Note M)
    
    
    
    
    
    
    (2,625
    )
    
    
    
    
    
    
    (2,625
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )
    
    
    (1,000
    )
    
    
    (1,000
    )Miscellaneous, net
    
    
    (754
    )
    
    
    9
    
    
    
    (1,055
    )
    
    
    (55
    )Income (loss) before income taxes
    
    
    15,951
    
    
    
    (2,048
    )
    
    
    22,816
    
    
    
    3,326Income tax (expense) benefit
    
    
    (5,926
    )
    
    
    633
    
    
    
    (8,284
    )
    
    
    (1,363
    )Net income (loss) from continuing operations
    
    
    10,025
    
    
    
    (1,415
    )
    
    
    14,532
    
    
    
    1,963Discontinued operations (Note D)Net income from discontinued operations,
net of tax
    
    
    
    
    
    
    566
    
    
    
    
    
    
    
    1,941Loss on sale of discontinued operations,
net of tax
    
    
    
    
    
    
    (18,272
    )
    
    
    
    
    
    
    (18,272
    )
    
    
    
    (17,706
    )
    
    
    
    
    
    
    (16,331
    )Net income (loss)
    
    $
    10,025
    
    
    $
    (19,121
    )
    
    $
    14,532
    
    
    $
    (14,368
    )
 The accompanying notes are an integral part of these statements.
 4




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##### 



United Components, Inc.
 Condensed Consolidated Statements of Cash Flows  (in thousands)
 Six Months ended June 30,2007
    
    
    2006Cash flows from operating activities of continuing operationsNet income (loss)
    
    $
    14,532
    
    
    $
    (14,368
    )Less:Net income from discontinued operations, net of tax
    
    
    
    
    
    
    1,941Loss on sale of discontinued operations, net of tax
    
    
    
    
    
    
    (18,272
    )Net income from continuing operations
    
    
    14,532
    
    
    
    1,963Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of other intangible assets
    
    
    18,128
    
    
    
    16,536Amortization of deferred financing costs and debt discount
    
    
    1,213
    
    
    
    962Deferred income taxes
    
    
    1,260
    
    
    
    (4,115
    )Gain on sale of Mexican land and building
    
    
    (1,764
    )
    
    
    Non-cash write off of deferred financing costs
    
    
    
    
    
    
    2,625Non-cash asset write-downs described in Notes C and E
    
    
    
    
    
    
    5,752Non-cash trademark impairment loss described in Note F
    
    
    3,600
    
    
    
    Other non-cash, net
    
    
    2,235
    
    
    
    2,180Changes in operating assets and liabilitiesAccounts receivable
    
    
    (48,226
    )
    
    
    (17,400
    )Inventories
    
    
    8,299
    
    
    
    885Other current assets
    
    
    3,575
    
    
    
    626Accounts payable
    
    
    10,915
    
    
    
    (2,663
    )Accrued expenses and other current liabilities
    
    
    (471
    )
    
    
    2,403Other assets
    
    
    98
    
    
    
    (1,534
    )Other long-term liabilities
    
    
    2,771
    
    
    
    1,351Net cash provided by operating activities of continuing operations
    
    
    16,165
    
    
    
    9,571Cash flows from investing activities of continuing operationsProceeds from sale of Mexican land and building (Note E)
    
    
    6,685
    
    
    
    Acquisition of ASC Industries, Inc., net of cash acquired
    
    
    
    
    
    
    (121,002
    )Proceeds from sale of discontinued operations, net of transaction costs and cash sold
    
    
    
    
    
    
    36,300Capital expenditures
    
    
    (14,706
    )
    
    
    (10,285
    )Proceeds from sale of other property, plant and equipment
    
    
    776
    
    
    
    1,397Net cash used in investing activities of continuing operations
    
    
    (7,245
    )
    
    
    (93,590
    )Cash flows from financing activities of continuing operationsIssuances of debt
    
    
    11,790
    
    
    
    113,000Debt repayments
    
    
    (47,985
    )
    
    
    (277
    )Financing fees
    
    
    
    
    
    
    (3,636
    )Shareholders equity contributions
    
    
    
    
    
    
    8,600Net cash (used in) provided by financing activities of continuing operations
    
    
    (36,195
    )
    
    
    117,687Discontinued operationsNet cash used in operating activities of discontinued operations
    
    
    
    
    
    
    (939
    )Net cash used in investing activities of discontinued operations
    
    
    
    
    
    
    (2,123
    )Effect of currency exchange rate change on cash of discontinued operations
    
    
    
    
    
    
    134Effect of currency exchange rate changes on cash
    
    
    (28
    )
    
    
    44Net (decrease) increase in cash and cash equivalents
    
    
    (27,303
    )
    
    
    30,784Cash and cash equivalents at beginning of year
    
    
    31,523
    
    
    
    26,182Less cash and cash equivalents of discontinued operations at end of period
    
    
    
    
    
    
    2,318Cash and cash equivalents of continuing operations at end of period
    
    $
    4,220
    
    
    $
    54,648
 The accompanying notes are an integral part of these statements.
 5




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##### 



United Components, Inc.
 Condensed Consolidated Statements of Changes in Shareholders Equity  (in thousands)
 AccumulatedAdditional
    
    
    Retained
    
    
    Other
    
    
    TotalCommon
    
    
    Paid In
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    Equity
    
    
    Income (Loss)Balance at January 1, 2006
    
    $
    
    
    
    $
    263,636
    
    
    $
    17,546
    
    
    $
    (836
    )
    
    $
    280,346Additions to paid in capital
    
    
    
    
    
    
    8,600
    
    
    
    
    
    
    
    
    
    
    
    8,600Recognition of stock based compensation expense
    
    
    
    
    
    
    829
    
    
    
    
    
    
    
    
    
    
    
    829Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    (14,368
    )
    
    
    
    
    
    
    (14,368
    )
    
    $
    (14,368
    )Other comprehensive incomeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    558
    
    
    
    558
    
    
    
    558Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,413
    
    
    
    1,413
    
    
    
    1,413Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    597
    
    
    
    597
    
    
    
    597Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (11,800
    )Balance at June 30, 2006
    
    $
    
    
    
    $
    273,065
    
    
    $
    3,178
    
    
    $
    1,732
    
    
    $
    277,975Balance at January 1, 2007
    
    $
    
    
    
    $
    273,749
    
    
    $
    (26,433
    )
    
    $
    (2,534
    )
    
    $
    244,782Effect of adopting FIN 48
    
    
    
    
    
    
    
    
    
    
    (337
    )
    
    
    
    
    
    
    (337
    )Recognition of stock based compensation expense
    
    
    
    
    
    
    2,240
    
    
    
    
    
    
    
    
    
    
    
    2,240Tax effect of exercise of Holdco stock options
    
    
    
    
    
    
    471
    
    
    
    
    
    
    
    
    
    
    
    471Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    14,532
    
    
    
    
    
    
    
    14,532
    
    
    $
    14,532Other comprehensive lossInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )
    
    
    (148
    )
    
    
    (148
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    (228
    )
    
    
    (228
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,156Balance at June 30, 2007
    
    $
    
    
    
    $
    276,460
    
    
    $
    (12,238
    )
    
    $
    (2,910
    )
    
    $
    261,312
 The accompanying notes are an integral part of these statements.
 6




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE A  GENERAL AND BASIS OF FINANCIAL STATEMENT PRESENTATION
 General
      Basis of Presentation
       7




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE B  ACQUISITION OF ASC INDUSTRIES, INC.
     Cash
    
    $
    3.7Accounts receivable
    
    
    11.4Inventory
    
    
    40.8Property, plant and equipment
    
    
    27.3Acquired intangible assets
    
    
    18.6Goodwill
    
    
    74.9Other assets
    
    
    2.2Accounts payable and accrued liabilities
    
    
    (25.5
    )Notes payable
    
    
    (10.0
    )Capital lease obligations
    
    
    (1.2
    )Other liabilities
    
    
    (5.0
    )Deferred income taxes
    
    
    (9.8
    )$
    127.4
  Pro Forma Information
   8




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  Three Months ended
    
    Six Months endedJune 30, 2006
    
    June 30, 2006Net sales
    
    $
    245.9
    
    
    $
    486.8Operating income
    
    
    10.4
    
    
    
    22.3Net income (loss) from continuing operations
    
    
    (0.3
    )
    
    
    (2.7
    )Net income (loss)
    
    
    (18.0
    )
    
    
    (19.1
    )
  NOTE C  COSTS OF INTEGRATION OF WATER PUMP OPERATIONS AND RESULTING ASSET IMPAIRMENT LOSSES
  2006 Background Information
  2007 Update
  Three Months ended
    
    
    Six Months endedJune 30, 2007
    
    
    June 30, 2007Severance
    
    $
    (0.7
    )
    
    $
    (1.4
    )Pension plan curtailment gain
    
    
    0.9
    
    
    
    0.9Production wind-down costs
    
    
    (0.8
    )
    
    
    (1.3
    )Other directly related costs
    
    
    (0.9
    )
    
    
    (1.4
    )$
    (1.5
    )
    
    $
    (3.2
    )
   9




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   Accrued
    
    
    Otherseverance
    
    
    liabilitiesDecember 31, 2006 balance
    
    $
    1.4
    
    
    $
    0.2Additional loss provision
    
    
    1.4
    
    
    
    Payments
    
    
    (1.3
    )
    
    
    (0.2
    )June 30, 2007 balance
    
    $
    1.5
    
    
    $
    
  2006 Second Quarter Loss Provision
  Severance
    
    $
    0.3Land, building, & equipment impairment losses
    
    
    4.3$
    4.6
  NOTE D  DISCONTINUED OPERATIONS
 2006 Sales of Operations
   10




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 2006 Results of Discontinued Operations
  Three Months ended
    
    Six Months endedJune 30, 2006
    
    June 30, 2006Net sales
    
    $
    50.1
    
    
    $
    99.1Income before income taxes
    
    
    2.0
    
    
    
    4.6
  NOTE E  COSTS OF CLOSING FACILITIES AND CONSOLIDATING OPERATIONS AND GAIN FROM SALE OF ASSETS
 2006 Loss Provision
  AssetWrite-downs
    
    
    Severance
    
    
    Other
    
    
    TotalSecond quarter of 2006 lossesClosure of Canadian facility
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    
    
    
    $
    (0.1
    )Closure of Mexican facility
    
    
    1.0
    
    
    
    2.0
    
    
    
    1.2
    
    
    
    4.2$
    0.9
    
    
    $
    2.0
    
    
    $
    1.2
    
    
    $
    4.1Six months ended June 30, 2006 lossesClosure of Canadian facility
    
    $
    0.4
    
    
    $
    0.4
    
    
    $
    0.1
    
    
    $
    0.9Closure of Mexican facility
    
    
    1.0
    
    
    
    2.0
    
    
    
    1.6
    
    
    
    4.6$
    1.4
    
    
    $
    2.4
    
    
    $
    1.7
    
    
    $
    5.5
 Closure of Canadian facility
    Closure of Mexican facility
  11




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
    2007 Update
  NOTE F  TRADEMARK IMPAIRMENT LOSS
  NOTE G  TERMINATION OF PAY-ON-SCAN PROGRAM
   NOTE H  SALES OF RECEIVABLES
   12




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  NOTE I  INVENTORIES
  June 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    47.6
    
    
    $
    47.2Work in process
    
    
    35.3
    
    
    
    32.7Finished products
    
    
    84.2
    
    
    
    97.8Valuation reserves
    
    
    (17.4
    )
    
    
    (19.7
    )$
    149.7
    
    
    $
    158.0
 NOTE J  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  June 30,
    
    
    December 31,2007
    
    
    2006Salaries and wages
    
    $
    3.1
    
    
    $
    2.9Bonuses
    
    
    3.8
    
    
    
    7.5Vacation pay
    
    
    5.0
    
    
    
    4.5Product returns
    
    
    28.0
    
    
    
    28.6Rebates, credits and discounts due customers
    
    
    12.0
    
    
    
    10.2Insurance
    
    
    10.6
    
    
    
    10.2Taxes payable
    
    
    11.2
    
    
    
    9.3Interest
    
    
    3.2
    
    
    
    3.7Other
    
    
    21.4
    
    
    
    22.1$
    98.3
    
    
    $
    99.0
 13




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE K  PRODUCT RETURNS LIABILITY
   Six Months ended June 30,2007
    
    
    2006Beginning of year
    
    $
    28.6
    
    
    $
    26.2Addition due to ASC Acquisition
    
    
    
    
    
    
    1.5Cost of unsalvageable parts
    
    
    (24.4
    )
    
    
    (24.2
    )Additional reductions to sales
    
    
    23.8
    
    
    
    22.5End of period
    
    $
    28.0
    
    
    $
    26.0
 NOTE L  PENSION
  Three Months ended June 30,
    
    
    Six Months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    1.6
    
    
    $
    1.9
    
    
    $
    3.2
    
    
    $
    3.8Interest cost
    
    
    2.9
    
    
    
    2.9
    
    
    
    5.9
    
    
    
    5.8Expected return on plan assets
    
    
    (3.4
    )
    
    
    (3.2
    )
    
    
    (7.0
    )
    
    
    (6.4
    )Amortization of prior service
cost and
unrecognized loss
    
    
    
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.3Curtailment gain
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.9
    )
    
    
    $
    0.2
    
    
    $
    1.8
    
    
    $
    1.3
    
    
    $
    3.5
  14




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M  DEBT
  June 30,
    
    
    December 31,2007
    
    
    2006Notes payable
    
    $
    11.0
    
    
    $
    8.6Revolving credit borrowings
    
    
    1.8
    
    
    
    Capital lease obligations
    
    
    1.8
    
    
    
    1.1Term loan
    
    
    225.0
    
    
    
    265.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Unamortized debt discount
    
    
    (3.8
    )
    
    
    (4.1
    )465.8
    
    
    
    500.6LessShort-term borrowings
    
    
    12.8
    
    
    
    8.6Current maturities
    
    
    0.6
    
    
    
    0.5Long-term debt
    
    $
    452.4
    
    
    $
    491.5
    NOTE N  CONTINGENCIES
 Environmental
  15




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Litigation
  NOTE O  INCOME TAXES
 Adoption of FIN 48
     Intercompany payable to Holdco and net operating loss utilization
  16




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE P  GEOGRAPHIC INFORMATION
  Three Months ended June 30,
    
    
    Six Months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006United States
    
    $
    221.0
    
    
    $
    198.2
    
    
    $
    422.1
    
    
    $
    379.9Mexico
    
    
    10.3
    
    
    
    9.8
    
    
    
    19.9
    
    
    
    19.1Canada
    
    
    9.0
    
    
    
    6.0
    
    
    
    17.2
    
    
    
    12.9United Kingdom
    
    
    3.5
    
    
    
    3.0
    
    
    
    7.0
    
    
    
    5.5Germany
    
    
    1.0
    
    
    
    0.9
    
    
    
    2.1
    
    
    
    2.2Spain
    
    
    1.2
    
    
    
    0.9
    
    
    
    2.2
    
    
    
    1.9France
    
    
    1.6
    
    
    
    2.3
    
    
    
    4.1
    
    
    
    4.4Venezuela
    
    
    1.3
    
    
    
    0.9
    
    
    
    3.3
    
    
    
    2.0Other
    
    
    10.7
    
    
    
    8.5
    
    
    
    20.5
    
    
    
    17.2$
    259.6
    
    
    $
    230.5
    
    
    $
    498.4
    
    
    $
    445.1
  June 30,
    
    
    December 31,2007
    
    
    2006United States
    
    $
    233.6
    
    
    $
    244.4China
    
    
    23.6
    
    
    
    20.8Mexico
    
    
    8.6
    
    
    
    12.4Spain
    
    
    2.8
    
    
    
    3.2Goodwill
    
    
    241.5
    
    
    
    239.8$
    510.1
    
    
    $
    520.6
 NOTE Q  STOCK OPTIONS
   NOTE R  OTHER INFORMATION
  17




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  Three Months ended June 30,
    
    Six Months ended June 30,2007
    
    2006
    
    2007
    
    2006Interest
    
    $
    15.0
    
    
    $
    14.8
    
    
    $
    20.5
    
    
    $
    18.8Income taxes (net of refunds)
    
    
    
    
    
    
    2.5
    
    
    
    (1.0
    )
    
    
    2.8
  Six Months ended June 30,2007
    
    2006Pre-tax
    
    After-tax
    
    Pre-tax
    
    After-taxInterest rate swaps
    
    $
    (0.2
    )
    
    $
    (0.1
    )
    
    $
    0.9
    
    
    $
    0.6Foreign currency adjustment
    
    
    (0.4
    )
    
    
    (0.2
    )
    
    
    1.7
    
    
    
    1.4Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    0.6
   NOTE S  NEW ACCOUNTING PRONOUNCEMENTS
   18




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T  GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
    19




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Balance Sheet
June 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    4,220
    
    
    $
    
    
    
    $
    47
    
    
    $
    1,589
    
    
    $
    2,584Accounts receivable, net
    
    
    277,222
    
    
    
    
    
    
    
    
    
    
    
    263,871
    
    
    
    13,351Inventories, net
    
    
    149,725
    
    
    
    
    
    
    
    
    
    
    
    130,080
    
    
    
    19,645Deferred tax assets
    
    
    30,638
    
    
    
    
    
    
    
    1,541
    
    
    
    29,114
    
    
    
    (17
    )Other current assets
    
    
    26,035
    
    
    
    
    
    
    
    7,918
    
    
    
    9,354
    
    
    
    8,763Total current assets
    
    
    487,840
    
    
    
    
    
    
    
    9,506
    
    
    
    434,008
    
    
    
    44,326Property, plant and equipment, net
    
    
    164,868
    
    
    
    
    
    
    
    1,270
    
    
    
    130,868
    
    
    
    32,730Investment in subsidiaries
    
    
    
    
    
    
    (224,450
    )
    
    
    210,864
    
    
    
    13,586
    
    
    
    Goodwill
    
    
    241,461
    
    
    
    
    
    
    
    241,461
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    88,047
    
    
    
    
    
    
    
    12,925
    
    
    
    75,122
    
    
    
    Deferred financing costs, net
    
    
    4,413
    
    
    
    
    
    
    
    4,413
    
    
    
    
    
    
    
    Pension and other assets
    
    
    9,714
    
    
    
    
    
    
    
    365
    
    
    
    9,174
    
    
    
    175Assets held for sale
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    Total assets
    
    $
    997,943
    
    
    $
    (224,450
    )
    
    $
    480,804
    
    
    $
    664,358
    
    
    $
    77,231Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    103,635
    
    
    $
    
    
    
    $
    654
    
    
    $
    87,981
    
    
    $
    15,000Short-term borrowings
    
    
    12,762
    
    
    
    
    
    
    
    1,750
    
    
    
    
    
    
    
    11,012Current maturities of long-term debt
    
    
    593
    
    
    
    
    
    
    
    324
    
    
    
    269
    
    
    
    Accrued expenses and other current liabilities
    
    
    98,324
    
    
    
    
    
    
    
    17,830
    
    
    
    74,435
    
    
    
    6,059Total current liabilities
    
    
    215,314
    
    
    
    
    
    
    
    20,558
    
    
    
    162,685
    
    
    
    32,071Long-term debt, less current maturities
    
    
    452,404
    
    
    
    
    
    
    
    451,862
    
    
    
    542
    
    
    
    Pension and other postretirement liabilities
    
    
    38,609
    
    
    
    
    
    
    
    
    
    
    
    37,287
    
    
    
    1,322Deferred tax liabilities
    
    
    17,895
    
    
    
    
    
    
    
    15,010
    
    
    
    865
    
    
    
    2,020Due to Holdco
    
    
    4,690
    
    
    
    
    
    
    
    4,690
    
    
    
    
    
    
    
    Minority interest
    
    
    3,260
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,260Other long-term liabilities
    
    
    4,459
    
    
    
    
    
    
    
    
    
    
    
    3,853
    
    
    
    606Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (272,628
    )
    
    
    270,994
    
    
    
    1,634Total shareholders equity
    
    
    261,312
    
    
    
    (224,450
    )
    
    
    261,312
    
    
    
    188,132
    
    
    
    36,318Total liabilities and shareholders equity
    
    $
    997,943
    
    
    $
    (224,450
    )
    
    $
    480,804
    
    
    $
    664,358
    
    
    $
    77,231
 20




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Balance Sheet
December 31, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    31,523
    
    
    $
    
    
    
    $
    30,212
    
    
    $
    (1,767
    )
    
    $
    3,078Accounts receivable, net
    
    
    228,996
    
    
    
    
    
    
    
    
    
    
    
    216,472
    
    
    
    12,524Inventories, net
    
    
    158,024
    
    
    
    
    
    
    
    
    
    
    
    139,973
    
    
    
    18,051Deferred tax assets
    
    
    33,920
    
    
    
    
    
    
    
    (658
    )
    
    
    34,029
    
    
    
    549Other current assets
    
    
    29,389
    
    
    
    
    
    
    
    2,583
    
    
    
    18,380
    
    
    
    8,426Total current assets
    
    
    481,852
    
    
    
    
    
    
    
    32,137
    
    
    
    407,087
    
    
    
    42,628Property, plant and equipment, net
    
    
    164,621
    
    
    
    
    
    
    
    199
    
    
    
    132,153
    
    
    
    32,269Investment in subsidiaries
    
    
    
    
    
    
    (169,432
    )
    
    
    152,960
    
    
    
    16,472
    
    
    
    Goodwill
    
    
    239,835
    
    
    
    
    
    
    
    239,835
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    95,354
    
    
    
    
    
    
    
    14,267
    
    
    
    81,087
    
    
    
    Deferred financing costs, net
    
    
    5,310
    
    
    
    
    
    
    
    5,310
    
    
    
    
    
    
    
    Pension and other assets
    
    
    9,452
    
    
    
    
    
    
    
    303
    
    
    
    8,908
    
    
    
    241Assets held for sale
    
    
    6,077
    
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    4,477Total assets
    
    $
    1,002,501
    
    
    $
    (169,432
    )
    
    $
    445,011
    
    
    $
    647,307
    
    
    $
    79,615Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    92,720
    
    
    $
    
    
    
    $
    2,866
    
    
    $
    76,578
    
    
    $
    13,276Short-term borrowings
    
    
    8,657
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,657Current maturities of long-term debt
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    462
    
    
    
    Accrued expenses and other current liabilities
    
    
    99,039
    
    
    
    
    
    
    
    14,093
    
    
    
    81,169
    
    
    
    3,777Total current liabilities
    
    
    200,878
    
    
    
    
    
    
    
    16,959
    
    
    
    158,209
    
    
    
    25,710Long-term debt, less current maturities
    
    
    491,478
    
    
    
    
    
    
    
    490,906
    
    
    
    572
    
    
    
    Pension and other postretirement liabilities
    
    
    40,430
    
    
    
    
    
    
    
    
    
    
    
    38,159
    
    
    
    2,271Deferred tax liabilities
    
    
    17,350
    
    
    
    
    
    
    
    12,552
    
    
    
    2,174
    
    
    
    2,624Minority interest
    
    
    3,738
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,738Other long-term liabilities
    
    
    3,845
    
    
    
    
    
    
    
    
    
    
    
    3,845
    
    
    
    Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (320,188
    )
    
    
    317,588
    
    
    
    2,600Total shareholders equity
    
    
    244,782
    
    
    
    (169,432
    )
    
    
    244,782
    
    
    
    126,760
    
    
    
    42,672Total liabilities and shareholders equity
    
    $
    1,002,501
    
    
    $
    (169,432
    )
    
    $
    445,011
    
    
    $
    647,307
    
    
    $
    79,615
 21




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Income Statement
Three Months Ended June 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    259,569
    
    
    $
    (16,939
    )
    
    $
    
    
    
    $
    246,884
    
    
    $
    29,624Cost of sales
    
    
    200,190
    
    
    
    (16,939
    )
    
    
    
    
    
    
    189,480
    
    
    
    27,649Gross profit
    
    
    59,379
    
    
    
    
    
    
    
    
    
    
    
    57,404
    
    
    
    1,975Operating (expense) incomeSelling and warehousing
    
    
    (14,903
    )
    
    
    
    
    
    
    (186
    )
    
    
    (13,270
    )
    
    
    (1,447
    )General and administrative
    
    
    (11,818
    )
    
    
    
    
    
    
    (4,177
    )
    
    
    (6,180
    )
    
    
    (1,461
    )Amortization of acquired intangible assets
    
    
    (1,831
    )
    
    
    
    
    
    
    
    
    
    
    (1,831
    )
    
    
    Costs of integration of water pump
operations and resulting asset impairment
losses
    
    
    256
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    Costs of closing facilities and
consolidating operations and gain from
sale of assets
    
    
    (101
    )
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    (218
    )Trademark impairment loss
    
    
    (3,600
    )
    
    
    
    
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income (loss)
    
    
    27,382
    
    
    
    
    
    
    
    (4,363
    )
    
    
    32,896
    
    
    
    (1,151
    )Other (expense) incomeInterest expense, net
    
    
    (10,177
    )
    
    
    
    
    
    
    (10,040
    )
    
    
    (6
    )
    
    
    (131
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    7,680
    
    
    
    (7,446
    )
    
    
    (234
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (754
    )
    
    
    
    
    
    
    
    
    
    
    (821
    )
    
    
    67Income (loss) before income taxes
    
    
    15,951
    
    
    
    
    
    
    
    (7,223
    )
    
    
    24,623
    
    
    
    (1,449
    )Income tax (expense) benefit
    
    
    (5,926
    )
    
    
    
    
    
    
    2,332
    
    
    
    (9,145
    )
    
    
    887Increase (decrease) before equity in
earnings of subsidiaries
    
    
    10,025
    
    
    
    
    
    
    
    (4,891
    )
    
    
    15,478
    
    
    
    (562
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (14,240
    )
    
    
    14,916
    
    
    
    (676
    )
    
    
    Net income (loss)
    
    $
    10,025
    
    
    $
    (14,240
    )
    
    $
    10,025
    
    
    $
    14,802
    
    
    $
    (562
    )
 22




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Income Statement
Three Months Ended June 30, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    230,482
    
    
    $
    (6,141
    )
    
    $
    
    
    
    $
    215,272
    
    
    $
    21,351Cost of sales
    
    
    183,670
    
    
    
    (6,141
    )
    
    
    
    
    
    
    171,560
    
    
    
    18,251Gross profit
    
    
    46,812
    
    
    
    
    
    
    
    
    
    
    
    43,712
    
    
    
    3,100Operating (expense) incomeSelling and warehousing
    
    
    (14,966
    )
    
    
    
    
    
    
    (383
    )
    
    
    (13,370
    )
    
    
    (1,213
    )General and administrative
    
    
    (9,729
    )
    
    
    
    
    
    
    (3,609
    )
    
    
    (4,569
    )
    
    
    (1,551
    )Amortization of acquired intangible assets
    
    
    (1,745
    )
    
    
    
    
    
    
    
    
    
    
    (1,745
    )
    
    
    Costs of integration of water pump operations and
resulting asset impairment losses
    
    
    (4,600
    )
    
    
    
    
    
    
    
    
    
    
    (4,600
    )
    
    
    Costs of closing facilities and consolidating
operations
    
    
    (4,069
    )
    
    
    
    
    
    
    
    
    
    
    (3,806
    )
    
    
    (263
    )Operating income (loss)
    
    
    11,703
    
    
    
    
    
    
    
    (3,992
    )
    
    
    15,622
    
    
    
    73Other (expense) incomeInterest expense, net
    
    
    (10,635
    )
    
    
    
    
    
    
    (10,706
    )
    
    
    115
    
    
    
    (44
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    10,432
    
    
    
    (9,869
    )
    
    
    (563
    )Write-off of deferred financing costs
    
    
    (2,625
    )
    
    
    
    
    
    
    (2,625
    )
    
    
    
    
    
    
    Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    (5
    )Income (loss) before income taxes
    
    
    (2,048
    )
    
    
    
    
    
    
    (7,391
    )
    
    
    5,882
    
    
    
    (539
    )Income tax benefit (expense)
    
    
    633
    
    
    
    
    
    
    
    1,692
    
    
    
    (1,896
    )
    
    
    837Decrease (increase) from continuing operations before
equity in earnings of subsidiaries
    
    
    (1,415
    )
    
    
    
    
    
    
    (5,699
    )
    
    
    3,986
    
    
    
    298Equity in earnings of subsidiaries
    
    
    
    
    
    
    (3,919
    )
    
    
    4,850
    
    
    
    (931
    )
    
    
    Discontinued operations:Net income (loss) from discontinued operations,
net of tax
    
    
    566
    
    
    
    
    
    
    
    
    
    
    
    946
    
    
    
    (380
    )Loss on sale of discontinued operations, net of tax
    
    
    (18,272
    )
    
    
    
    
    
    
    (18,272
    )
    
    
    
    
    
    
    Net (loss) income
    
    $
    (19,121
    )
    
    $
    (3,919
    )
    
    $
    (19,121
    )
    
    $
    4,001
    
    
    $
    (82
    )
 23




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Income Statement
Six Months Ended June 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    498,417
    
    
    $
    (28,468
    )
    
    $
    
    
    
    $
    471,566
    
    
    $
    55,319Cost of sales
    
    
    389,481
    
    
    
    (28,468
    )
    
    
    
    
    
    
    366,081
    
    
    
    51,868Gross profit
    
    
    108,936
    
    
    
    
    
    
    
    
    
    
    
    105,485
    
    
    
    3,451Operating (expense) incomeSelling and warehousing
    
    
    (30,955
    )
    
    
    
    
    
    
    (372
    )
    
    
    (28,050
    )
    
    
    (2,533
    )General and administrative
    
    
    (26,110
    )
    
    
    
    
    
    
    (8,570
    )
    
    
    (14,383
    )
    
    
    (3,157
    )Amortization of acquired
intangible assets
    
    
    (3,609
    )
    
    
    
    
    
    
    
    
    
    
    (3,609
    )
    
    
    Costs of integration of
water pump operations
    
    
    (474
    )
    
    
    
    
    
    
    
    
    
    
    (474
    )
    
    
    Costs of closing facilities
and consolidating operations
and gain from sale of assets
    
    
    1,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,546Trademark impairment loss
    
    
    (3,600
    )
    
    
    
    
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income (loss)
    
    
    45,734
    
    
    
    
    
    
    
    (8,942
    )
    
    
    55,369
    
    
    
    (693
    )Other (expense) incomeInterest expense, net
    
    
    (20,863
    )
    
    
    
    
    
    
    (20,524
    )
    
    
    (58
    )
    
    
    (281
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    16,000
    
    
    
    (15,465
    )
    
    
    (535
    )Management fee expense
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (1,055
    )
    
    
    
    
    
    
    
    
    
    
    (1,231
    )
    
    
    176Income (loss) before income taxes
    
    
    22,816
    
    
    
    
    
    
    
    (14,466
    )
    
    
    38,615
    
    
    
    (1,333
    )Income tax (expense) benefit
    
    
    (8,284
    )
    
    
    
    
    
    
    5,295
    
    
    
    (14,401
    )
    
    
    822Increase (decrease) from
continuing operations before
equity in earnings of
subsidiaries
    
    
    14,532
    
    
    
    
    
    
    
    (9,171
    )
    
    
    24,214
    
    
    
    (511
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (22,664
    )
    
    
    23,703
    
    
    
    (1,039
    )
    
    
    Net income (loss)
    
    $
    14,532
    
    
    $
    (22,664
    )
    
    $
    14,532
    
    
    $
    23,175
    
    
    $
    (511
    )
 24




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Income Statement
Six Months Ended June 30, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    445,073
    
    
    $
    (11,104
    )
    
    $
    
    
    
    $
    417,216
    
    
    $
    38,961Cost of sales
    
    
    353,148
    
    
    
    (11,104
    )
    
    
    
    
    
    
    331,651
    
    
    
    32,601Gross profit
    
    
    91,925
    
    
    
    
    
    
    
    
    
    
    
    85,565
    
    
    
    6,360Operating (expense) incomeSelling and warehousing
    
    
    (30,455
    )
    
    
    
    
    
    
    (675
    )
    
    
    (27,313
    )
    
    
    (2,467
    )General and administrative
    
    
    (21,534
    )
    
    
    
    
    
    
    (7,554
    )
    
    
    (11,007
    )
    
    
    (2,973
    )Amortization of acquired intangible assets
    
    
    (2,929
    )
    
    
    
    
    
    
    
    
    
    
    (2,929
    )
    
    
    Costs of integration of water pump
operations and resulting asset impairment
losses
    
    
    (4,600
    )
    
    
    
    
    
    
    
    
    
    
    (4,600
    )
    
    
    Costs of closing facilities and
consolidating operations
    
    
    (5,462
    )
    
    
    
    
    
    
    
    
    
    
    (4,208
    )
    
    
    (1,254
    )Operating income (loss)
    
    
    26,945
    
    
    
    
    
    
    
    (8,229
    )
    
    
    35,508
    
    
    
    (334
    )Other (expense) incomeInterest expense, net
    
    
    (19,939
    )
    
    
    
    
    
    
    (20,148
    )
    
    
    258
    
    
    
    (49
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    20,324
    
    
    
    (19,194
    )
    
    
    (1,130
    )Write-off of deferred financing costs
    
    
    (2,625
    )
    
    
    
    
    
    
    (2,625
    )
    
    
    
    
    
    
    Management fee expense
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    8Income (loss) before income taxes
    
    
    3,326
    
    
    
    
    
    
    
    (11,678
    )
    
    
    16,509
    
    
    
    (1,505
    )Income tax (expense) benefit
    
    
    (1,363
    )
    
    
    
    
    
    
    3,199
    
    
    
    (5,961
    )
    
    
    1,399Increase (decrease) from continuing
operations before equity in earnings of
subsidiaries
    
    
    1,963
    
    
    
    
    
    
    
    (8,479
    )
    
    
    10,548
    
    
    
    (106
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (11,546
    )
    
    
    12,383
    
    
    
    (837
    )
    
    
    Discontinued operationsNet income from discontinued operations,
net of tax
    
    
    1,941
    
    
    
    
    
    
    
    
    
    
    
    1,509
    
    
    
    432Loss on sale of discontinued operations,
net of tax
    
    
    (18,272
    )
    
    
    
    
    
    
    (18,272
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (14,368
    )
    
    $
    (11,546
    )
    
    $
    (14,368
    )
    
    $
    11,220
    
    
    $
    326
 25




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Statement of Cash Flows
Six Months Ended June 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by (used in) operating activities
    
    $
    16,165
    
    
    $
    
    
    
    $
    8,216
    
    
    $
    11,903
    
    
    $
    (3,954
    )Cash flows from investing activitiesProceeds from sale of Mexican land and building
    
    
    6,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,685Capital expenditures
    
    
    (14,706
    )
    
    
    
    
    
    
    (11
    )
    
    
    (9,060
    )
    
    
    (5,635
    )Proceeds from sale of other property, plant and
equipment
    
    
    776
    
    
    
    
    
    
    
    
    
    
    
    693
    
    
    
    83Net cash (used in) provided by investing activities
    
    
    (7,245
    )
    
    
    
    
    
    
    (11
    )
    
    
    (8,367
    )
    
    
    1,133Cash flows from financing activitiesIssuances of debt
    
    
    11,790
    
    
    
    
    
    
    
    1,750
    
    
    
    
    
    
    
    10,040Debt repayments
    
    
    (47,985
    )
    
    
    
    
    
    
    (40,120
    )
    
    
    (180
    )
    
    
    (7,685
    )Net cash (used in) provided by financing activities
    
    
    (36,195
    )
    
    
    
    
    
    
    (38,370
    )
    
    
    (180
    )
    
    
    2,355Effect of currency exchange rate changes on cash
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28
    )Net (decrease) increase in cash and cash equivalents
    
    
    (27,303
    )
    
    
    
    
    
    
    (30,165
    )
    
    
    3,356
    
    
    
    (494
    )Cash and cash equivalents at beginning of year
    
    
    31,523
    
    
    
    
    
    
    
    30,212
    
    
    
    (1,767
    )
    
    
    3,078Cash and cash equivalents at end of period
    
    $
    4,220
    
    
    $
    
    
    
    $
    47
    
    
    $
    1,589
    
    
    $
    2,584
 26




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Statement of Cash Flows
Six Months Ended June 30, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by (used in) operating activities
of continuing operations
    
    $
    9,571
    
    
    $
    
    
    
    $
    (3,865
    )
    
    $
    6,318
    
    
    $
    7,118Cash flows from investing activities of continuing
operationsAcquisition of ASC Industries, Inc., net of
cash acquired
    
    
    (121,002
    )
    
    
    
    
    
    
    (121,002
    )
    
    
    
    
    
    
    Proceeds from sale of discontinued
operations, net of transaction costs and
cash sold
    
    
    36,300
    
    
    
    
    
    
    
    36,300
    
    
    
    
    
    
    
    Capital expenditures
    
    
    (10,285
    )
    
    
    
    
    
    
    (1,525
    )
    
    
    (6,768
    )
    
    
    (1,992
    )Proceeds from sale of other property, plant
and equipment
    
    
    1,397
    
    
    
    
    
    
    
    
    
    
    
    997
    
    
    
    400Net cash used in investing activities of
continuing operations
    
    
    (93,590
    )
    
    
    
    
    
    
    (86,227
    )
    
    
    (5,771
    )
    
    
    (1,592
    )Cash flows from financing activities of continuing
operationsIssuances of debt
    
    
    113,000
    
    
    
    
    
    
    
    113,000
    
    
    
    
    
    
    
    Debt repayments
    
    
    (277
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (277
    )Financing fees
    
    
    (3,636
    )
    
    
    
    
    
    
    (3,636
    )
    
    
    
    
    
    
    Shareholders equity contributions
    
    
    8,600
    
    
    
    
    
    
    
    8,600
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities of continuing operations
    
    
    117,687
    
    
    
    
    
    
    
    117,964
    
    
    
    
    
    
    
    (277
    )Discontinued operationsNet cash used in operating activities of
discontinued operations
    
    
    (939
    )
    
    
    
    
    
    
    
    
    
    
    369
    
    
    
    (1,308
    )Net cash used in investing activities of
discontinued operations
    
    
    (2,123
    )
    
    
    
    
    
    
    
    
    
    
    (806
    )
    
    
    (1,317
    )Effect of currency exchange rate on cash of
discontinued operations
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134Effect of currency exchange rate changes on cash
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44Net increase in cash and cash equivalents
    
    
    30,784
    
    
    
    
    
    
    
    27,872
    
    
    
    110
    
    
    
    2,802Cash and cash equivalents at beginning of year
    
    
    26,182
    
    
    
    
    
    
    
    20,029
    
    
    
    1,307
    
    
    
    4,846Less cash and cash equivalents of discontinued
operations at end of period
    
    
    2,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,318Cash and cash equivalents at end of period
    
    $
    54,648
    
    
    $
    
    
    
    $
    47,901
    
    
    $
    1,417
    
    
    $
    5,330
 27




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
    Overview
 Sales.
    28




---



##### 



Cost of sales
  Selling and warehousing expenses
 General and administrative expenses
 Recent Developments
  Critical Accounting Policies and Estimates
  29




---



##### 



Inventory
 Revenue recognition
    Product returns .
 Impairment of intangible assets and tangible fixed assets
  Retirement benefits
 30




---



##### 



Insurance reserves .
 Environmental expenditures
  Acquisition of ASC Industries, Inc .
 31




---



##### 



Results of Operations
  Three Months ended June 30,
    
    
    Six Months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    259,569
    
    
    $
    230,482
    
    
    $
    498,417
    
    
    $
    445,073Cost of sales
    
    
    200,190
    
    
    
    183,670
    
    
    
    389,481
    
    
    
    353,148Gross profit
    
    
    59,379
    
    
    
    46,812
    
    
    
    108,936
    
    
    
    91,925Operating (expense) incomeSelling and warehousing
    
    
    (14,903
    )
    
    
    (14,966
    )
    
    
    (30,955
    )
    
    
    (30,455
    )General and administrative
    
    
    (11,818
    )
    
    
    (9,729
    )
    
    
    (26,110
    )
    
    
    (21,534
    )Amortization of acquired intangible assets
    
    
    (1,831
    )
    
    
    (1,745
    )
    
    
    (3,609
    )
    
    
    (2,929
    )Costs of integration of water pump
operations and resulting asset impairment
losses
    
    
    256
    
    
    
    (4,600
    )
    
    
    (474
    )
    
    
    (4,600
    )Costs of closing facilities and
consolidating operations and gain from
sale of assets
    
    
    (101
    )
    
    
    (4,069
    )
    
    
    1,546
    
    
    
    (5,462
    )Trademark impairment loss
    
    
    (3,600
    )
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income
    
    
    27,382
    
    
    
    11,703
    
    
    
    45,734
    
    
    
    26,945Other (expense) incomeInterest expense, net
    
    
    (10,177
    )
    
    
    (10,635
    )
    
    
    (20,863
    )
    
    
    (19,939
    )Write-off of deferred financing costs
    
    
    
    
    
    
    (2,625
    )
    
    
    
    
    
    
    (2,625
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )
    
    
    (1,000
    )
    
    
    (1,000
    )Miscellaneous, net
    
    
    (754
    )
    
    
    9
    
    
    
    (1,055
    )
    
    
    (55
    )Income (loss) before income taxes
    
    
    15,951
    
    
    
    (2,048
    )
    
    
    22,816
    
    
    
    3,326Income tax (expense) benefit
    
    
    (5,926
    )
    
    
    633
    
    
    
    (8,284
    )
    
    
    (1,363
    )Net income (loss) from continuing operations
    
    
    10,025
    
    
    
    (1,415
    )
    
    
    14,532
    
    
    
    1,963Discontinued operationsNet income from discontinued operations,
net of tax
    
    
    
    
    
    
    566
    
    
    
    
    
    
    
    1,941Loss on sale of discontinued operations,
net of tax
    
    
    
    
    
    
    (18,272
    )
    
    
    
    
    
    
    (18,272
    )
    
    
    
    (17,706
    )
    
    
    
    
    
    
    (16,331
    )Net income (loss)
    
    $
    10,025
    
    
    $
    (19,121
    )
    
    $
    14,532
    
    
    $
    (14,368
    )
 32




---



##### 



Acquisition and Sales of Operations
    Three Months Ended June 30, 2007 compared with the Three Months Ended June 30, 2006
 Net sales
  Gross profit
     33




---



##### 



Selling and warehousing expenses
 General and administrative expenses
 Costs of integration of water pump operations and resulting asset impairment losses.
 Costs of closing facilities and consolidating operations and gain from sale of assets
 Trademark impairment loss .
 Interest expense, net
 Write-off of deferred financing costs
 Income tax (expense) benefit
 Net income (loss) from continuing operations
 Discontinued operations
 Net income (loss)
 Six Months Ended June 30, 2007 compared with the Six Months Ended June 30, 2006
 Net sales
 34




---



##### 



Gross profit
     Selling and warehousing expenses
 General and administrative expenses
  Costs of integration of water pump operations and resulting asset impairment losses
 Costs of closing facilities and consolidating operations and gain from sale of assets
 35




---



##### 



Trademark impairment loss .
 Interest expense, net
 Write-off of deferred financing costs
 Income tax (expense) benefit
 Net income (loss) from continuing operations
 Discontinued operations
 Net income (loss)
 Liquidity and Capital Resources
  June 30,
    
    
    December 31,2007
    
    
    2006Notes payable
    
    $
    11.0
    
    
    $
    8.6Revolving credit borrowings
    
    
    1.8
    
    
    
    Capitalized leases
    
    
    1.8
    
    
    
    1.1Term loan
    
    
    225.0
    
    
    
    265.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Amount of debt requiring repayment
    
    
    469.6
    
    
    
    504.7Unamortized debt discount
    
    
    (3.8
    )
    
    
    (4.1
    )$
    465.8
    
    
    $
    500.6
    36




---



##### 



Last six months of 2007
    
    $
    9.42008
    
    
    4.32009
    
    
    0.42010
    
    
    0.12011
    
    
    100.0Thereafter
    
    
    355.4$
    469.6
       Net cash provided by operating activities
 37




---



##### 



Net cash used in investing activities
  Recent Accounting Pronouncements
   38




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Foreign Currency Exposure
 Currency translation.
  Currency transactions
  39




---



##### 



Interest Rate Risk
   Treasury Policy
  Item 4. Controls and Procedures
    40




---



##### 



PART II
 OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1.A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Default Upon Senior Securities
  Item 4. Submission of Matters to Vote of Security Holders
  Item 5. Other Information
  Item 6. Exhibits
 Exhibit 31.1
    
    Certification of Periodic Report by the Chief Executive
Officer pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.Exhibit 31.2
    
    Certification of Periodic Report by the Chief Financial
Officer pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.Exhibit 32
    
    Certification of Periodic Report by the Chief Executive
Officer and Chief Financial Officer pursuant to 18 U.S.C.
1350, as created by Section 906 of the Sarbanes-Oxley Act of
2002.*
 
 *
    
    This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C.
1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, and is not to be incorporated by reference into any filing of UCI, whether made
before or after the date hereof, regardless of any general incorporation language in such
filing. 41




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##### 



SIGNATURES
  UNITED COMPONENTS, INC.Date: August 14, 2007
    
    By:
    
    /s/ DANIEL J. JOHNSTONName:
    
    Daniel J. JohnstonTitle:
    
    Chief Financial Officer
 42