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, 2008
 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
    
    04-3759857(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)14601 Highway 41 NorthEvansville, Indiana(Address of Principal Executive
    
    47725Offices)
    
    (Zip Code)
 (812) 867-4156
 o þ
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 þ o




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##### 



United Components, Inc.
   IndexPart I FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed consolidated balance sheets  June 30, 2008 and
December 31, 2007Condensed consolidated income statements  Three and Six months
ended June 30, 2008 and 2007Condensed consolidated statements of cash flows  Six months
ended June 30, 2008 and 2007Condensed consolidated statements of changes in shareholders
equity  Six months ended June 30, 2008 and 2007Notes 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 31,2008
    
    
    2007AssetsCurrent assetsCash and cash equivalents
    
    $
    35,190
    
    
    $
    41,440Accounts receivable, net
    
    
    248,378
    
    
    
    253,904Inventories, net
    
    
    158,325
    
    
    
    142,621Deferred tax assets
    
    
    22,656
    
    
    
    22,837Other current assets
    
    
    22,551
    
    
    
    29,306Total current assets
    
    
    487,100
    
    
    
    490,108Property, plant and equipment, net
    
    
    170,994
    
    
    
    167,812Goodwill
    
    
    241,461
    
    
    
    241,461Other intangible assets, net
    
    
    79,137
    
    
    
    83,594Deferred financing costs, net
    
    
    3,141
    
    
    
    3,701Pension and other assets
    
    
    11,507
    
    
    
    11,478Assets held for sale
    
    
    1,300
    
    
    
    1,300Total assets
    
    $
    994,640
    
    
    $
    999,454Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    107,804
    
    
    $
    102,553Short-term borrowings
    
    
    901
    
    
    
    10,134Current maturities of long-term debt
    
    
    471
    
    
    
    479Accrued expenses and other current liabilities
    
    
    85,856
    
    
    
    95,169Total current liabilities
    
    
    195,032
    
    
    
    208,335Long-term debt, less current maturities
    
    
    417,903
    
    
    
    427,815Pension and other postretirement liabilities
    
    
    23,054
    
    
    
    22,871Deferred tax liabilities
    
    
    28,163
    
    
    
    27,338Due to Holdco
    
    
    16,344
    
    
    
    11,330Minority interest
    
    
    2,988
    
    
    
    3,308Other long-term liabilities
    
    
    2,684
    
    
    
    2,638Total liabilities
    
    
    686,168
    
    
    
    703,635Contingencies  Note MShareholders equityCommon stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    278,071
    
    
    
    277,741Retained earnings
    
    
    22,098
    
    
    
    11,316Accumulated other comprehensive income
    
    
    8,303
    
    
    
    6,762Total shareholders equity
    
    
    308,472
    
    
    
    295,819Total liabilities and shareholders equity
    
    $
    994,640
    
    
    $
    999,454
 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 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    229,269
    
    
    $
    259,569
    
    
    $
    458,559
    
    
    $
    498,417Cost of sales
    
    
    182,579
    
    
    
    200,190
    
    
    
    360,809
    
    
    
    389,481Gross profit
    
    
    46,690
    
    
    
    59,379
    
    
    
    97,750
    
    
    
    108,936Operating (expense) incomeSelling and warehousing
    
    
    (16,026
    )
    
    
    (14,903
    )
    
    
    (31,531
    )
    
    
    (30,955
    )General and administrative
    
    
    (12,811
    )
    
    
    (11,818
    )
    
    
    (25,339
    )
    
    
    (26,110
    )Amortization of acquired intangible assets
    
    
    (1,664
    )
    
    
    (1,831
    )
    
    
    (3,257
    )
    
    
    (3,609
    )Costs of integrating water pump
operations (Note B)
    
    
    (125
    )
    
    
    256
    
    
    
    (488
    )
    
    
    (474
    )Gain from sale of assets and costs of
closing a facility (Note D)
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    1,546Trademark impairment loss (Note E)
    
    
    
    
    
    
    (3,600
    )
    
    
    
    
    
    
    (3,600
    )Operating income
    
    
    16,064
    
    
    
    27,382
    
    
    
    37,135
    
    
    
    45,734Other expenseInterest expense, net
    
    
    (8,414
    )
    
    
    (10,177
    )
    
    
    (17,556
    )
    
    
    (20,863
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )
    
    
    (1,000
    )
    
    
    (1,000
    )Miscellaneous, net
    
    
    (691
    )
    
    
    (754
    )
    
    
    (1,189
    )
    
    
    (1,055
    )Income before income taxes
    
    
    6,459
    
    
    
    15,951
    
    
    
    17,390
    
    
    
    22,816Income tax expense
    
    
    (2,432
    )
    
    
    (5,926
    )
    
    
    (6,608
    )
    
    
    (8,284
    )Net income
    
    $
    4,027
    
    
    $
    10,025
    
    
    $
    10,782
    
    
    $
    14,532
 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 30,2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    10,782
    
    
    $
    14,532Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of other intangible assets
    
    
    18,475
    
    
    
    18,128Amortization of deferred financing costs and debt discount
    
    
    876
    
    
    
    1,213Deferred income taxes
    
    
    1,006
    
    
    
    1,260Gain on sale of Mexican land and building
    
    
    
    
    
    
    (1,764
    )Non-cash trademark impairment loss (Note E)
    
    
    
    
    
    
    3,600Other non-cash, net
    
    
    1,178
    
    
    
    2,235Changes in operating assets and liabilitiesAccounts receivable
    
    
    5,526
    
    
    
    (48,226
    )Inventories
    
    
    (15,704
    )
    
    
    8,299Other current assets
    
    
    6,755
    
    
    
    3,575Accounts payable
    
    
    5,251
    
    
    
    10,915Accrued expenses and other current liabilities
    
    
    (9,313
    )
    
    
    (471
    )Other assets
    
    
    (29
    )
    
    
    98Due to Holdco
    
    
    5,014
    
    
    
    Other long-term liabilities
    
    
    229
    
    
    
    2,771Net cash provided by operating activities
    
    
    30,046
    
    
    
    16,165Cash flows from investing activitiesCapital expenditures
    
    
    (17,274
    )
    
    
    (14,706
    )Proceeds from sale of Mexican land and building (Note D)
    
    
    
    
    
    
    6,685Proceeds from sale of other property, plant and equipment
    
    
    261
    
    
    
    776Net cash used in investing activities
    
    
    (17,013
    )
    
    
    (7,245
    )Cash flows from financing activitiesIssuances of debt
    
    
    1,249
    
    
    
    11,790Debt repayments
    
    
    (20,718
    )
    
    
    (47,985
    )Net cash used in financing activities
    
    
    (19,469
    )
    
    
    (36,195
    )Effect of currency exchange rate changes on cash
    
    
    186
    
    
    
    (28
    )Net decrease in cash and cash equivalents
    
    
    (6,250
    )
    
    
    (27,303
    )Cash and cash equivalents at beginning of year
    
    
    41,440
    
    
    
    31,523Cash and cash equivalents at end of period
    
    $
    35,190
    
    
    $
    4,220
 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, 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
incomeInterest rate swaps
(net of $195 of
income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )
    
    
    (148
    )
    
    
    (148
    )Foreign currency
adjustment (net of
$53 of income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    (228
    )
    
    
    (228
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,156Balance at June 30, 2007
    
    $
    
    
    
    
    276,460
    
    
    $
    (12,238
    )
    
    $
    (2,910
    )
    
    $
    261,312Balance at January 1, 2008
    
    $
    
    
    
    $
    277,741
    
    
    $
    11,316
    
    
    $
    6,762
    
    
    $
    295,819Recognition of stock based
compensation expense
    
    
    
    
    
    
    461
    
    
    
    
    
    
    
    
    
    
    
    461Tax effect of exercise of
Holdco stock options
    
    
    
    
    
    
    (131
    )
    
    
    
    
    
    
    
    
    
    
    (131
    )Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    10,782
    
    
    
    
    
    
    
    10,782
    
    
    $
    10,782Other comprehensive lossInterest rate swaps
(net of $66 of
income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103
    )
    
    
    (103
    )
    
    
    (103
    )Foreign currency
adjustment (net of
$3 of income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,644
    
    
    
    1,644
    
    
    
    1,644Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,323Balance at June 30, 2008
    
    $
    
    
    
    $
    278,071
    
    
    $
    22,098
    
    
    $
    8,303
    
    
    $
    308,472
 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  COSTS OF INTEGRATING WATER PUMP OPERATIONS
  2008 Expenses
  2007 Expenses and Gain
  Cost of integratingwater pumpoperations
    
    
    Cost of Sales
    
    
    CombinedThree months ended June 30, 2007Severance
    
    $
    (0.7
    )
    
    $
    
    
    
    $
    (0.7
    )Pension plan curtailment gain
    
    
    0.9
    
    
    
    
    
    
    
    0.9Production wind-down costs
    
    
    
    
    
    
    (0.8
    )
    
    
    (0.8
    )Transportation and other directly related costs
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.9
    )$
    0.2
    
    
    $
    (1.7
    )
    
    $
    (1.5
    )Six months ended June 30, 2007Severance
    
    $
    (1.4
    )
    
    $
    
    
    
    $
    (1.4
    )Pension plan curtailment gain
    
    
    0.9
    
    
    
    
    
    
    
    0.9Production wind-down costs
    
    
    
    
    
    
    (1.3
    )
    
    
    (1.3
    )Transportation and other directly related costs
    
    
    
    
    
    
    (1.4
    )
    
    
    (1.4
    )$
    (0.5
    )
    
    $
    (2.7
    )
    
    $
    (3.2
    )
   8




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE C  DISCONTINUED OPERATIONS
  NOTE D  GAIN FROM SALE OF ASSETS AND COSTS OF CLOSING A FACILITY
   NOTE E  TRADEMARK IMPAIRMENT LOSS
  NOTE F  TERMINATION OF PAY-ON-SCAN PROGRAM
   NOTE G  SALES OF RECEIVABLES
   9




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United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  NOTE H  INVENTORIES
  June 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    58.2
    
    
    $
    45.8Work in process
    
    
    38.9
    
    
    
    33.0Finished products
    
    
    78.4
    
    
    
    79.4Valuation reserves
    
    
    (17.2
    )
    
    
    (15.6
    )$
    158.3
    
    
    $
    142.6
 NOTE I  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  June 30,
    
    
    December 31,2008
    
    
    2007Salaries and wages
    
    $
    3.0
    
    
    $
    3.5Bonuses and profit sharing
    
    
    4.0
    
    
    
    8.8Vacation pay
    
    
    5.2
    
    
    
    4.7Product returns
    
    
    30.7
    
    
    
    28.1Rebates, credits and discounts due customers
    
    
    9.8
    
    
    
    10.9Insurance
    
    
    9.7
    
    
    
    9.8Taxes payable
    
    
    7.8
    
    
    
    10.4Interest
    
    
    2.1
    
    
    
    2.6Other
    
    
    13.6
    
    
    
    16.4$
    85.9
    
    
    $
    95.2
 NOTE J  PRODUCT RETURNS LIABILITY
  10




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   Six Months ended June 30,2008
    
    
    2007Beginning of year
    
    $
    28.1
    
    
    $
    28.6Cost of unsalvageable parts
    
    
    (25.5
    )
    
    
    (24.4
    )Additional reductions to sales
    
    
    28.1
    
    
    
    23.8End of period
    
    $
    30.7
    
    
    $
    28.0
 NOTE K  PENSION
  Three Months ended June 30,
    
    
    Six Months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    1.3
    
    
    $
    1.6
    
    
    $
    2.6
    
    
    $
    3.2Interest cost
    
    
    3.2
    
    
    
    2.9
    
    
    
    6.4
    
    
    
    5.9Expected return on plan assets
    
    
    (3.7
    )
    
    
    (3.4
    )
    
    
    (7.4
    )
    
    
    (7.0
    )Amortization of prior service
cost and unrecognized loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Special termination benefits
    
    
    
    
    
    
    (0.9
    )
    
    
    0.2
    
    
    
    (0.9
    )$
    0.8
    
    
    $
    0.2
    
    
    $
    1.8
    
    
    $
    1.3
 NOTE L  DEBT
  June 30,
    
    
    December 31,2008
    
    
    2007Short-term borrowings
    
    $
    0.9
    
    
    $
    10.1Capital lease obligations
    
    
    1.5
    
    
    
    1.8Term loan
    
    
    190.0
    
    
    
    200.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Unamortized debt issuance costs
    
    
    (3.1
    )
    
    
    (3.5
    )419.3
    
    
    
    438.4LessShort-term borrowing
    
    
    0.9
    
    
    
    10.1Current maturities
    
    
    0.5
    
    
    
    0.5Long-term debt
    
    $
    417.9
    
    
    $
    427.8
  11




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  NOTE M  CONTINGENCIES
 Insurance Reserves
  Environmental
  Class Action Litigation
   12




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
       Value-added Tax Receivable
  Other Litigation
  13




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE N  GEOGRAPHIC INFORMATION
  Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007United States
    
    $
    190.2
    
    
    $
    221.0
    
    
    $
    383.1
    
    
    $
    422.1Mexico
    
    
    7.8
    
    
    
    10.3
    
    
    
    16.5
    
    
    
    19.9Canada
    
    
    8.4
    
    
    
    9.0
    
    
    
    15.8
    
    
    
    17.2United Kingdom
    
    
    4.3
    
    
    
    3.5
    
    
    
    7.6
    
    
    
    7.0France
    
    
    2.7
    
    
    
    1.6
    
    
    
    5.8
    
    
    
    4.1Germany
    
    
    1.2
    
    
    
    1.0
    
    
    
    2.8
    
    
    
    2.1Spain
    
    
    1.3
    
    
    
    1.2
    
    
    
    2.3
    
    
    
    2.2Other
    
    
    13.4
    
    
    
    12.0
    
    
    
    24.7
    
    
    
    23.8$
    229.3
    
    
    $
    259.6
    
    
    $
    458.6
    
    
    $
    498.4
  June 30,
    
    
    December 31,2008
    
    
    2007United States
    
    $
    218.2
    
    
    $
    226.0China
    
    
    31.7
    
    
    
    27.0Mexico
    
    
    13.6
    
    
    
    12.2Spain
    
    
    2.5
    
    
    
    2.6Goodwill
    
    
    241.5
    
    
    
    241.5$
    507.5
    
    
    $
    509.3
 NOTE O  STOCK OPTIONS
  NOTE P  OTHER INFORMATION
   Three months ended June 30,
    
    Six  months ended June 30,2008
    
    2007
    
    2008
    
    2007Interest
    
    $
    13.8
    
    
    $
    15.0
    
    
    $
    17.4
    
    
    $
    20.5Income taxes (net of refunds)
    
    
    1.6
    
    
    
    
    
    
    
    (1.0
    )
    
    
    (1.0
    )
 14




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   NOTE Q ADOPTION OF SFAS NO. 157
   Interest rate swaps
   Fair value hierarchy
 Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    Significant
    
    SignificantFair Value
    
    in Active Markets
    
    Other
    
    Unobservableat
    
    for Identical Assets
    
    Observable Inputs
    
    InputsDescription
    
    June 30, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Interest rate swaps
    
    $
    0.2
    
    
    
    
    $
    0.2
    
    
    
 Fair market value disclosures
  15




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Fair value hierarchy
   Level 1 
    
    Quoted market prices in active markets for identical assets or liabilities
 Level 2 
    
    Inputs other than Level 1 inputs that are either directly or indirectly observable
 Level 3 
    
    Unobservable inputs developed using UCIs estimates and assumptions, which reflect
those that market participants would use when valuing an asset or liability
  NOTE R  OTHER NEW ACCOUNTING PRONOUNCEMENTS
     16




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   NOTE S  GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
    17




---



##### 



United Components, Inc.
 Notes
to Condensed Consolidated Financial Statements
 Note S (continued)
 Consolidating
Condensed Balance Sheet 
June 30, 2008  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    35,190
    
    
    $
    
    
    
    $
    31,776
    
    
    $
    (878
    )
    
    $
    4,292Accounts receivable, net
    
    
    248,378
    
    
    
    
    
    
    
    
    
    
    
    231,590
    
    
    
    16,788Inventories, net
    
    
    158,325
    
    
    
    
    
    
    
    
    
    
    
    130,115
    
    
    
    28,210Deferred tax assets
    
    
    22,656
    
    
    
    
    
    
    
    222
    
    
    
    22,691
    
    
    
    (257
    )Other current assets
    
    
    22,551
    
    
    
    
    
    
    
    6,405
    
    
    
    5,215
    
    
    
    10,931Total current assets
    
    
    487,100
    
    
    
    
    
    
    
    38,403
    
    
    
    388,733
    
    
    
    59,964Property, plant and equipment, net
    
    
    170,994
    
    
    
    
    
    
    
    820
    
    
    
    125,669
    
    
    
    44,505Investment in subsidiaries
    
    
    
    
    
    
    (298,013
    )
    
    
    282,732
    
    
    
    15,281
    
    
    
    Goodwill
    
    
    241,461
    
    
    
    
    
    
    
    241,461
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    79,137
    
    
    
    
    
    
    
    10,257
    
    
    
    68,671
    
    
    
    209Deferred financing costs, net
    
    
    3,141
    
    
    
    
    
    
    
    3,141
    
    
    
    
    
    
    
    Pension and other assets
    
    
    11,507
    
    
    
    
    
    
    
    365
    
    
    
    11,049
    
    
    
    93Assets held for sale
    
    
    1,300
    
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    Total assets
    
    $
    994,640
    
    
    $
    (298,013
    )
    
    $
    577,179
    
    
    $
    610,703
    
    
    $
    104,771Liabilities
and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    107,804
    
    
    $
    
    
    
    $
    1,801
    
    
    $
    86,920
    
    
    $
    19,083Short-term borrowings
    
    
    901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    901Current maturities of long-term debt
    
    
    471
    
    
    
    
    
    
    
    410
    
    
    
    61
    
    
    
    Accrued expenses and other current liabilities
    
    
    85,856
    
    
    
    
    
    
    
    12,109
    
    
    
    69,383
    
    
    
    4,364Total current liabilities
    
    
    195,032
    
    
    
    
    
    
    
    14,320
    
    
    
    156,364
    
    
    
    24,348Long-term debt, less current maturities
    
    
    417,903
    
    
    
    
    
    
    
    417,422
    
    
    
    481
    
    
    
    Pension and other postretirement liabilities
    
    
    23,054
    
    
    
    
    
    
    
    
    
    
    
    23,054
    
    
    
    Deferred tax liabilities
    
    
    28,163
    
    
    
    
    
    
    
    16,639
    
    
    
    10,903
    
    
    
    621Due to Holdco
    
    
    16,344
    
    
    
    
    
    
    
    16,344
    
    
    
    
    
    
    
    Minority interest
    
    
    2,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,988Other long-term liabilities
    
    
    2,684
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    784Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (196,018
    )
    
    
    162,023
    
    
    
    33,995Total shareholders equity
    
    
    308,472
    
    
    
    (298,013
    )
    
    
    308,472
    
    
    
    255,978
    
    
    
    42,035Total liabilities and shareholders equity
    
    $
    994,640
    
    
    $
    (298,013
    )
    
    $
    577,179
    
    
    $
    610,703
    
    
    $
    104,771
 18




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note S (continued)
 Consolidating Condensed Balance Sheet
December 31, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    41,440
    
    
    $
    
    
    
    $
    36,684
    
    
    $
    1,234
    
    
    $
    3,522Accounts receivable, net
    
    
    253,904
    
    
    
    
    
    
    
    
    
    
    
    239,888
    
    
    
    14,016Inventories, net
    
    
    142,621
    
    
    
    
    
    
    
    
    
    
    
    119,882
    
    
    
    22,739Deferred tax assets
    
    
    22,837
    
    
    
    
    
    
    
    49
    
    
    
    23,329
    
    
    
    (541
    )Other current assets
    
    
    29,306
    
    
    
    
    
    
    
    11,532
    
    
    
    9,913
    
    
    
    7,861Total current assets
    
    
    490,108
    
    
    
    
    
    
    
    48,265
    
    
    
    394,246
    
    
    
    47,597Property, plant and equipment, net
    
    
    167,812
    
    
    
    
    
    
    
    1,190
    
    
    
    124,744
    
    
    
    41,878Investment in subsidiaries
    
    
    
    
    
    
    (273,387
    )
    
    
    262,871
    
    
    
    10,516
    
    
    
    Goodwill
    
    
    241,461
    
    
    
    
    
    
    
    241,461
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    83,594
    
    
    
    
    
    
    
    11,628
    
    
    
    71,966
    
    
    
    Deferred financing costs, net
    
    
    3,701
    
    
    
    
    
    
    
    3,701
    
    
    
    
    
    
    
    Deferred tax assets
    
    
    
    
    
    
    
    
    
    
    (186
    )
    
    
    
    
    
    
    186Pension and other assets
    
    
    11,478
    
    
    
    
    
    
    
    365
    
    
    
    9,997
    
    
    
    1,116Assets held for sale
    
    
    1,300
    
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    Total assets
    
    $
    999,454
    
    
    $
    (273,387
    )
    
    $
    569,295
    
    
    $
    612,769
    
    
    $
    90,777Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    102,553
    
    
    $
    
    
    
    $
    1,072
    
    
    $
    85,181
    
    
    $
    16,300Short-term borrowings
    
    
    10,134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,134Current maturities of long-term debt
    
    
    479
    
    
    
    
    
    
    
    418
    
    
    
    61
    
    
    
    Accrued expenses and other current
liabilities
    
    
    95,169
    
    
    
    
    
    
    
    19,981
    
    
    
    71,187
    
    
    
    4,001Total current liabilities
    
    
    208,335
    
    
    
    
    
    
    
    21,471
    
    
    
    156,429
    
    
    
    30,435Long-term debt, less current maturities
    
    
    427,815
    
    
    
    
    
    
    
    427,304
    
    
    
    511
    
    
    
    Pension and other postretirement liabilities
    
    
    22,871
    
    
    
    
    
    
    
    
    
    
    
    21,657
    
    
    
    1,214Deferred tax liabilities
    
    
    27,338
    
    
    
    
    
    
    
    15,570
    
    
    
    10,230
    
    
    
    1,538Due to Holdco
    
    
    11,330
    
    
    
    
    
    
    
    11,330
    
    
    
    
    
    
    
    Minority interest
    
    
    3,308
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,308Other long-term liabilities
    
    
    2,638
    
    
    
    
    
    
    
    
    
    
    
    1,984
    
    
    
    654Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (202,199
    )
    
    
    187,938
    
    
    
    14,261Total shareholders equity
    
    
    295,819
    
    
    
    (273,387
    )
    
    
    295,819
    
    
    
    234,020
    
    
    
    39,367Total liabilities and shareholders equity
    
    $
    999,454
    
    
    $
    (273,387
    )
    
    $
    569,295
    
    
    $
    612,769
    
    
    $
    90,777
 19




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note S (continued)
 Consolidating Condensed Income Statement
Three Months Ended June 30, 2008  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    229,269
    
    
    $
    (26,970
    )
    
    $
    
    
    
    $
    218,169
    
    
    $
    38,070Cost of sales
    
    
    182,579
    
    
    
    (26,970
    )
    
    
    
    
    
    
    172,029
    
    
    
    37,520Gross profit
    
    
    46,690
    
    
    
    
    
    
    
    
    
    
    
    46,140
    
    
    
    550Operating (expense) incomeSelling and warehousing
    
    
    (16,026
    )
    
    
    
    
    
    
    (45
    )
    
    
    (14,415
    )
    
    
    (1,566
    )General and administrative
    
    
    (12,811
    )
    
    
    
    
    
    
    (4,745
    )
    
    
    (6,632
    )
    
    
    (1,434
    )Amortization of acquired intangible assets
    
    
    (1,664
    )
    
    
    
    
    
    
    
    
    
    
    (1,664
    )
    
    
    Costs of integrating water pump operations
    
    
    (125
    )
    
    
    
    
    
    
    
    
    
    
    (125
    )
    
    
    Gain from sale of assets and costs of
closing a facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    16,064
    
    
    
    
    
    
    
    (4,790
    )
    
    
    23,304
    
    
    
    (2,450
    )Other expenseInterest expense, net
    
    
    (8,414
    )
    
    
    
    
    
    
    (8,398
    )
    
    
    (8
    )
    
    
    (8
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    7,125
    
    
    
    (6,925
    )
    
    
    (200
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (691
    )
    
    
    
    
    
    
    
    
    
    
    (955
    )
    
    
    264Income (loss) before income taxes
    
    
    6,459
    
    
    
   
    
    
    
    (6,563
    )
    
    
    15,416
    
    
    
    (2,394
    )Income tax expense (benefit)
    
    
    (2,432
    )
    
    
    
    
    
    
    2,663
    
    
    
    (5,854
    )
    
    
    759Increase (decrease) before equity in
earnings of subsidiaries
    
    
    4,027
    
    
    
    
    
    
    
    (3,900
    )
    
    
    9,562
    
    
    
    (1,635
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (5,342
    )
    
    
    7,927
    
    
    
    (2,585
    )
    
    
    Net income (loss)
    
    $
    4,027
    
    
    $
    (5,342
    )
    
    $
    4,027
    
    
    $
    6,977
    
    
    $
    (1,635
    )
 20




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note S (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 integrating water pump operations
    
    
    256
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    Gain from sale of assets and costs of
closing a facility
    
    
    (101
    )
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    (218
    )Trademark impairment loss
    
    
    (3,600
    )
    
    
    
    
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income (loss)
    
    
    27,382
    
    
    
    
    
    
    
    (4,363
    )
    
    
    32,896
    
    
    
    (1,151
    )Other expenseInterest 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
    )
 21




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note S (continued)
 Consolidating Condensed Income Statement
Six Months Ended June 30, 2008  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    458,559
    
    
    $
    (47,162
    )
    
    $
    
    
    
    $
    433,767
    
    
    $
    71,954Cost of sales
    
    
    360,809
    
    
    
    (47,162
    )
    
    
    
    
    
    
    338,371
    
    
    
    69,600Gross profit
    
    
    97,750
    
    
    
    
    
    
    
    
    
    
    
    95,396
    
    
    
    2,354Operating (expense) incomeSelling and warehousing
    
    
    (31,531
    )
    
    
    
    
    
    
    (440
    )
    
    
    (28,260
    )
    
    
    (2,831
    )General and administrative
    
    
    (25,339
    )
    
    
    
    
    
    
    (8,687
    )
    
    
    (13,831
    )
    
    
    (2,821
    )Amortization of acquired intangible assets
    
    
    (3,257
    )
    
    
    
    
    
    
    
    
    
    
    (3,257
    )
    
    
    Costs of integrating water pump operations
    
    
    (488
    )
    
    
    
    
    
    
    
    
    
    
    (488
    )
    
    
    Gain from sale of assets and costs of
closing a facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    37,135
    
    
    
    
    
    
    
    (9,127
    )
    
    
    49,560
    
    
    
    (3,298
    )Other expenseInterest expense, net
    
    
    (17,556
    )
    
    
    
    
    
    
    (17,444
    )
    
    
    (15
    )
    
    
    (97
    )Inter-company interest
    
    
    
    
    
    
    
    
    
    
    14,311
    
    
    
    (13,886
    )
    
    
    (425
    )Management fee expense
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
      Miscellaneous, net
    
    
    (1,189
    )
    
    
    
    
    
    
    
    
    
    
    (1,483
    )
    
    
    294Income (loss) before income taxes
    
    
    17,390
    
    
    
    
    
    
    
    (13,260
    )
    
    
    34,176
    
    
    
    (3,526
    )Income tax expense (benefit)
    
    
    (6,608
    )
    
    
    
    
    
    
    5,145
    
    
    
    (12,795
    )
    
    
    1,042Increase (decrease) before equity in
earnings of subsidiaries
    
    
    10,782
    
    
    
    
    
    
    
    (8,115
    )
    
    
    21,381
    
    
    
    (2,484
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (15,240
    )
    
    
    18,897
    
    
    
    (3,657
    )
    
    
    Net income (loss)
    
    $
    10,782
    
    
    $
    (15,240
    )
    
    $
    10,782
    
    
    $
    17,724
    
    
    $
    (2,484
    )
 22




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note S (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 integrating water pump operations
    
    
    (474
    )
    
    
    
    
    
    
    
    
    
    
    (474
    )
    
    
    Gain from sale of assets and costs of
closing a facility
    
    
    1,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,546Trademark impairment loss
    
    
    (3,600
    )
    
    
    
    
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income (loss)
    
    
    45,734
    
    
    
    
    
    
    
    (8,942
    )
    
    
    55,369
    
    
    
    (693
    )Other expenseInterest 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) 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
    )
 23




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note S (continued)
 Consolidating Condensed Statement of Cash Flows
Six Months Ended June 30, 2008  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by operating activities
    
    $
    30,046
    
    
    $
    
    
    
    $
    5,321
    
    
    $
    7,890
    
    
    $
    16,835Cash flows from investing activities:Capital expenditures
    
    
    (17,274
    )
    
    
    
    
    
    
    (23
    )
    
    
    (10,063
    )
    
    
    (7,188
    )Proceeds from sale of Mexican land and
building
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from sale of other property,
plant and equipment
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    170Net cash provided by (used in)
investing activities
    
    
    (17,013
    )
    
    
    
    
    
    
    (23
    )
    
    
    (9,972
    )
    
    
    (7,018
    )Cash flows from financing activities:Issuances of debt
    
    
    1,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,249Debt repayments
    
    
    (20,718
    )
    
    
    
    
    
    
    (10,206
    )
    
    
    (30
    )
    
    
    (10,482
    )Net cash (used in) provided by
financing activities
    
    
    (19,469
    )
    
    
    
    
    
    
    (10,206
    )
    
    
    (30
    )
    
    
    (9,233
    )Effect of currency exchange rate changes
on cash
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186Net (decrease) increase in cash and cash
equivalents
    
    
    (6,250
    )
    
    
    
    
    
    
    (4,908
    )
    
    
    (2,112
    )
    
    
    770Cash and cash equivalents at beginning
of year
    
    
    41,440
    
    
    
    
    
    
    
    36,684
    
    
    
    1,234
    
    
    
    3,522Cash and cash equivalents at end of
period
    
    $
    35,190
    
    
    $
    
    
    
    $
    31,776
    
    
    $
    (878
    )
    
    $
    4,292
 24




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note S (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 operating activities
    
    $
    16,165
    
    
    $
    
    
    
    $
    8,216
    
    
    $
    11,903
    
    
    $
    (3,954
    )Cash flows from investing activities:Capital expenditures
    
    
    (14,706
    )
    
    
    
    
    
    
    (11
    )
    
    
    (9,060
    )
    
    
    (5,635
    )Proceeds from sale of Mexican land and
building
    
    
    6,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,685Proceeds from sale of other property, plant
and equipment
    
    
    776
    
    
    
    
    
    
    
    
    
    
    
    693
    
    
    
    83Net cash provided by (used in) investing
activities
    
    
    (7,245
    )
    
    
    
    
    
    
    (11
    )
    
    
    (8,367
    )
    
    
    1,133Cash flows from financing activities:Issuances 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
 25




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
    Overview
 Sales.
   26




---



##### 



Cost of sales
     27




---



##### 



Selling and warehousing expenses
 General and administrative expenses
 Critical Accounting Policies and Estimates
   Inventory
 Revenue recognition
    Product returns.
 Impairment of intangible assets and tangible fixed assets
 28




---



##### 



Retirement benefits
  Insurance reserves.
 Environmental expenditures
  29




---



##### 



Results of Operations
  Three Months ended June 30,
    
    

Six Months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    229,269
    
    
    $
    259,569
    
    
    $
    458,559
    
    
    $
    498,417Cost of sales
    
    
    182,579
    
    
    
    200,190
    
    
    
    360,809
    
    
    
    389,481Gross profit
    
    
    46,690
    
    
    
    59,379
    
    
    
    97,750
    
    
    
    108,936Operating (expense) incomeSelling and warehousing
    
    
    (16,026
    )
    
    
    (14,903
    )
    
    
    (31,531
    )
    
    
    (30,955
    )General and administrative
    
    
    (12,811
    )
    
    
    (11,818
    )
    
    
    (25,339
    )
    
    
    (26,110
    )Amortization of acquired
intangible assets
    
    
    (1,664
    )
    
    
    (1,831
    )
    
    
    (3,257
    )
    
    
    (3,609
    )Costs of integration of
water pump operations
    
    
    (125
    )
    
    
    256
    
    
    
    (488
    )
    
    
    (474
    )Gain from sale of assets
and costs of closing a
facility
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    1,546Trademark impairment loss
    
    
    
    
    
    
    (3,600
    )
    
    
    
    
    
    
    (3,600
    )Operating income
    
    
    16,064
    
    
    
    27,382
    
    
    
    37,135
    
    
    
    45,734Other expenseInterest expense, net
    
    
    (8,414
    )
    
    
    (10,177
    )
    
    
    (17,556
    )
    
    
    (20,863
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )
    
    
    (1,000
    )
    
    
    (1,000
    )Miscellaneous, net
    
    
    (691
    )
    
    
    (754
    )
    
    
    (1,189
    )
    
    
    (1,055
    )Income before income taxes
    
    
    6,459
    
    
    
    15,951
    
    
    
    17,390
    
    
    
    22,816Income tax expense
    
    
    (2,432
    )
    
    
    (5,926
    )
    
    
    (6,608
    )
    
    
    (8,284
    )Net income
    
    $
    4,027
    
    
    $
    10,025
    
    
    $
    10,782
    
    
    $
    14,532
 Three Months Ended June 30, 2008 compared with the Three Months Ended June 30, 2007
 Net sales
  Gross profit.
  30




---



##### 



Selling and warehousing expenses
 General and administrative expenses
 Costs of integration of water pump operations
 Gain from sale of assets and costs of closing a facility
 Interest expense, net
 Income tax expense
 Net income
 Six Months Ended June 30, 2008 compared with the Six Months Ended June 30, 2007
 Net sales
  Gross profit.
 31




---



##### 



Selling and warehousing expenses
 General and administrative expenses
 Costs of integration of water pump operations
 Gain from sale of assets and costs of closing a facility
 Trademark impairment loss.
 Interest expense, net
 Income tax expense
 Net income
 Liquidity and Capital Resources
  June 30,
    
    
    December 31,2008
    
    
    2007Notes payable
    
    $
    0.9
    
    
    $
    10.1Capitalized leases
    
    
    1.5
    
    
    
    1.8Term loan
    
    
    190.0
    
    
    
    200.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Amount of debt requiring repayment
    
    
    422.4
    
    
    
    441.9Unamortized debt discount
    
    
    (3.1
    )
    
    
    (3.5
    )$
    419.3
    
    
    $
    438.4
 32




---



##### 



Last six months of 2008
    
    $
    1.22009
    
    
    0.42010
    
    
    0.22011
    
    
    45.22012
    
    
    145.2Thereafter
    
    
    230.2$
    422.4
      33




---



##### 



Net cash provided by operating activities
 Net cash used in investing activities
  Net cash used in financing activities
 Recent Accounting Pronouncements
     34




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Foreign Currency Exposure
 Currency translation .
  Currency transactions
 35




---



##### 



Interest Rate Risk
    Treasury Policy
  
 Item 4. Controls and Procedures
    36




---



##### 



PART II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
 T.D.S. Co. v. Champion Labs. et al. Barjan, LLC v. Champion Labs et al. Bruene v. Champion Labs. et al. S&E Quick Lube Distrib.,
Inc. v. Champion Labs. et al. Flash Sales, Inc. v. Champion Labs.
et al. The Parts Plus Group, Inc. v. Champion Labs. et al. Wards Auto Painting & Body Works, Inc. v. Champion Labs. et al. G.W.C. Distributors, Inc. v. Champion Laboratories, Inc. et al A&L Systems, Inc. v. Champion Laboratories, Inc. et al. Aaron Dunham v. Champion Laboratories, Inc. et al. Auto Pro, LLC v. Champion Laboratories, Inc. et al. JDL
Corp. v. Champion Laboratories, Inc. et al. Central Warehouse Sales
Corp. v. Champion Labs. et al. All American Plazas of New Jersey,
Inc. v. Honeywell International Inc. et al. Werner Aero Services v.
Champion Labs. et al. Pawnee/S.A.E. Warehouse, Inc. v. Champion
Laboratories, Inc. et al. S.A.E. Warehouse, Inc. v. Champion
Laboratories, Inc. et al. Monroe Motor Products Corp. v. Champion
Laboratories, Inc. et al. Flash Sales, S&E Quick Lube, Bruene,
Central Warehouse, Pawnee/S.A.E., S.A.E., All American Monroe Motor Lovett Auto & Tractor Parts, Inc. v. Champion Labs. et al. Neptune Warehouse Distributors, Inc. v. Champion Labs. et al. Hovis Auto Supply, Inc. v. Robert Bosch LLC et al. Manasek Auto Parts, Inc. v. Champion Labs. et al. Big T
Inc. v. Champion Labs. et al. Gemini of Westmont, Inc. v. Champion
Laboratories, Inc. et al. Cals Auto Service, Inc. v. Champion
Laboratories, Inc. et al WWD Parts, Inc. d/b/a Parts for Imports
v. Champion Laboratories, Inc. et al. Muralts, Inc. v. Champion
Laboratories, Inc. et al. G&H Import Auto Inc. v. Champion
Laboratories, Inc. et al. Mikes Inc. v. Champion Laboratories,
Inc. et al. . Worldwide Equipment, Inc. v. Honeywell Intl et al.
 Packard Automotive, Inc. v. Honeywell International, Inc. et al., Doll et al. v. Champion Labs. et al. Austin v. Honeywell
Intl et al. Gasoline and Automotive Service Dealers of America,
Inc. v. Champion Laboratories, Inc. et al. David Stoll v. Honeywell
International, Inc. et al. Jerry Vandiver v. Champion Laboratories,
Inc. et al. Bettendorf Transfer & Excavating, Inc. v. Champion
Laboratories, Inc. et al. Ponce v. Honeywell International, Inc.
et al. G.S.G Excavating v. Honeywell International, Inc. et al. Gertha Wilkerson V. Honeywell International, Inc. et al. Bobbi Cooper v. Honeywell International, Inc. et al. Bay Area Truck Services v. Champion Laboratories, Inc. et al. Robert A. Nilsen v. Champion Laboratories, Inc. et al Austin G.S.G. Excavating Bathea et al. v. Champion
Labs. Mark Moynahan v. Champion Laboratories, Inc. et al. Sepher Torabi d/b/a Protec Auto v. Champion Laboratories, Inc. et al
 37




---



##### 



Austin David Stoll Bay Area Bettendorf
  Jean-Paul Perrault v. Champion Labs. et al.
 Urlin Rent A Car Ltd. v. Champion Laboratories, Inc. et al
    
 Item 1.A. Risk Factors
  Increases in our raw materials and component costs or the loss of a number of our suppliers could
adversely affect our financial health.
  38




---



##### 



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. 39




---



##### 



SIGNATURES
  UNITED COMPONENTS, INC.Date: August XX, 2008
    By:
    /s/ DANIEL J. JOHNSTONName:  Daniel J. JohnstonTitle:
    Chief Financial Officer 40