##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the quarterly period ended March 31, 2005o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from  to
 Commission File Number: 333-107219 UNITED COMPONENTS, INC.  Delaware
    
    04-3759857(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 14601 Highway 41 North
    
    47725Evansville, Indiana
    
    (Zip Code)(Address of Principal Executive Offices)
 (812) 867-4156  
 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 o No þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange
Act Rule 12b-2). Yes o No þ The
registrant had 1,000 shares of its $0.01 par value common stock outstanding as of May 11,
2005.




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United Components, Inc. Index Part I FINANCIAL INFORMATION
Page No.Item 1.Financial Statements (unaudited)Condensed consolidated balance sheets-March 31, 2005 and December 31, 2004
3Condensed consolidated income statements-Three months ended March 31, 2005 and 2004
4Condensed consolidated statements of cash flows-Three months ended March 31, 2005 and
2004
5Condensed consolidated statements of changes in shareholders equity- Three months ended
March 31, 2005 and 2004
6Notes to condensed consolidated financial statements
7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
20Item 3. Quantitative and Qualitative Disclosures About Market Risk
28Item 4. Controls and Procedures
29Part II OTHER INFORMATIONItem 1. Legal Proceedings
30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
30Item 3. Default Upon Senior Securities
30Item 4. Submission of Matters to Vote of Security Holders
30Item 5. Other Information
30Item 6. Exhibits
30
 FORWARD-LOOKING STATEMENTS In this periodic report on Form 10-Q, United Components, Inc. (UCI) makes some forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended. These statements are included throughout
this report on Form 10-Q and relate to analyses and other information based on forecasts of future
results and estimates of amounts not yet determinable. These forward-looking statements are
identified by their use of terms and phrases such as anticipate, believe, could, estimate,
expect, intend, may, plan, predict, project, will, continue, and other similar
terms and phrases, including references to assumptions. These forward-looking statements are based on the Companys expectations and beliefs concerning
future events affecting the Company. They are subject to uncertainties and factors relating to the
Companys operations and business environment, all of which are difficult to predict and many of
which are beyond the Companys control. Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we do not know whether our expectations will prove
correct. They can be affected by inaccurate assumptions we make or by known or unknown risks and
uncertainties. Many factors mentioned in our discussion in this report will be important in
determining future results. Although we believe the expectations reflected in our forward-looking statements are based upon
reasonable assumptions, we can give no assurance that we will attain these expectations or that any
deviations will not be material. Except as otherwise required by the Federal securities laws, we
disclaim any obligation or undertaking to publicly release any updates or revisions to any
forward-looking statement contained in this periodic report on Form 10-Q to reflect any change in
our expectations with regard thereto or any change in events, conditions or circumstances on which
any such statement is based. 2




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##### 



PART I
FINANCIAL INFORMATION Item 1. Financial Statements United Components, Inc. Condensed Consolidated Balance Sheets(unaudited)(in thousands) March 31,
    
    
    December 31,2005
    
    
    2004AssetsCurrent assetsCash and cash equivalents
    
    $
    26,756
    
    
    $
    11,291Accounts receivable, net
    
    
    243,935
    
    
    
    238,581Inventories, net
    
    
    193,214
    
    
    
    188,212Deferred tax assets
    
    
    19,981
    
    
    
    18,578Other current assets
    
    
    14,106
    
    
    
    12,188Total current assets
    
    
    497,992
    
    
    
    468,850Property, plant and equipment, net
    
    
    213,778
    
    
    
    216,849Goodwill
    
    
    166,559
    
    
    
    166,559Other intangible assets, net
    
    
    96,097
    
    
    
    94,229Deferred financing costs, net
    
    
    7,351
    
    
    
    7,686Pension and other assets
    
    
    12,307
    
    
    
    12,772Total assets
    
    $
    994,084
    
    
    $
    966,945Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    111,174
    
    
    $
    91,505Short-term borrowings
    
    
    806
    
    
    
    1,267Current maturities of long-term debt
    
    
    151
    
    
    
    228Accrued expenses and other current liabilities
    
    
    70,397
    
    
    
    67,808Total current liabilities
    
    
    182,528
    
    
    
    160,808Long-term debt, less current maturities
    
    
    456,826
    
    
    
    456,674Pension and other postretirement liabilities
    
    
    54,413
    
    
    
    53,141Deferred tax liabilities
    
    
    8,073
    
    
    
    6,430Other liabilities
    
    
    2,019
    
    
    
    1,972Contingencies  Note G
    
    
    
    
    
    
    Total liabilities
    
    
    703,859
    
    
    
    679,025Shareholders equityCommon stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    263,720
    
    
    
    263,120Retained earnings
    
    
    24,803
    
    
    
    22,074Accumulated other comprehensive income
    
    
    1,702
    
    
    
    2,726Total shareholders equity
    
    
    290,225
    
    
    
    287,920Total liabilities and shareholders equity
    
    $
    994,084
    
    
    $
    966,945
 The accompanying notes are an integral part of these statements. 3




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United Components, Inc. Condensed Consolidated Income Statements(unaudited)(in thousands) Three Months ended March 31,2005
    
    
    2004Net sales
    
    $
    245,506
    
    
    $
    256,811Cost of sales
    
    
    199,420
    
    
    
    201,264Gross profit
    
    
    46,086
    
    
    
    55,547Operating expensesSelling and warehousing
    
    
    18,263
    
    
    
    19,045General and administrative
    
    
    12,419
    
    
    
    12,072Amortization of intangible assets
    
    
    1,532
    
    
    
    1,851Operating income
    
    
    13,872
    
    
    
    22,579Other income (expense)Interest income
    
    
    24
    
    
    
    65Interest expense
    
    
    (8,796
    )
    
    
    (9,631
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )Miscellaneous, net
    
    
    (52
    )
    
    
    85Income before income taxes
    
    
    4,548
    
    
    
    12,598Income tax expense
    
    
    1,819
    
    
    
    5,063Net income
    
    $
    2,729
    
    
    $
    7,535
 The accompanying notes are an integral part of these statements. 4




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##### 



United Components, Inc. Condensed Consolidated Statements of Cash Flows(unaudited)(in thousands) Three Months ended March 31,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    2,729
    
    
    $
    7,535Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation
    
    
    8,308
    
    
    
    9,082Amortization of intangible assets
    
    
    1,532
    
    
    
    1,851Amortization of deferred financing costs
and debt issuance costs
    
    
    493
    
    
    
    1,156Deferred income taxes
    
    
    595
    
    
    
    3,381Other non-cash, net
    
    
    1,774
    
    
    
    (2,089
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    (5,648
    )
    
    
    (11,742
    )Inventories
    
    
    (5,002
    )
    
    
    (4,406
    )Other current assets
    
    
    (1,918
    )
    
    
    1,462Accounts payable
    
    
    19,669
    
    
    
    20,814Accrued expenses and other current liabilities
    
    
    2,589
    
    
    
    11,758Other assets
    
    
    (1,329
    )
    
    
    1,783Other liabilities
    
    
    1,319
    
    
    
    1,268Net cash provided by operating activities
    
    
    25,111
    
    
    
    41,853Cash flows from investing activities:Final Acquisition purchase price payment
    
    
    
    
    
    
    (8,000
    )Capital expenditures
    
    
    (9,687
    )
    
    
    (8,931
    )Proceeds from sale of property, plant and equipment
    
    
    112
    
    
    
    129Net cash used in investing activities
    
    
    (9,575
    )
    
    
    (16,802
    )Cash flows from financing activities:Issuances of debt
    
    
    8,039
    
    
    
    Debt repayments
    
    
    (8,583
    )
    
    
    (40,015
    )Shareholders equity contribution
    
    
    600
    
    
    
    (28
    )Net cash provided by (used in) financing activities
    
    
    56
    
    
    
    (40,043
    )Effect of exchange rate changes on cash
    
    
    (127
    )
    
    
    110Net increase (decrease) in cash and cash equivalents
    
    
    15,465
    
    
    
    (14,882
    )Cash and cash equivalents at beginning of year
    
    
    11,291
    
    
    
    46,130Cash and cash equivalents at end of period
    
    $
    26,756
    
    
    $
    31,248
 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(unaudited)(in thousands) AccumulatedAdditional
    
    
    Retained
    
    
    Other
    
    
    TotalCommon
    
    
    Paid In
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Income
    
    
    Equity
    
    
    IncomeBalance at January 1, 2004
    
    $
    
    
    
    $
    261,385
    
    
    $
    (8,755
    )
    
    $
    1,460
    
    
    $
    254,090Additions to paid in capital
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    (28
    )Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    7,535
    
    
    
    
    
    
    
    7,535
    
    
    $
    7,535Other comprehensive incomeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (340
    )
    
    
    (340
    )
    
    
    (340
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    786
    
    
    
    786
    
    
    
    786Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,981Balance at March 31, 2004
    
    $
    
    
    
    $
    261,357
    
    
    $
    (1,220
    )
    
    $
    1,906
    
    
    $
    262,043Balance at January 1, 2005
    
    $
    
    
    
    $
    263,120
    
    
    $
    22,074
    
    
    $
    2,726
    
    
    $
    287,920Additions to paid in capital
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    2,729
    
    
    
    
    
    
    
    2,729
    
    
    $
    2,729Other comprehensive incomeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )
    
    
    (34
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (990
    )
    
    
    (990
    )
    
    
    (990
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,705Balance at March 31, 2005
    
    $
    
    
    
    $
    263,720
    
    
    $
    24,803
    
    
    $
    1,702
    
    
    $
    290,225
 The accompanying notes are an integral part of these statements. 6




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United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE A  GENERAL AND BASIS OF FINANCIAL STATEMENT PRESENTATION General United Components, Inc. (UCI) is a wholly owned subsidiary of UCI Acquisition Holdings, Inc. UCI
Acquisition Holdings, Inc. and United Components, Inc. are corporations formed at the direction of
The Carlyle Group. At March 31, 2005, affiliates of The Carlyle Group own 98.6% of UCI Acquisition
Holdings, Inc.s common stock, and the remainder is owned by certain members of senior management
and UCIs Board of Directors. On June 20, 2003, United Components, Inc. purchased, from UIS, Inc. and UIS Industries, Inc., their
vehicle parts businesses. This acquisition is referred to in these notes to the financial
statements as the Acquisition. The Company operates in one business segment through its subsidiaries. The Company manufactures
and distributes vehicle parts primarily servicing the vehicle replacement parts market in North
America and Europe. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of UCI
and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.
In these notes to the financial statements, the term the Company refers to UCI and its
subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted in the United States
for complete financial statements. The December 31, 2004 consolidated balance sheet has been derived from the audited financial
statements included in the Companys annual report on Form 10-K for the year ended December 31,
2004. The financial statements at March 31, 2005 and for the three-month periods ended March 31,
2005 and 2004 are unaudited. In the opinion of the Company, these financial statements include all
adjustments necessary for a fair presentation of the financial position and results of operations
for such periods. Such adjustments include normal recurring adjustments and, in the case of the
income statement for the 2004 period, include the effects of the preliminary allocation of the
Acquisition purchase price. For all periods subsequent to March 31, 2004, the financial
information presented in these financial statements and related notes reflects the final allocation
of the Acquisition purchase price. The final allocation had no impact on previously reported
results of operations. The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions in determining the
reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of sales and expenses during the reporting period. The estimates and assumptions include
estimates of the collectibility of accounts receivable and the realizability of inventory, goodwill
and other intangible assets. They also include estimates of cost accruals, environmental
liabilities, warranty and product returns, insurance reserves, income taxes, pensions and other
postretirement benefits and other factors. Management has exercised reasonableness in deriving
these estimates; however, actual results could differ from these estimates. These financial statements should be read in conjunction with the financial statements and notes
thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2004. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2005. 7




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United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE B  SALES OF RECEIVABLES The Company has agreements to sell undivided interests in certain of its receivables to a factoring
company, which in turn has the right to sell an undivided interest to a financial institution or
other third party. The Company enters these agreements at its discretion when it determines that
the cost of factoring is less than the cost of servicing its receivables with existing debt.
Pursuant to these agreements, the Company sold $5.1 million of receivables during the 2005 quarter
which would otherwise have been outstanding at March 31, 2005. The Company retained no rights or
interest and has no obligations with respect to the sold receivables. The Company does not service
the receivables after the sales. The sales of receivables were accounted for as a sale in accordance with SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The sold
receivables were removed from the balance sheet at the time of sales. The costs of the sales were
a 0.25% agents fee and a discount deducted by the factoring company, which is calculated based on
LIBOR plus 1.5%. These costs were $57 thousand in the first quarter of 2005 and are recorded in
miscellaneous, net. NOTE C  INVENTORIES The components of inventory are as follows (in thousands): March 31,
    

    
    December 31,2005
    
    
    2004Raw materials
    
    $
    33,976
    
    
    $
    34,461Work in process
    
    
    51,212
    
    
    
    49,376Finished products
    
    
    129,614
    
    
    
    125,620Valuation reserves
    
    
    (21,588
    )
    
    
    (21,245
    )$
    193,214
    
    
    $
    188,212
 NOTE D  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consists of the following (in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Salaries and wages
    
    $
    4,472
    
    
    $
    2,756Bonuses
    
    
    1,842
    
    
    
    4,245Vacation pay
    
    
    6,424
    
    
    
    5,721Pension and other postretirement liabilities
    
    
    4,006
    
    
    
    4,039Product returns
    
    
    15,119
    
    
    
    15,291Rebates, credits and discounts due customers
    
    
    6,942
    
    
    
    6,475Insurance
    
    
    7,016
    
    
    
    9,337Interest
    
    
    7,147
    
    
    
    1,751Taxes payable
    
    
    2,952
    
    
    
    4,081Other
    
    
    14,477
    
    
    
    14,112$
    70,397
    
    
    $
    67,808
 8




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United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE E  PRODUCT RETURNS LIABILITY The product returns liability is included in accrued expenses and other current liabilities. It
includes accruals for parts returned due to manufacturing defects and for certain parts returned
because of customer excess quantities. The changes in the Companys product returns liability are
as follows (in thousands): Three Months ended March 31,2005
    
    
    2004Beginning of year
    
    $
    15,291
    
    
    $
    13,999Returned parts expense
    
    
    (9,527
    )
    
    
    (9,541
    )Additional loss provision
    
    
    9,355
    
    
    
    9,891End of period
    
    $
    15,119
    
    
    $
    14,349
 NOTE F  PENSION The following are the components of net periodic pension expense (in thousands): Three Months ended March 31,2005
    
    
    2004Service cost
    
    $
    2,217
    
    
    $
    2,035Interest cost
    
    
    3,224
    
    
    
    2,947Expected return on plan assets
    
    
    (3,486
    )
    
    
    (3,395
    )Amortization of transition asset
    
    
    6
    
    
    
    Amortization of prior services cost
    
    
    22
    
    
    
    Amortization of unrecognized gain
    
    
    10
    
    
    
    $
    1,993
    
    
    $
    1,587
 NOTE G  CONTINGENCIES Environmental The Company is subject to a variety of Federal, state, local and foreign environmental laws and
regulations, including those governing the discharge of pollutants into the air or water, the
management and disposal of hazardous substances or wastes and the cleanup of contaminated sites.
The Company has been identified as a potentially responsible party for contamination at two sites.
One of these sites is a former facility in Edison, New Jersey, where a state agency has ordered the
Company to continue with the monitoring and investigation of chlorinated solvent contamination.
The Company has informed the agency that this contamination was caused by another party at a
neighboring facility and has initiated a lawsuit against that party for damages and to compel it to
take responsibility for any further investigation or remediation. The second site is a previously
owned site in Solano County, California, where the Company, at the request of the regional water
board, is investigating and analyzing the nature and extent of the contamination and is conducting
some remediation. Based on currently available information, management believes that the cost of
the ultimate outcome of these environmental matters will not exceed the $3.2 million accrued at
March 31, 2005 by a material amount, if at all. However, because all investigation and analysis
has not yet been completed and because of the inherent uncertainty in such environmental matters,
it is reasonably possible that the ultimate outcome of these matters could have a material adverse
effect on results for a single quarter. 9




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United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) Litigation The Company is subject to various other contingencies, including routine legal proceedings and
claims arising out of the normal course of business. These proceedings primarily involve
commercial claims, product liability claims, personal injury claims and workers compensation
claims. The outcome of these lawsuits, legal proceedings and claims cannot be predicted with
certainty. Nevertheless, the Company believes that the outcome of any currently existing
proceedings, even if determined adversely, would not have a material adverse effect on financial
condition or results of operations. NOTE H  GEOGRAPHIC INFORMATION The Company had the following net sales by country (in thousands): Three Months ended March 31,2005
    
    
    2004United States
    
    $
    202,372
    
    
    $
    209,134Canada
    
    
    7,830
    
    
    
    9,187United Kingdom
    
    
    5,284
    
    
    
    10,235Mexico
    
    
    5,398
    
    
    
    7,217Germany
    
    
    4,092
    
    
    
    3,690Spain
    
    
    1,064
    
    
    
    1,213Belgium
    
    
    1,874
    
    
    
    1,994France
    
    
    3,575
    
    
    
    3,024Sweden
    
    
    1,703
    
    
    
    1,568Other
    
    
    12,314
    
    
    
    9,549$
    245,506
    
    
    $
    256,811
 Net long-lived assets by country are as follows (in thousands): March 31,
    
    
    December 31,2005
    
    
    2004United States
    
    $
    271,299
    
    
    $
    271,958United Kingdom
    
    
    39,770
    
    
    
    40,921Mexico
    
    
    13,673
    
    
    
    13,708Spain
    
    
    4,184
    
    
    
    4,366Canada
    
    
    607
    
    
    
    583Goodwill
    
    
    166,559
    
    
    
    166,559$
    496,092
    
    
    $
    498,095
 10




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##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE I  STOCK OPTIONS The Company has adopted the disclosure only provisions of SFAS 123, Accounting for Stock-Based
Compensation. Accordingly, stock options are accounted for by the intrinsic-value-method of APB
Opinion No. 25, Accounting for Stock Issued to Employees. Had the compensation cost of the stock
option plan been applied using the fair-value-based method at the grant date, rather than the
intrinsic-value method of accounting, the pro forma amounts would be as follows (in millions): Three Months ended March 31,2005
    
    
    2004Net income as reported
    
    $
    2.7
    
    
    $
    7.5Pro forma stock-based compensation expense, net of tax
    
    
    0.4
    
    
    
    0.5Pro forma net income
    
    $
    2.3
    
    
    $
    7.0
 Pro forma disclosures for stock option accounting may not be representative of the effects on
reported net income in future periods. NOTE J  NEW ACCOUNTING PRONOUNCEMENTS In May 2004, the FASB issued FASB Staff Position No. 106-2 (FSP 106-2), Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization
Act of 2003. FSP 106-2 provides guidance regarding accounting and disclosure related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) that was signed
into law in December 2003. FSP 106-2 is effective for interim and annual periods beginning after
June 15, 2004. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as
well as a Federal subsidy to sponsors of retiree health care benefit plans that provide a benefit
that is at least equivalent to Medicare Part D. Benefits from the Act generally cover individuals
who are age 65 or greater. Since postretirement medical coverage under the Companys plans ceases
at age 65, the Act does not have an impact on the Companys obligations. In December 2004, SFAS No. 123R, Share-Based Payment was issued. SFAS No. 123R requires the
measurement of share-based payments to employees using a fair-value-based method and the recording
of such expense in the income statement. The accounting provisions of SFAS No. 123R are effective
for reporting periods beginning after December 15, 2005 and are to be applied prospectively. Also,
in March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin 107
(SAB 107). SAB 107 provides clarification on the implementation of SFAS No. 123R and the
relationship of SFAS No. 123R to certain SEC rules and regulations. The pro forma disclosures
previously permitted under SFAS No. 123 will no longer be an alternative to financial statement
recognition. See Note I for the pro forma net income as if the Company had used a fair-value-based
method, similar to the methods required under SFAS No.123R, to measure compensation expense. Had
SFAS No. 123R been applied in the periods disclosed, the impact would have been similar to those
pro forma amounts. The future impact is dependent upon if and when additional options are granted
or expire, as well as the vesting period of such options. 11




---



##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) In December 2004, the FASB issued SFAS No. 151, Inventory Costs. SFAS No. 151 primarily
clarifies the accounting for inventory when there are abnormal amounts of idle facility expense,
freight, handling costs and wasted materials. Under existing guidelines, items such as idle
facility expense, excessive spoilage and re-handling costs may be so abnormal as to require
treatment as current period charges rather than recorded adjustments to the value of inventory.
SFAS No. 151 requires that such items be recognized as current period charges regardless of whether
they meet the so abnormal criteria. The accounting provisions of SFAS No. 151 are to be applied
prospectively and are effective for inventory costs incurred during fiscal years beginning after
June 15, 2005. The Company does not expect SFAS No. 151 to have a material effect on its financial
statements. In December 2004, the FASB issued FASB Staff Position No. 109-1 (FSP 109-1), Application of SFAS
No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities
Provided by the American Jobs Creation Act of 2004. FSP 109-1 states that the tax deduction of
qualified domestic production activities, which is provided by the American Jobs Creation Act of
2004 (the Jobs Act), will be treated as a special deduction as described in SFAS No. 109.
Consequently, the impact of the deduction, which was effective January 1, 2005, will be reported in
the period in which the deduction is claimed on the Companys income tax returns. The effect of
FSP 109-2 is expected to be less than $0.3 million for the year ended December 31, 2005. In December 2004, the FASB issued FASB Staff Position No. 109-2 (FSP 109-2), Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004. FSP 109-2 provides accounting and disclosure guidance related to the Jobs
Act provision for the limited time 85% dividends received deduction on the repatriation of certain
foreign earnings. Although adoption is effective immediately, FSP 109-2 states that a company is
allowed time beyond the financial reporting period to evaluate the effects of the Jobs Act on its
plan for reinvestment or repatriation of foreign earnings. The Company is evaluating the impact of
the repatriation provisions of the Jobs Act and will complete its review by December 31, 2005. It
is not expected that these provisions will have a material impact on the Companys financial
statements. Accordingly, as provided for in FSP 109-2, the Company has not adjusted its tax
expense or net deferred tax assets to reflect the repatriation provisions of the Jobs Act. In March 2005, the FASB issued FASB Interpretation No. 47 (FIN 47), Accounting for Conditional
Asset Retirement Obligations. FIN 47 clarifies that a company must record a liability for a
conditional asset retirement obligation if the fair value of the obligation can be reasonably
estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15,
2005. The Company does not expect FIN 47 to have a material effect on its financial statements. NOTE K  OTHER INFORMATION At March 31, 2005, 1,000 shares of common stock were authorized, issued and outstanding. The par
value of each share of common stock is $0.01 per share. Cash payments for interest and income taxes (net of refunds) are as follows (in thousands): Three Months ended March 31,2005
    
    
    2004Interest
    
    $
    2,956
    
    
    $
    3,935Income taxes (net of refunds)
    
    
    4,709
    
    
    
    1,899
 12




---



##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE L  GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS The senior credit facilities are secured by substantially all the assets of the Company. The
senior subordinated notes (the Notes) are unsecured and rank equally in right of payment with any
of the Companys future senior subordinated indebtedness. The Notes are subordinated to
indebtedness and other liabilities of UCIs subsidiaries that are not guarantors of the Notes. The
Notes and borrowings under the senior credit facilities are guaranteed on a full and unconditional
and joint and several basis by UCIs domestic subsidiaries. The information, which follows in this Note L, includes condensed financial statements for (a) UCI,
which is the issuer of the Notes and borrower under the senior credit facilities, (b) the domestic
subsidiaries, which guarantee the Notes and borrowings under the senior credit facilities (the
Guarantors), (c) the foreign subsidiaries (the Non-Guarantors), and (d) consolidated UCI. Also
included are consolidating entries, which principally consist of eliminations of investments in
consolidated subsidiaries and intercompany balances and transactions. All goodwill is included in
UCIs balance sheet. The condensed balance sheets and the condensed income statement for the 2005 quarter, which follow
in this Note L, include the final allocation of the Acquisition purchase price. The condensed
income statement for the 2004 quarter is based on a preliminary allocation for the Acquisition
purchase price. Preliminary purchase price allocations were based on preliminary estimates of the
fair value of assets acquired and liabilities assumed. Separate financial statements of the Guarantor subsidiaries are not presented because their
guarantees are full and unconditional and joint and several, and the Company thinks separate
financial statements and other disclosure regarding the Guarantor subsidiaries are not material to
investors. 13




---



##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE L (continued) Consolidating Condensed Balance Sheet
March 31, 2005(in thousands) UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    26,756
    
    
    $
    
    
    
    $
    18,261
    
    
    $
    2,044
    
    
    $
    6,451Accounts receivable, net
    
    
    243,935
    
    
    
    
    
    
    
    
    
    
    
    217,060
    
    
    
    26,875Inventories, net
    
    
    193,214
    
    
    
    
    
    
    
    
    
    
    
    175,483
    
    
    
    17,731Deferred tax assets
    
    
    19,981
    
    
    
    
    
    
    
    (166
    )
    
    
    18,747
    
    
    
    1,400Other current assets
    
    
    14,106
    
    
    
    
    
    
    
    2,975
    
    
    
    4,876
    
    
    
    6,255Total current assets
    
    
    497,992
    
    
    
    
    
    
    
    21,070
    
    
    
    418,210
    
    
    
    58,712Property, plant and equipment, net
    
    
    213,778
    
    
    
    
    
    
    
    810
    
    
    
    160,158
    
    
    
    52,810Intercompany receivables
    
    
    
    
    
    
    (84,543
    )
    
    
    354
    
    
    
    82,672
    
    
    
    1,517Intercompany notes receivable
    
    
    
    
    
    
    (482,000
    )
    
    
    482,000
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    (151,315
    )
    
    
    141,357
    
    
    
    9,958
    
    
    
    Goodwill
    
    
    166,559
    
    
    
    
    
    
    
    166,559
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    96,097
    
    
    
    
    
    
    
    11,046
    
    
    
    82,610
    
    
    
    2,441Deferred financing costs, net
    
    
    7,351
    
    
    
    
    
    
    
    7,351
    
    
    
    
    
    
    
    Pension and other assets
    
    
    12,307
    
    
    
    
    
    
    
    323
    
    
    
    11,778
    
    
    
    206Total assets
    
    $
    994,084
    
    
    $
    (717,858
    )
    
    $
    830,870
    
    
    $
    765,386
    
    
    $
    115,686Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    111,174
    
    
    $
    
    
    
    $
    5,494
    
    
    $
    90,644
    
    
    $
    15,036Short-term borrowings
    
    
    806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    806Current maturities of long-term debt
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151Accrued expenses and other current
liabilities
    
    
    70,397
    
    
    
    
    
    
    
    2,107
    
    
    
    59,170
    
    
    
    9,120Total current liabilities
    
    
    182,528
    
    
    
    
    
    
    
    7,601
    
    
    
    149,814
    
    
    
    25,113Long-term debt, less current maturities
    
    
    456,826
    
    
    
    
    
    
    
    456,799
    
    
    
    
    
    
    
    27Pension and other postretirement liabilities
    
    
    54,413
    
    
    
    
    
    
    
    
    
    
    
    38,072
    
    
    
    16,341Deferred tax liabilities
    
    
    8,073
    
    
    
    
    
    
    
    8,090
    
    
    
    1,036
    
    
    
    (1,053
    )Other liabilities
    
    
    2,019
    
    
    
    
    
    
    
    
    
    
    
    2,019
    
    
    
    Intercompany payables
    
    
    
    
    
    
    (84,543
    )
    
    
    68,155
    
    
    
    1,440
    
    
    
    14,948Intercompany notes payable
    
    
    
    
    
    
    (482,000
    )
    
    
    
    
    
    
    462,000
    
    
    
    20,000Total shareholders equity
    
    
    290,225
    
    
    
    (151,315
    )
    
    
    290,225
    
    
    
    111,005
    
    
    
    40,310Total liabilities and shareholders
equity
    
    $
    994,084
    
    
    $
    (717,858
    )
    
    $
    830,870
    
    
    $
    765,386
    
    
    $
    115,686
 14




---



##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE L (continued) Consolidating Condensed Balance Sheet
December 31, 2004(in thousands) UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    11,291
    
    
    $
    
    
    
    $
    3,916
    
    
    $
    2,114
    
    
    $
    5,261Accounts receivable, net
    
    
    238,581
    
    
    
    
    
    
    
    
    
    
    
    215,425
    
    
    
    23,156Inventories, net
    
    
    188,212
    
    
    
    
    
    
    
    
    
    
    
    169,664
    
    
    
    18,548Deferred tax assets
    
    
    18,578
    
    
    
    
    
    
    
    (250
    )
    
    
    17,825
    
    
    
    1,003Other current assets
    
    
    12,188
    
    
    
    
    
    
    
    2,123
    
    
    
    3,670
    
    
    
    6,395Total current assets
    
    
    468,850
    
    
    
    
    
    
    
    5,789
    
    
    
    408,698
    
    
    
    54,363Property, plant and equipment, net
    
    
    216,849
    
    
    
    
    
    
    
    604
    
    
    
    160,907
    
    
    
    55,338Intercompany receivables
    
    
    
    
    
    
    (58,212
    )
    
    
    
    
    
    
    58,212
    
    
    
    Intercompany notes receivable
    
    
    
    
    
    
    (482,000
    )
    
    
    482,000
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    (146,288
    )
    
    
    135,414
    
    
    
    10,874
    
    
    
    Goodwill
    
    
    166,559
    
    
    
    
    
    
    
    166,559
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    94,229
    
    
    
    
    
    
    
    7,738
    
    
    
    84,068
    
    
    
    2,423Deferred financing costs, net
    
    
    7,686
    
    
    
    
    
    
    
    7,686
    
    
    
    
    
    
    
    Pension and other assets
    
    
    12,772
    
    
    
    
    
    
    
    272
    
    
    
    12,325
    
    
    
    175Total assets
    
    $
    966,945
    
    
    $
    (686,500
    )
    
    $
    806,062
    
    
    $
    735,084
    
    
    $
    112,299Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    91,505
    
    
    $
    
    
    
    $
    4,020
    
    
    $
    72,678
    
    
    $
    14,807Short-term borrowings
    
    
    1,267
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    767Current maturities of long-term debt
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228Accrued expenses and other current
liabilities
    
    
    67,808
    
    
    
    
    
    
    
    3,811
    
    
    
    56,423
    
    
    
    7,574Total current liabilities
    
    
    160,808
    
    
    
    
    
    
    
    8,331
    
    
    
    129,101
    
    
    
    23,376Long-term debt, less current maturities
    
    
    456,674
    
    
    
    
    
    
    
    456,641
    
    
    
    
    
    
    
    33Pension and other postretirement liabilities
    
    
    53,141
    
    
    
    
    
    
    
    
    
    
    
    35,911
    
    
    
    17,230Deferred tax liabilities
    
    
    6,430
    
    
    
    
    
    
    
    6,824
    
    
    
    (40
    )
    
    
    (354
    )Other liabilities
    
    
    1,972
    
    
    
    
    
    
    
    
    
    
    
    1,972
    
    
    
    Intercompany payables
    
    
    
    
    
    
    (58,212
    )
    
    
    46,346
    
    
    
    
    
    
    
    11,866Intercompany notes payable
    
    
    
    
    
    
    (482,000
    )
    
    
    
    
    
    
    462,000
    
    
    
    20,000Total shareholders equity
    
    
    287,920
    
    
    
    (146,288
    )
    
    
    287,920
    
    
    
    106,140
    
    
    
    40,148Total liabilities and shareholders
equity
    
    $
    966,945
    
    
    $
    (686,500
    )
    
    $
    806,062
    
    
    $
    735,084
    
    
    $
    112,299
 15




---



##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE L (continued) Consolidating Condensed Income Statement
Three Months Ended March 31, 2005(in thousands) UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    245,506
    
    
    $
    (3,272
    )
    
    $
    
    
    
    $
    214,650
    
    
    $
    34,128Cost of sales
    
    
    199,420
    
    
    
    (3,272
    )
    
    
    
    
    
    
    175,433
    
    
    
    27,259Gross profit
    
    
    46,086
    
    
    
    
    
    
    
    
    
    
    
    39,217
    
    
    
    6,869Operating expensesSelling and warehousing
    
    
    18,263
    
    
    
    
    
    
    
    
    
    
    
    16,361
    
    
    
    1,902General and administrative
    
    
    12,419
    
    
    
    
    
    
    
    3,707
    
    
    
    5,661
    
    
    
    3,051Amortization of intangible assets
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532
    
    
    
    Operating income (loss)
    
    
    13,872
    
    
    
    
    
    
    
    (3,707
    )
    
    
    15,663
    
    
    
    1,916Other income (expense)Interest income
    
    
    24
    
    
    
    
    
    
    
    17
    
    
    
    2
    
    
    
    5Interest expense
    
    
    (8,796
    )
    
    
    
    
    
    
    (8,776
    )
    
    
    
    
    
    
    (20
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    6,174
    
    
    
    (5,667
    )
    
    
    (507
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    119
    
    
    
    (171
    )Income (loss) before income taxes
    
    
    4,548
    
    
    
    
    
    
    
    (6,792
    )
    
    
    10,117
    
    
    
    1,223Income tax expense (benefit)
    
    
    1,819
    
    
    
    
    
    
    
    (2,656
    )
    
    
    4,047
    
    
    
    428Increase (decrease) before equity in earnings
of subsidiaries
    
    
    2,729
    
    
    
    
    
    
    
    (4,136
    )
    
    
    6,070
    
    
    
    795Equity in earnings of subsidiaries
    
    
    
    
    
    
    (6,185
    )
    
    
    6,865
    
    
    
    (680
    )
    
    
    Net income
    
    $
    2,729
    
    
    $
    (6,185
    )
    
    $
    2,729
    
    
    $
    5,390
    
    
    $
    795
 16




---



##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE L (continued) Consolidating Condensed Income Statement
Three Months Ended March 31, 2004(in thousands) UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    256,811
    
    
    $
    (4,023
    )
    
    $
    
    
    
    $
    227,542
    
    
    $
    33,292Cost of sales
    
    
    201,264
    
    
    
    (4,023
    )
    
    
    
    
    
    
    178,622
    
    
    
    26,665Gross profit
    
    
    55,547
    
    
    
    
    
    
    
    
    
    
    
    48,920
    
    
    
    6,627Operating expensesSelling and warehousing
    
    
    19,045
    
    
    
    
    
    
    
    
    
    
    
    17,170
    
    
    
    1,875General and administrative
    
    
    12,072
    
    
    
    
    
    
    
    2,591
    
    
    
    6,603
    
    
    
    2,878Amortization of intangible assets
    
    
    1,851
    
    
    
    
    
    
    
    
    
    
    
    1,851
    
    
    
    Operating income (loss)
    
    
    22,579
    
    
    
    
    
    
    
    (2,591
    )
    
    
    23,296
    
    
    
    1,874Other income (expense)Interest income
    
    
    65
    
    
    
    (78
    )
    
    
    5
    
    
    
    113
    
    
    
    25Interest expense
    
    
    (9,631
    )
    
    
    78
    
    
    
    (9,618
    )
    
    
    (17
    )
    
    
    (74
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    84Income (loss) before income taxes
    
    
    12,598
    
    
    
    
    
    
    
    (12,704
    )
    
    
    23,393
    
    
    
    1,909Income tax expense (benefit)
    
    
    5,063
    
    
    
    
    
    
    
    (4,982
    )
    
    
    9,303
    
    
    
    742Increase (decrease) before equity
in earnings of subsidiaries
    
    
    7,535
    
    
    
    
    
    
    
    (7,722
    )
    
    
    14,090
    
    
    
    1,167Equity in earnings of subsidiaries
    
    
    
    
    
    
    (14,820
    )
    
    
    15,257
    
    
    
    (437
    )
    
    
    Net income
    
    $
    7,535
    
    
    $
    (14,820
    )
    
    $
    7,535
    
    
    $
    13,653
    
    
    $
    1,167
 17




---



##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE L (continued) Consolidating Condensed Statement of Cash Flows
Three Months Ended March 31, 2005(in thousands) UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by operating activities
    
    $
    25,111
    
    
    $
    
    
    
    $
    17,759
    
    
    $
    4,201
    
    
    $
    3,151Cash flows from investing activities:Capital expenditures
    
    
    (9,687
    )
    
    
    
    
    
    
    (3,514
    )
    
    
    (4,280
    )
    
    
    (1,893
    )Proceeds from sale of property, plant
and equipment
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    103Net cash used in investing activities
    
    
    (9,575
    )
    
    
    
    
    
    
    (3,514
    )
    
    
    (4,271
    )
    
    
    (1,790
    )Cash flows from financing activities:Issuances of debt
    
    
    8,039
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    39Debt repayments
    
    
    (8,583
    )
    
    
    
    
    
    
    (8,500
    )
    
    
    
    
    
    
    (83
    )Shareholders equity contribution
    
    
    600
    
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    Net cash provided from (used in) financing
activities
    
    
    56
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    (44
    )Effect of exchange rate changes on cash
    
    
    (127
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (127
    )Net increase (decrease) in cash and cash
equivalents
    
    
    15,465
    
    
    
    
    
    
    
    14,345
    
    
    
    (70
    )
    
    
    1,190Cash and cash equivalents at beginning of year
    
    
    11,291
    
    
    
    
    
    
    
    3,916
    
    
    
    2,114
    
    
    
    5,261Cash and cash equivalents at end of period
    
    $
    26,756
    
    
    $
    
    
    
    $
    18,261
    
    
    $
    2,044
    
    
    $
    6,451
 18




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##### 



United Components, Inc. Notes to Condensed Consolidated Financial Statements(unaudited) NOTE L (continued) Consolidating Condensed Statement of Cash Flows
Three Months Ended March 31, 2004(in thousands) UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by operating activities
    
    $
    41,853
    
    
    $
    
    
    
    $
    36,893
    
    
    $
    1,655
    
    
    $
    3,305Cash flows from investing activities:Final Acquisition purchase price
payment
    
    
    (8,000
    )
    
    
    
    
    
    
    (8,000
    )
    
    
    
    
    
    
    Capital expenditures
    
    
    (8,931
    )
    
    
    
    
    
    
    
    
    
    
    (7,694
    )
    
    
    (1,237
    )Proceeds from sale of property,
plant and equipment
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    113Net cash used in investing activities
    
    
    (16,802
    )
    
    
    
    
    
    
    (8,000
    )
    
    
    (7,678
    )
    
    
    (1,124
    )Cash flows from financing activities:Debt repayments
    
    
    (40,015
    )
    
    
    
    
    
    
    (40,000
    )
    
    
    
    
    
    
    (15
    )Other
    
    
    (28
    )
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (40,043
    )
    
    
    
    
    
    
    (40,028
    )
    
    
    
    
    
    
    (15
    )Effect of exchange rate changes on cash
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110Net increase (decrease) in cash and cash
equivalents
    
    
    (14,882
    )
    
    
    
    
    
    
    (11,135
    )
    
    
    (6,023
    )
    
    
    2,276Cash and cash equivalents at beginning of year
    
    
    46,130
    
    
    
    
    
    
    
    33,164
    
    
    
    4,448
    
    
    
    8,518Cash and cash equivalents at end of period
    
    $
    31,248
    
    
    $
    
    
    
    $
    22,029
    
    
    $
    (1,575
    )
    
    $
    10,794
 19




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##### 



Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations Overview Sales.We are among North Americas largest and most diversified companies servicing the
vehicle replacement parts market, or the aftermarket. We supply a broad range of filtration
products, fuel and cooling systems, engine management systems, driveline components and lighting
systems to the automotive, trucking, marine, mining, construction, agricultural and industrial
vehicle markets. We estimate that about 77% of our net sales in 2004 were made in the aftermarket,
to a customer base that includes some of the largest and fastest growing companies servicing the
aftermarket. The aftermarket has grown at an annual rate of approximately 3.7% from 1994 through
2003. We believe it will continue to grow, at least in the near term. We believe we are well
positioned to participate in that growth. We believe we have leading market positions in our primary product lines. We continue to expand
our product and service offerings to meet the needs of our customers, and we believe that we offer
one of the most comprehensive lines of products in the vehicle replacement parts market consisting
of over 60,000 parts. We believe our breadth of product offering is a key competitive advantage.
This product breadth, along with our extensive manufacturing and distribution capabilities, product
innovation, and reputation for quality and service, makes us a leader in our industry. Because most of our sales are to the aftermarket, we believe that our sales are primarily driven by
the number of vehicles on the road, the average age of those vehicles, the average number of miles
driven per year, the mix of light trucks to passenger cars on the road and the relative strength of
our sales channels. Historically, our sales have not been materially adversely affected by market
cyclicality, as we believe that our aftermarket sales are less dependent on economic conditions
than our sales to OEMs, due to the non-discretionary nature of vehicle maintenance and repair. However, it is also important to note that in 2004, 22% and in 2003, 23% of our total net sales
were derived from our business with AutoZone, and our failure to maintain a healthy relationship
with AutoZone stores would result in a significant decrease in our net sales. Even if we maintain
our relationship, this sales concentration with one customer increases the potential impact to our
business that could result from any changes in the economic terms of this relationship. In the
first quarter of 2005, we transitioned one product line to an AutoZone program called Pay-on-Scan.
Under this program, we retain title to the product at AutoZone locations, and we record sales for
the product when an AutoZone customer purchases it. As part of this transition, we bought back an
immaterial amount of our products from AutoZone and will resell the product to AutoZone under the
Pay-on-Scan program. We do not expect the transition to the Pay-on-Scan program for this product
line to have a material impact on our financial condition or results of operations. We currently
have no agreement to expand the Pay-on-Scan program beyond the single product line. AutoZone may
in the future, however, request that we transition additional products to the Pay-on-Scan program.
Any such transition or other change in the terms of sale to this customer could result in, among
other things, an increase in the time it takes for us to record sales or collect on receivables,
which could have a material impact on our financial condition or results of operations. AutoZone
has publicly announced its intent to transition a significant percentage of its purchases from
suppliers to the Pay-on-Scan program. Cost of Sales. Cost of sales includes all costs of manufacturing required to bring a
product to a ready-for-sale condition. Such costs include direct and indirect materials (net of
vendor consideration), direct and indirect labor costs, including fringe benefits, supplies,
utilities, freight, depreciation, insurance, pension and postretirement benefits, information
technology costs and other costs. Cost of sales also includes all costs to procure, package and
ship products that we purchase and resell. The two largest components of our cost of sales are
steel and labor. 20




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##### 



Since early in 2004, global demand for steel has been high and has resulted in supplier-imposed
price increases and/or surcharges for this raw material. While we have been, and expect to
continue to be, able to obtain sufficient quantities to satisfy our needs, we have been required to
pay significantly higher prices for the material. The Company has implemented price increases on
certain products with high steel content and is considering the implementation of additional price
increases on these products. Existing price increases, as well as any future increases, have not
been and may not be sufficient to offset all of the steel cost increases. The higher cost of
steel, net of the Companys price increases, adversely affected pretax income by approximately $3.0
million in 2004 and approximately $0.8 million in the first quarter of 2005. The adverse effect
for the full year of 2005 is forecasted to be comparable to 2004. This forecast is based on
assumptions regarding the future cost of steel and the Companys ability to increase selling prices
on products with high steel content. Actual events could vary significantly from the Companys
assumptions. Consequently, the actual effect of higher steel costs could be significantly
different than the Companys forecast. Selling and Warehousing Expenses. Selling and warehousing expenses primarily include sales
and marketing, warehousing and distribution costs. Our major cost elements include salaries and
wages, pension and fringe benefits, depreciation, advertising and information technology costs. Management intends to leverage the fixed portion of sales and warehousing as sales increase.
Consequently, management thinks that selling and warehousing expense as a percentage of sales is a
key measure and is working to reduce this percentage. General and Administrative Expenses. General and administrative expenses primarily include
executive, accounting and administrative personnel salaries and fringe benefits, professional fees,
pension benefits, insurance, provision for doubtful accounts, rent and information technology
costs. Critical Accounting Policies and Estimates The methods, estimates and judgments we use in applying our most critical accounting policies have
a significant impact on the results we report in our financial statements. We evaluate our
estimates and judgments on an on-going basis. We base our estimates on historical experience and
on assumptions that we believe to be reasonable under the circumstances. Our experience and
assumptions form the basis for our judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may vary from what we anticipate,
and different assumptions or estimates about the future could change our reported results. We believe the following accounting policies are the most critical in that they significantly
affect our financial statements, and they require our most significant estimates and complex
judgments. Accounts receivable. We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. These allowances are
based on a combination of an aging analysis and our analyses of our history of write-offs. In
addition, we evaluate allowance requirements on a more specific basis in the event that the
financial condition of a particular customer were to deteriorate. Inventory. We record inventory at the lower of cost or market. Cost is determined using
standard cost, which approximates the first-in, first-out (FIFO) method. Estimated market value is
based on assumptions for future demand and related pricing. If actual market conditions are less
favorable than those projected by management, reductions in the value of inventory may be required. 21




---



##### 



Revenue recognition. We record sales when title transfers to the customer. Where we have
sales rebate programs with some of our customers, we estimate amounts due under these sales rebate
programs when the sale is recognized. Net sales relating to any particular shipment are based upon
the amount invoiced for the shipped goods less estimated future rebate payments. These estimates
are based upon our historical experience. Revisions to these estimates are recorded in the period
in which the facts that give rise to the revision become known. Additionally, we enter into formal and informal agreements with our customers that provide for
sales discounts, marketing allowances, return allowances and performance incentives. Any discount,
allowance or incentive is treated as a reduction to sales, based on estimates of the criteria that
give rise to the discount, allowance or incentive, such as sales volume and marketing spending. We
routinely review these criteria and our estimating process and make adjustments as facts and
circumstances change. Historically, we have not found material differences between our estimates
and actual results. Product Returns.Credits for parts returned due to manufacturing defects and parts
returned because of customer excess quantities are estimated and recorded at the time of the
related sales. These estimates are based on historical experience, current trends and other
factors. Revisions to these estimates are recorded in the period in which the facts that give rise
to the revision become known. Impairment of intangible assets and tangible fixed assets. Our goodwill and other
intangible assets with indefinite lives are held at historical cost. Our other intangible assets
with finite lives and tangible fixed assets are held at historical cost, net of depreciation and
amortization. We periodically evaluate the realizability of our intangible assets. We also
perform a review of these intangible assets and tangible fixed assets if an indicator of
impairment, such as an operating loss or a significant adverse change in the business or market
place, exists. If we determine that the historical carrying value of any of these assets has been
impaired, we record the amount of the impairment as a charge against income. Tests for impairment involve managements estimates of future cash flows. Such estimates require
numerous assumptions including, but not limited to, assumptions regarding future economic and
market conditions, competition, customer relations, pricing, raw material costs, production costs,
selling, general and administrative costs, and income and other taxes. These estimates require
judgment and are, by their nature, subjective. Retirement benefits. Pension obligations are actuarially determined and are affected by
assumptions including discount rate, life expectancy, annual compensation increases and the
expected rate of return on plan assets. Changes in the discount rate, and differences between
actual results and assumptions, will affect the amount of pension expense we recognize in future
periods. Postretirement health obligations are actuarially determined and are based on assumptions including
discount rate, life expectancy and health care cost trends. Changes in the discount rate, and
differences between actual results and assumptions, will affect the amount of expense we recognize
in future periods. A one percent increase or decrease in the assumed health care cost trends would
result in a $48,600 annual increase and a $42,000 annual decrease in postretirement health costs,
respectively. Insurance Reserves.Our insurance for workers compensation, automobile, product and
general liability include high deductibles for which the Company is responsible. Estimated losses
for which the Company is responsible are recorded in accrued expenses. Estimates of such losses
involve substantial uncertainties including litigation trends, the severity of reported claims, and
incurred but not yet reported claims. External actuaries are used to assist us in estimating these
losses. Environmental Expenditures. Our expenditures for environmental matters fall into two
categories. The first category is routine compliance with applicable laws and regulations related
to the protection of the environment. The costs of such compliance are based on actual charges and
do not require significant estimates. 22




---



##### 



The second category of expenditures is for matters related to investigation and remediation of
contaminated sites. The impact of this type of expenditure requires significant estimates by
management. The estimated cost of the ultimate outcome of these matters is included as a liability
in the Companys March 31, 2005 balance sheet. This estimate is based on all currently available
information, including input from outside legal and environmental professionals, and numerous
assumptions. Management believes that the ultimate outcome of these matters will not exceed the
$3.2 million accrued at March 31, 2005 by a material amount, if at all. However, because all
investigation and site analysis has not yet been completed and because of the inherent uncertainty
in such environmental matters, there can be no assurance that the ultimate outcome of these matters
will not be significantly different than our estimates. Income Taxes.The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Accordingly, deferred tax assets and liabilities are recognized for
the expected future tax consequences of the temporary differences between the book carrying amounts
and the tax basis of assets and liabilities. These future tax consequences, as well as current tax
expense, require estimates of taxable income for each of the tax jurisdictions in which the Company
operates. Such estimates include estimates of the portion of income subject to tax and allowable
deductions for each tax jurisdiction. In addition, when determining the carrying value of deferred
tax assets, the Company must also estimate future taxable income. Results of Operations The following table was derived from the Companys unaudited condensed consolidated income
statements for the three months ended March 31, 2005 and 2004. The amounts are presented in
millions of dollars. Three Months ended March 31,2005
    
    
    2004Net sales
    
    $
    245.5
    
    
    $
    256.8Cost of sales
    
    
    199.4
    
    
    
    201.3Gross profit
    
    
    46.1
    
    
    
    55.5Operating expensesSelling and warehousing
    
    
    18.3
    
    
    
    19.0General and administrative
    
    
    12.4
    
    
    
    12.0Amortization of intangible assets
    
    
    1.5
    
    
    
    1.9Operating income
    
    
    13.9
    
    
    
    22.6Other income (expense)Interest, net
    
    
    (8.8
    )
    
    
    (9.6
    )Management fee expense
    
    
    (0.5
    )
    
    
    (0.5
    )Miscellaneous, net
    
    
    (0.1
    )
    
    
    0.1Income before income taxes
    
    
    4.5
    
    
    
    12.6Income tax expense
    
    
    1.8
    
    
    
    5.1Net income
    
    $
    2.7
    
    
    $
    7.5
 23




---



##### 



Three Months Ended March 31, 2005 Compared with the Three Months Ended March 31, 2004 Net sales. Net sales decreased $11.3 million, or 4.4%, from $256.8 million in the 2004
quarter to $245.5 million in the 2005 quarter. The decrease was volume driven, primarily lower
sales to the retail and traditional channels. Gross Profit.Results for the 2005 quarter included $0.8 million of non-recurring
facilities consolidation and severance costs. The 2004 quarter included a non-recurring $0.5
million charge due to the sale of inventory that was written-up from cost to market value as part
of the allocation of the June 20, 2003 Acquisition purchase price. Excluding these non-recurring charges, gross profit declined to $46.9 million in the first quarter
of 2005 from $56.0 million in the 2004 quarter, and the gross margin percentage declined to 19.1%
in the 2005 quarter from 21.8% in first quarter of 2004. Lower sales volume in the 2005 quarter contributed significantly to the gross profit decline. The
remaining decline in gross profit and the reduction in gross margin percentage were primarily due
to the higher per-unit cost of manufacturing at lower production volumes, a shift in sales mix and
an increase in steel costs, net of pass-through selling price increases. The cost of
inflation-driven wage and raw material increases and higher product returns was offset by savings
due to improved procurement of materials and reduced insurance costs. Selling and warehousing expenses. Selling and warehousing expenses were $18.3 million for
the 2005 quarter, $0.7 million lower than the 2004 quarter. This cost is 7.5% of sales in the 2005
quarter and 7.4% in the 2004 quarter. General and administrative expenses. General and administrative expense increased by $0.4
million, or 3.3%, to $12.4 million in the 2005 quarter. This increase was due to the Companys
continuing investment in processes and management talent necessary to drive improvements in future
operational efficiency. Interest, net. Net interest expense decreased $0.8 million from $9.6 million in 2004 to
$8.8 million in 2005. The 2004 amount includes $0.6 million of accelerated amortization of
deferred financing costs associated with the voluntary prepayment of $40 million of debt in the
2004 quarter. The remaining $0.2 million reduction of interest expense was attributable to lower
debt levels, partially offset by higher interest rates. Income tax expense. Income tax expense is lower in the 2005 quarter because pre-tax income
is lower. Net Income. Due to the factors described above, net income declined $4.8 million from $7.5
million in the 2004 quarter to $2.7 million in the 2005 quarter. 24




---



##### 



Liquidity and Capital Resources At March 31, 2005, the Company had $26.8 million of cash and $463.0 million of debt outstanding.
(The difference between this debt amount and the amount on the balance sheet is $5.2 million of
unamortized debt issuance costs.) At December 31, 2004, the Company had $11.3 million of cash and
$463.5 million of debt outstanding (before netting unamortized debt issuance costs). Both the
March 31, 2005 and the December 31, 2004 balances include $232 million of senior credit facility
term loans and its $230 million senior subordinated notes. The Companys significant debt service
obligation is an important factor when assessing the Companys liquidity and capital resources. At the $463.0 million debt level, annual interest expense, including amortization of deferred
financing costs and debt issuance costs, is approximately $34.9 million at March 31, 2005 borrowing
rates. An increase in the interest rate of 0.25% in the variable interest rate would increase the
annual interest cost by $0.3 million. In 2005, the Company expects to spend between $35 million and $40 million on additions to property,
plant and equipment and on a new, fully integrated information technology system. Implementation
of the new information technology system began in the third quarter of 2004. Our primary source of liquidity is cash flow from operations and borrowings under our $75 million
revolving credit facility. Borrowings under the revolving credit facility are available to fund
the Companys working capital requirements, capital expenditures and other general corporate
purposes. At March 31, 2005, $6.1 million of revolving credit borrowing capacity had been used to
support outstanding letters of credit. This results in $68.9 million of unused borrowings
capacity. The Companys credit agreement for its senior credit facility permits sales of and liens on
receivables which are being sold pursuant to factoring arrangements, subject to certain
limitations. We intend to factor our receivables when it is economically beneficial to do so. We
have established a factoring relationship with one of our customers, which has resulted in the
sales of approximately $5.1 million of receivables that would otherwise have been outstanding at
March 31, 2005. As the opportunities arise, we will evaluate other factoring arrangements which,
if implemented, would increase the amount of receivables sold in the future. Because of voluntary prepayments, the Company does not have any required repayments of its senior
credit facility term loans until December 2006. The $230 million senior subordinated notes are due
in 2013. Our ability to make scheduled payments of principal or interest on, or to refinance, our
indebtedness or to fund planned capital expenditures will depend on our ability to generate cash in
the future. Such cash generation is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. Based on the current level of operations, the Company believes that cash flow from operations and
available cash, together with available borrowings under its revolving credit facility, will be
adequate to service debt, meet liquidity needs and fund planned capital expenditures for the next
two years. For later years, the Company can give no assurance that its business will generate
sufficient cash flow from operations, or that future borrowings will be available under its
revolving credit facility in an amount sufficient to enable it to service its indebtedness or to
fund other liquidity needs. Also, in the future, we may need to refinance all or a portion of the
principal amount of the senior subordinated notes and/or senior credit facility borrowings, on or
prior to maturity. If refinancing is necessary, there can be no assurance that we will be able to
secure such financing on acceptable terms, or at all. 25




---



##### 



Net cash provided by operating activities Net cash provided by operating activities for the quarter ended March 31, 2005 was $25.1 million.
Profits, before deducting depreciation and amortization, generated $13.1 million of cash.
Receivables increased due to higher sales in the 2005 quarter compared to the fourth quarter of
2004. This resulted in a $5.6 million net use of cash. Increases in inventory resulted in an
additional $5.0 million use of cash. Inventory increased because sales were lower than expected.
The receivable and inventory working capital changes were more than offset by the favorable effect
of a $19.7 million increase in accounts payable. The increase in payables was due to extending
payment timeframes with our suppliers and normal fluctuation in the timing of payments. Changes in
all other assets and liabilities netted to a $1.3 million positive effect on cash. This $1.3
million included $5.4 million increase in accrued interest that will be paid in the second quarter
of 2005, offset by pay-downs of tax and insurance liabilities. Net cash used in investing activities Historically, net cash used in investing activities has been for capital expenditures, offset by
proceeds from the disposition of property, plant and equipment. Capital expenditures for the
quarter ended March 31, 2005 and 2004 were $9.7 million and $8.9 million, respectively.
Approximately $1.0 and $4.4 million, respectively, of the 2005 and 2004 capital expenditures were
related to the long-term capital investment plan to increase capacity and reduce cost at our
filtration facilities. The 2005 amount included $3.4 million for the implementation of a new,
fully integrated information technology system. It will support financial reporting and
operations. Recent Accounting Pronouncements In May 2004, the FASB issued FASB Staff Position No. 106-2 (FSP 106-2), Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization
Act of 2003. FSP 106-2 provides guidance regarding accounting and disclosure related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) that was signed
into law in December 2003. FSP 106-2 is effective for interim and annual periods beginning after
June 15, 2004. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as
well as a Federal subsidy to sponsors of retiree health care benefit plans that provide a benefit
that is at least equivalent to Medicare Part D. Benefits from the Act generally cover individuals
who are age 65 or greater. Since postretirement medical coverage under the Companys plans ceases
at age 65, the Act does not have an impact on the Companys obligations. In December 2004, SFAS No. 123R, Share-Based Payment was issued. SFAS No. 123R requires the
measurement of share-based payments to employees using a fair-value-based method and the recording
of such expense in the income statement. The accounting provisions of SFAS No. 123R are effective
for reporting periods beginning after December 15, 2005 and are to be applied prospectively. Also,
in March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin 107
(SAB 107). SAB 107 provides clarification on the implementation on SFAS No. 123R and the
relationship of SFAS No. 123R to certain SEC rules and regulations. The pro forma disclosures
previously permitted under SFAS No. 123 will no longer be an alternative to financial statement
recognition. See Note I to the financial statements included elsewhere in this Form 10-Q for the
pro forma net income as if the Company had used a fair-value-based method, similar to the methods
required under SFAS No.123R, to measure compensation expense. Had SFAS No. 123R been applied in
the periods disclosed, the impact would have been similar to those pro forma amounts. The future
impact is dependent upon if and when additional options are granted or expire, as well as the
vesting period of such options. 26




---



##### 



In December 2004, the FASB issued SFAS No. 151, Inventory Costs. SFAS No. 151 primarily
clarifies the accounting for inventory when there are abnormal amounts of idle facility expense,
freight, handling costs and wasted materials. Under existing guidelines, items such as idle
facility expense, excessive spoilage and re-handling costs may be so abnormal as to require
treatment as current period charges rather than recorded adjustments to the value of inventory.
SFAS No. 151 requires that such items be recognized as current period charges regardless of whether
they meet the so abnormal criteria. The accounting provisions of SFAS No. 151 are to be applied
prospectively and are effective for inventory costs incurred during fiscal years beginning after
June 15, 2005. The Company does not expect SFAS No. 151 to have a material effect on its financial
statements. In December 2004, the FASB issued FASB Staff Position No. 109-1 (FSP 109-1), Application of SFAS
No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities
Provided by the American Jobs Creation Act of 2004. FSP 109-1 states that the tax deduction of
qualified domestic production activities, which is provided by the American Jobs Creation Act of
2004 (the Jobs Act), will be treated as a special deduction as described in SFAS No. 109.
Consequently, the impact of the deduction, which is effective January 1, 2005, will be reported in
the period in which the deduction is claimed on the Companys income tax returns. The effect of
FSP 109-2 is expected to be less than $0.3 million for the year ended December 31, 2005. In December 2004, the FASB issued FASB Staff Position No. 109-2 (FSP 109-2), Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004. FSP 109-2 provides accounting and disclosure guidance related to the Jobs
Act provision for the limited time 85% dividends received deduction on the repatriation of certain
foreign earnings. Although adoption is effective immediately, FSP 109-2 states that a company is
allowed time beyond the financial reporting period to evaluate the effect of the Jobs Act on its
plan for reinvestment or repatriation of foreign earnings. The Company is evaluating the impact of
the repatriation provisions of the Jobs Act and will complete its review by December 31, 2005. It
is not expected that these provisions will have a material impact on the Companys financial
statements. Accordingly, as provided for in FSP 109-2, the Company has not adjusted its tax
expense or net deferred tax assets to reflect the repatriation provisions of the Jobs Act. In March 2005, the FASB issued FASB Interpretation No. 47 (FIN 47), Accounting for Conditional
Asset Retirement Obligations. FIN 47 clarifies that a company must record a liability for a
conditional asset retirement obligation if the fair value of the obligation can be reasonably
estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15,
2005. The Company does not expect FIN 47 to have a material effect on its financial statements. 27




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk Our exposure to market risk consists of foreign currency exchange rate fluctuations and
changes in interest rates. Foreign Currency Exposure Currency translation. As a result of international operating activities, we are exposed to
risks associated with changes in foreign exchange rates, principally exchange rates between the
U.S. dollar and the Mexican peso, Euro, Canadian dollar and British pound. The results of
operations of our foreign subsidiaries are translated into U.S. dollars at the average exchange
rates for each relevant period. This translation has no impact on our cash flow. However, as
foreign exchange rates change, there are changes to the U.S. dollar equivalent of sales and
expenses denominated in foreign currencies. During 2004, approximately 12% of our business was
transacted in local currencies of foreign countries. While our international results of operations
as measured in U.S. dollars, are subject to foreign exchange fluctuations, we do not consider the
related risk to be material to our financial condition or results of operations. If the exchange
rate between the foreign currencies and the U.S. dollar were to decrease by 10%, our annual net
income would have been lower by $0.3 million in 2004 due to the reduction in reported results from
our foreign operations. The balance sheets of foreign subsidiaries are translated into U.S. dollars at the closing exchange
rates as of the relevant balance sheet date. Any adjustments resulting from the translation are
recorded as other comprehensive income on our statement of shareholders equity. We manage this
exposure primarily by balancing monetary assets and liabilities and maintaining cash positions only
at levels necessary for operating purposes in those countries. Currency transactions.Currency transaction exposure arises where actual sales and
purchases are made by a business or company in a currency other than its own functional currency.
The majority of our businesses source raw materials and sell their products within their local
markets currencies and, therefore, have limited transaction exposure. In the future, we expect to continue to monitor our transaction exposure to currency rate changes
and enter into currency forward and option contracts to limit the exposure, as appropriate. Gains
and losses on contracts are deferred until the transaction being hedged is finalized. As of March
31, 2005, we had one immaterial foreign currency contract outstanding. We do not engage in any
speculative activities. 28




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Interest Rate Risk Borrowings under our senior credit facilities bear variable rates of interest. Pursuant to our
senior credit facilities, we are required to provide interest rate protection through August 2005,
so that at least 60% of the senior credit loans and senior subordinated notes is subject to either
a fixed interest rate or interest rate protection. To comply with this requirement, the Company
entered into interest rate swap agreements for $118 million in August 2003. These agreements
effectively convert $118 million of variable rate debt to fixed rate debt for the two years ending
August 2005. The variable component of the interest rate on borrowings under the senior credit
facilities is based on LIBOR. Under the swap agreements, we will pay 1.94%, and will receive the
then current LIBOR, on $118 million. Although not required to do so, the Company will evaluate the desirability of entering into new
interest rate protection contracts when the current swap agreements expire in August 2005. We utilize, and we will continue to utilize, sensitivity analyses to assess the potential effect of
our variable rate debt. If the variable interest rates were to increase by 0.25% per annum, the net
impact would be a decrease of approximately $0.2 million on our annual net income and cash flow. Treasury Policy Our treasury policy seeks to ensure that adequate financial resources are available for the
development of our businesses while managing our currency and interest rate risks. Our policy is
to not engage in speculative transactions. Our policies with respect to the major areas of our
treasury activity are set forth above. Item 4. Controls and Procedures The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Companys Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms and that such information is accumulated and communicated to the
Companys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and
with the participation of the Companys management, including the Companys Chief Executive Officer
and the Companys Chief Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as of the end of the quarter covered by this report.
Based on the foregoing, the Companys Chief Executive Officer and Chief Financial Officer concluded
that, as of the end of the quarter covered by this report, the Companys disclosure controls and
procedures were effective at the reasonable assurance level. There has been no change in the Companys internal controls over financial reporting during the
Companys most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Companys internal controls over financial reporting. 29




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PART II
OTHER INFORMATION Item 1. Legal Proceedings Not Applicable Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not Applicable Item 3. Default Upon Senior Securities Not Applicable Item 4. Submission of Matters to Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable 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 the Company, whether made before or
after the date hereof, regardless of any general incorporation language in such filing. 30




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. UNITED COMPONENTS, INC.Date: May 11, 2005
    
    By:
    
    /s/ Charles T. DicksonName:
    
    Charles T. DicksonTitle:
    
    Chief Financial Officer
 31