##### 



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 September 30, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 333-107219
 UNITED COMPONENTS, INC.
  Delaware
(State or Other Jurisdiction of Incorporation or Organization)
    
    04-3759857
(I.R.S. Employer Identification No.)14601 Highway 41 North 
Evansville, Indiana
(Address of Principal Executive Offices)
    
    47725
(Zip Code)
 (812) 867-4156
  o þ
  o o þ
  o þ




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##### 



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




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##### 



PART I
FINANCIAL INFORMATION
 Item 1. Financial Statements
 United Components, Inc.
 Condensed Consolidated Balance Sheets  (in thousands)
 September 30,
    
    
    December 31,2007
    
    
    2006AssetsCurrent assetsCash and cash equivalents
    
    $
    15,396
    
    
    $
    31,523Accounts receivable, net
    
    
    268,102
    
    
    
    228,996Inventories, net
    
    
    154,222
    
    
    
    158,024Deferred tax assets
    
    
    27,133
    
    
    
    33,920Other current assets
    
    
    33,594
    
    
    
    29,389Total current assets
    
    
    498,447
    
    
    
    481,852Property, plant and equipment, net
    
    
    167,816
    
    
    
    164,621Goodwill
    
    
    241,461
    
    
    
    239,835Other intangible assets, net
    
    
    85,712
    
    
    
    95,354Deferred financing costs, net
    
    
    4,150
    
    
    
    5,310Pension and other assets
    
    
    9,757
    
    
    
    9,452Assets held for sale
    
    
    1,600
    
    
    
    6,077Total assets
    
    $
    1,008,943
    
    
    $
    1,002,501Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    99,588
    
    
    $
    92,720Short-term borrowings
    
    
    9,967
    
    
    
    8,657Current maturities of long-term debt
    
    
    611
    
    
    
    462Accrued expenses and other current liabilities
    
    
    103,551
    
    
    
    99,039Total current liabilities
    
    
    213,717
    
    
    
    200,878Long-term debt, less current maturities
    
    
    453,035
    
    
    
    491,478Pension and other postretirement liabilities
    
    
    35,636
    
    
    
    40,430Deferred tax liabilities
    
    
    19,956
    
    
    
    17,350Due to Holdco
    
    
    7,754
    
    
    
    Minority interest
    
    
    3,380
    
    
    
    3,738Other long-term liabilities
    
    
    2,474
    
    
    
    3,845Total liabilities
    
    
    735,952
    
    
    
    757,719Contingencies  Note NShareholders equity
Common stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    277,057
    
    
    
    273,749Retained earnings (deficit)
    
    
    (1,136
    )
    
    
    (26,433
    )Accumulated other comprehensive income (loss)
    
    
    (2,930
    )
    
    
    (2,534
    )Total shareholders equity
    
    
    272,991
    
    
    
    244,782Total liabilities and shareholders equity
    
    $
    1,008,943
    
    
    $
    1,002,501
 The accompanying notes are an integral part of these statements.
 3




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##### 



United Components, Inc.
 Condensed Consolidated Income Statements  (in thousands)
 Three Months ended September 30,
    
    
    Nine Months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    230,742
    
    
    $
    238,298
    
    
    $
    729,159
    
    
    $
    683,371Cost of sales
    
    
    177,185
    
    
    
    193,173
    
    
    
    566,666
    
    
    
    546,321Gross profit
    
    
    53,557
    
    
    
    45,125
    
    
    
    162,493
    
    
    
    137,050Operating (expense) incomeSelling and warehousing
    
    
    (15,092
    )
    
    
    (14,946
    )
    
    
    (46,047
    )
    
    
    (45,401
    )General and administrative
    
    
    (10,790
    )
    
    
    (9,670
    )
    
    
    (36,900
    )
    
    
    (31,204
    )Amortization of acquired intangible assets
    
    
    (1,694
    )
    
    
    (1,875
    )
    
    
    (5,303
    )
    
    
    (4,804
    )Costs of integration of water pump operations and
resulting asset impairment losses (Note C)
    
    
    (222
    )
    
    
    (829
    )
    
    
    (696
    )
    
    
    (5,429
    )Costs of closing facilities and consolidating operations
and gain from sale of assets (Note E)
    
    
    
    
    
    
    (813
    )
    
    
    1,546
    
    
    
    (6,275
    )Trademark impairment loss (Note F)
    
    
    
    
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income
    
    
    25,759
    
    
    
    16,992
    
    
    
    71,493
    
    
    
    43,937Other (expense) incomeInterest expense, net
    
    
    (10,175
    )
    
    
    (11,804
    )
    
    
    (31,038
    )
    
    
    (31,743
    )Write-off of deferred financing costs (Note M)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,625
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )
    
    
    (1,500
    )
    
    
    (1,500
    )Miscellaneous, net
    
    
    (917
    )
    
    
    147
    
    
    
    (1,972
    )
    
    
    92Income before income taxes
    
    
    14,167
    
    
    
    4,835
    
    
    
    36,983
    
    
    
    8,161Income tax expense
    
    
    (5,772
    )
    
    
    (2,727
    )
    
    
    (14,056
    )
    
    
    (4,090
    )Net income from continuing operations
    
    
    8,395
    
    
    
    2,108
    
    
    
    22,927
    
    
    
    4,071Discontinued operations (Note D)Net income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    1,895Gain (loss) on sale of discontinued operations, net of tax
    
    
    2,707
    
    
    
    
    
    
    
    2,707
    
    
    
    (18,272
    )2,707
    
    
    
    (46
    )
    
    
    2,707
    
    
    
    (16,377
    )Net income (loss)
    
    $
    11,102
    
    
    $
    2,062
    
    
    $
    25,634
    
    
    $
    (12,306
    )
 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)
 Nine Months ended September 30,2007
    
    
    2006Cash flows from operating activities of continuing operationsNet income (loss)
    
    $
    25,634
    
    
    $
    (12,306
    )Less:Net income from discontinued operations, net of tax
    
    
    
    
    
    
    1,895Gain (loss) on sale of discontinued operations, net of tax
    
    
    2,707
    
    
    
    (18,272
    )Net income from continuing operations
    
    
    22,927
    
    
    
    4,071Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of intangible assets
    
    
    26,556
    
    
    
    25,412Amortization of deferred financing costs and debt discount
    
    
    1,634
    
    
    
    1,775Deferred income taxes
    
    
    6,850
    
    
    
    (3,759
    )Gain on sale of Mexican land and building
    
    
    (1,764
    )
    
    
    Non-cash write off of deferred financing costs
    
    
    
    
    
    
    2,625Non-cash asset write-downs described in Notes C and E
    
    
    
    
    
    
    6,052Non-cash trademark impairment loss described in Note F
    
    
    3,600
    
    
    
    Other non-cash, net
    
    
    3,368
    
    
    
    2,440Changes in operating assets and liabilitiesAccounts receivable
    
    
    (39,106
    )
    
    
    (5,302
    )Inventories
    
    
    3,802
    
    
    
    13,875Other current assets
    
    
    (3,984
    )
    
    
    (703
    )Accounts payable
    
    
    6,868
    
    
    
    (14,009
    )Accrued expenses and other current liabilities
    
    
    5,806
    
    
    
    1,418Other assets
    
    
    (208
    )
    
    
    889Due to Holdco
    
    
    7,754
    
    
    
    Other long-term liabilities
    
    
    (6,237
    )
    
    
    531Net cash provided by operating activities of continuing operations
    
    
    37,866
    
    
    
    35,315Cash flows from investing activities of continuing operationsProceeds from sale of Mexican land and building (Note E)
    
    
    6,685
    
    
    
    Acquisition of ASC Industries, Inc., net of cash acquired
    
    
    
    
    
    
    (121,734
    )Proceeds from sale of discontinued operations, net of transaction costs and cash
sold
    
    
    2,202
    
    
    
    36,300Capital expenditures
    
    
    (25,080
    )
    
    
    (16,279
    )Proceeds from sale of other property, plant and equipment
    
    
    1,408
    
    
    
    1,006Net cash used in investing activities of continuing operations
    
    
    (14,785
    )
    
    
    (100,707
    )Cash flows from financing activities of continuing operationsIssuances of debt
    
    
    15,367
    
    
    
    113,000Debt repayments
    
    
    (54,556
    )
    
    
    (34,538
    )Financing fees
    
    
    
    
    
    
    (3,636
    )Shareholders equity contributions
    
    
    
    
    
    
    8,515Net cash (used in) provided by financing activities of continuing operations
    
    
    (39,189
    )
    
    
    83,341Discontinued operationsNet cash used in operating activities of discontinued operations
    
    
    
    
    
    
    (298
    )Net cash used in investing activities of discontinued operations
    
    
    
    
    
    
    (2,653
    )Effect of currency exchange rate change on cash of discontinued operations
    
    
    
    
    
    
    137Effect of currency exchange rate changes on cash
    
    
    (19
    )
    
    
    78Net (decrease) increase in cash and cash equivalents
    
    
    (16,127
    )
    
    
    15,213Cash and cash equivalents at beginning of year
    
    
    31,523
    
    
    
    26,182Less cash and cash equivalents of discontinued operations at end of period
    
    
    
    
    
    
    2,236Cash and cash equivalents of continuing operations at end of period
    
    $
    15,396
    
    
    $
    39,159
 The accompanying notes are an integral part of these statements.
 5




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##### 



United Components, Inc.
 Condensed Consolidated Statements of Changes in Shareholders Equity  (in thousands)
 AccumulatedAdditional
    
    
    Retained
    
    
    Other
    
    
    TotalCommon
    
    
    Paid In
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    Equity
    
    
    Income (Loss)Balance at January 1, 2006
    
    $
    
    
    
    $
    263,636
    
    
    $
    17,546
    
    
    $
    (836
    )
    
    $
    280,346Additions to paid in capital
    
    
    
    
    
    
    8,515
    
    
    
    
    
    
    
    
    
    
    
    8,515Recognition of stock based compensation expense
    
    
    
    
    
    
    1,174
    
    
    
    
    
    
    
    
    
    
    
    1,174Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    (12,306
    )
    
    
    
    
    
    
    (12,306
    )
    
    $
    (12,306
    )Other comprehensive incomeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199
    
    
    
    199
    
    
    
    199Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,699
    
    
    
    1,699
    
    
    
    1,699Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    598
    
    
    
    598
    
    
    
    598Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (9,810
    )Balance at September 30, 2006
    
    $
    
    
    
    $
    273,325
    
    
    $
    5,240
    
    
    $
    1,660
    
    
    $
    280,225Balance at January 1, 2007
    
    $
    
    
    
    $
    273,749
    
    
    $
    (26,433
    )
    
    $
    (2,534
    )
    
    $
    244,782Effect of adopting FIN 48
    
    
    
    
    
    
    
    
    
    
    (337
    )
    
    
    
    
    
    
    (337
    )Recognition of stock based compensation expense
    
    
    
    
    
    
    2,837
    
    
    
    
    
    
    
    
    
    
    
    2,837Tax effect of exercise of Holdco stock options
    
    
    
    
    
    
    471
    
    
    
    
    
    
    
    
    
    
    
    471Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    25,634
    
    
    
    
    
    
    
    25,634
    
    
    $
    25,634Other comprehensive lossInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (361
    )
    
    
    (361
    )
    
    
    (361
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    (35
    )
    
    
    (35
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    25,238Balance at September 30, 2007
    
    $
    
    
    
    $
    277,057
    
    
    $
    (1,136
    )
    
    $
    (2,930
    )
    
    $
    272,991
 The accompanying notes are an integral part of these statements.
 6




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##### 



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




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE B  ACQUISITION OF ASC INDUSTRIES, INC.
     Cash
    
    $
    3.7Accounts receivable
    
    
    11.4Inventory
    
    
    40.8Property, plant and equipment
    
    
    27.3Acquired intangible assets
    
    
    18.6Goodwill
    
    
    74.9Other assets
    
    
    2.2Accounts payable and accrued liabilities
    
    
    (25.5
    )Notes payable
    
    
    (10.0
    )Capital lease obligations
    
    
    (1.2
    )Other liabilities
    
    
    (5.0
    )Deferred income taxes
    
    
    (9.8
    )$
    127.4
  Pro Forma Information
    Nine Months endedSeptember 30, 2006Net sales
    
    $
    725.3Operating income
    
    
    45.9Net income from continuing operations
    
    
    4.1Net income (loss)
    
    
    (12.3
    )
  8




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE C  COSTS OF INTEGRATION OF WATER PUMP OPERATIONS AND RESULTING ASSET IMPAIRMENT LOSSES
  2006 Background Information
  2007 Update
  Three Months ended
    
    
    Nine Months endedSeptember 30, 2007
    
    
    September 30, 2007Severance
    
    $
    0.2
    
    
    $
    1.6Pension plan curtailment gain
    
    
    
    
    
    
    (0.9
    )Production wind-down costs
    
    
    0.8
    
    
    
    2.1Other directly related costs
    
    
    0.8
    
    
    
    2.2$
    1.8
    
    
    $
    5.0
     Accrued
    
    
    Otherseverance
    
    
    liabilitiesDecember 31, 2006 balance
    
    $
    1.4
    
    
    $
    0.2Additional loss provision
    
    
    1.6
    
    
    
    Payments
    
    
    (2.6
    )
    
    
    (0.2
    )September 30, 2007 balance
    
    $
    0.4
    
    
    $
    
  9




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 2006 Loss Provisions
  Three Months ended
    
    
    Nine Months endedSeptember 30, 2006
    
    
    September 30, 2006Land, building, & equipment impairment losses
    
    $
    
    
    
    $
    4.3Severance
    
    
    
    
    
    
    0.3Raw materials write-off
    
    
    0.3
    
    
    
    0.3Other integration costs
    
    
    0.5
    
    
    
    0.5$
    0.8
    
    
    $
    5.4
  NOTE D  DISCONTINUED OPERATIONS
 2006 Sales of Operations
   2006 Results of Discontinued Operations
  Three Months ended
    
    Nine Months endedSeptember 30, 2006
    
    September 30, 2006Net sales
    
    $
    14.1
    
    
    $
    113.2Income (loss) before income taxes
    
    
    (0.5
    )
    
    
    4.1
  10




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE E  COSTS OF CLOSING FACILITIES AND CONSOLIDATING OPERATIONS AND GAIN FROM SALE OF ASSETS
 2006 Loss Provision
  AssetWrite-downs
    
    
    Severance
    
    
    Other
    
    
    TotalThird quarter of 2006 lossesClosure of Canadian facility
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Closure of Mexican facility
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    0.8$
    
    
    
    $
    
    
    
    $
    0.8
    
    
    $
    0.8Nine months ended September 30, 2006 lossesClosure of Canadian facility
    
    $
    0.4
    
    
    $
    0.4
    
    
    $
    0.1
    
    
    $
    0.9Closure of Mexican facility
    
    
    1.0
    
    
    
    2.0
    
    
    
    2.4
    
    
    
    5.4$
    1.4
    
    
    $
    2.4
    
    
    $
    2.5
    
    
    $
    6.3
 Closure of Canadian facility
    Closure of Mexican facility
     2007 Update
  11




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE F  TRADEMARK IMPAIRMENT LOSS
  NOTE G  TERMINATION OF PAY-ON-SCAN PROGRAM
   NOTE H  SALES OF RECEIVABLES
   NOTE I  INVENTORIES
  September 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    52.4
    
    
    $
    47.2Work in process
    
    
    33.7
    
    
    
    32.7Finished products
    
    
    86.0
    
    
    
    97.8Valuation reserves
    
    
    (17.9
    )
    
    
    (19.7
    )$
    154.2
    
    
    $
    158.0
 12




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE J  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  September 30,
    
    
    December 31,2007
    
    
    2006Salaries and wages
    
    $
    3.0
    
    
    $
    2.9Bonuses
    
    
    5.2
    
    
    
    7.5Vacation pay
    
    
    4.8
    
    
    
    4.5Product returns
    
    
    27.5
    
    
    
    28.6Rebates, credits and discounts due customers
    
    
    10.4
    
    
    
    10.2Insurance
    
    
    10.5
    
    
    
    10.2Taxes payable
    
    
    15.4
    
    
    
    9.3Interest
    
    
    8.6
    
    
    
    3.7Other
    
    
    18.2
    
    
    
    22.1$
    103.6
    
    
    $
    99.0
 NOTE K  PRODUCT RETURNS LIABILITY
   Nine Months ended September 30,2007
    
    
    2006Beginning of year
    
    $
    28.6
    
    
    $
    26.2Addition due to ASC Acquisition
    
    
    
    
    
    
    1.2Cost of unsalvageable parts
    
    
    (35.8
    )
    
    
    (37.5
    )Additional reductions to sales
    
    
    34.7
    
    
    
    34.7End of period
    
    $
    27.5
    
    
    $
    24.6
 NOTE L  PENSION
  Three Months ended September 30,
    
    
    Nine Months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    1.6
    
    
    $
    1.6
    
    
    $
    4.8
    
    
    $
    5.4Interest cost
    
    
    2.9
    
    
    
    2.9
    
    
    
    8.8
    
    
    
    8.7Expected return on plan assets
    
    
    (3.5
    )
    
    
    (3.5
    )
    
    
    (10.5
    )
    
    
    (9.9
    )Amortization of prior service cost and unrecognized loss
    
    
    
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.4Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    $
    1.0
    
    
    $
    1.1
    
    
    $
    2.3
    
    
    $
    4.6
  13




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M  DEBT
  September 30,
    
    
    December 31,2007
    
    
    2006Notes payable
    
    $
    10.0
    
    
    $
    8.6Capital lease obligations
    
    
    2.2
    
    
    
    1.1Term loan
    
    
    225.0
    
    
    
    265.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Unamortized debt discount
    
    
    (3.6
    )
    
    
    (4.1
    )463.6
    
    
    
    500.6LessShort-term borrowings
    
    
    10.0
    
    
    
    8.6Current maturities
    
    
    0.6
    
    
    
    0.5Long-term debt
    
    $
    453.0
    
    
    $
    491.5
    NOTE N  CONTINGENCIES
 Environmental
  14




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Litigation
  NOTE O  INCOME TAXES
 Adoption of FIN 48
     2006 effective income tax rates
  Intercompany payable to Holdco
   Net operating loss utilization
  15




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE P  GEOGRAPHIC INFORMATION
  Three Months ended
    
    
    Nine Months endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006United States
    
    $
    193.4
    
    
    $
    203.4
    
    
    $
    615.6
    
    
    $
    583.3Mexico
    
    
    9.4
    
    
    
    10.1
    
    
    
    29.2
    
    
    
    29.1Canada
    
    
    8.7
    
    
    
    7.1
    
    
    
    25.9
    
    
    
    20.0United Kingdom
    
    
    3.4
    
    
    
    3.9
    
    
    
    10.5
    
    
    
    9.4Germany
    
    
    1.0
    
    
    
    0.8
    
    
    
    3.2
    
    
    
    3.0Spain
    
    
    0.7
    
    
    
    0.8
    
    
    
    2.9
    
    
    
    2.7France
    
    
    1.9
    
    
    
    1.7
    
    
    
    6.0
    
    
    
    6.1Venezuela
    
    
    1.7
    
    
    
    1.9
    
    
    
    5.0
    
    
    
    3.9Other
    
    
    10.5
    
    
    
    8.6
    
    
    
    30.9
    
    
    
    25.9$
    230.7
    
    
    $
    238.3
    
    
    $
    729.2
    
    
    $
    683.4
  September 30,
    
    
    December 31,2007
    
    
    2006United States
    
    $
    229.5
    
    
    $
    244.4China
    
    
    24.8
    
    
    
    20.8Mexico
    
    
    11.9
    
    
    
    12.4Spain
    
    
    2.8
    
    
    
    3.2Goodwill
    
    
    241.5
    
    
    
    239.8$
    510.5
    
    
    $
    520.6
 NOTE Q  STOCK OPTIONS
   NOTE R  OTHER INFORMATION
   Three Months ended
    
    Nine Months endedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Interest
    
    $
    4.5
    
    
    $
    5.6
    
    
    $
    25.0
    
    
    $
    24.4Income taxes (net of refunds)
    
    
    0.8
    
    
    
    (0.7
    )
    
    
    (0.2
    )
    
    
    (1.8
    )
 16




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  Nine Months ended September 30,2007
    
    2006Pre-tax
    
    After-tax
    
    Pre-tax
    
    After-taxInterest rate swaps
    
    $
    (0.6
    )
    
    $
    (0.4
    )
    
    $
    0.3
    
    
    $
    0.2Foreign currency adjustment
    
    
    (0.2
    )
    
    
    
    
    
    
    2.6
    
    
    
    1.7Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    0.6
   NOTE S  NEW ACCOUNTING PRONOUNCEMENTS
   17




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T  GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
    18




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Balance Sheet
September 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    15,396
    
    
    $
    
    
    
    $
    12,934
    
    
    $
    (776
    )
    
    $
    3,238Accounts receivable, net
    
    
    268,102
    
    
    
    
    
    
    
    
    
    
    
    254,610
    
    
    
    13,492Inventories, net
    
    
    154,222
    
    
    
    
    
    
    
    
    
    
    
    134,471
    
    
    
    19,751Deferred tax assets
    
    
    27,133
    
    
    
    
    
    
    
    1,157
    
    
    
    26,070
    
    
    
    (94
    )Other current assets
    
    
    33,594
    
    
    
    
    
    
    
    14,423
    
    
    
    10,154
    
    
    
    9,017Total current assets
    
    
    498,447
    
    
    
    
    
    
    
    28,514
    
    
    
    424,529
    
    
    
    45,404Property, plant and equipment, net
    
    
    167,816
    
    
    
    
    
    
    
    1,830
    
    
    
    126,457
    
    
    
    39,529Investment in subsidiaries
    
    
    
    
    
    
    (242,003
    )
    
    
    229,412
    
    
    
    12,591
    
    
    
    Goodwill
    
    
    241,461
    
    
    
    
    
    
    
    241,461
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    85,712
    
    
    
    
    
    
    
    12,300
    
    
    
    73,412
    
    
    
    Deferred financing costs, net
    
    
    4,150
    
    
    
    
    
    
    
    4,150
    
    
    
    
    
    
    
    Pension and other assets
    
    
    9,757
    
    
    
    
    
    
    
    383
    
    
    
    9,213
    
    
    
    161Assets held for sale
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    Total assets
    
    $
    1,008,943
    
    
    $
    (242,003
    )
    
    $
    518,050
    
    
    $
    647,802
    
    
    $
    85,094Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    99,588
    
    
    $
    
    
    
    $
    509
    
    
    $
    83,357
    
    
    $
    15,722Short-term borrowings
    
    
    9,967
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,967Current maturities of long-term debt
    
    
    611
    
    
    
    
    
    
    
    449
    
    
    
    162
    
    
    
    Accrued expenses and other current liabilities
    
    
    103,551
    
    
    
    
    
    
    
    28,591
    
    
    
    70,663
    
    
    
    4,297Total current liabilities
    
    
    213,717
    
    
    
    
    
    
    
    29,549
    
    
    
    154,182
    
    
    
    29,986Long-term debt, less current maturities
    
    
    453,035
    
    
    
    
    
    
    
    452,507
    
    
    
    528
    
    
    
    Pension and other postretirement liabilities
    
    
    35,636
    
    
    
    
    
    
    
    
    
    
    
    34,302
    
    
    
    1,334Deferred tax liabilities
    
    
    19,956
    
    
    
    
    
    
    
    16,049
    
    
    
    2,121
    
    
    
    1,786Due to Holdco
    
    
    7,754
    
    
    
    
    
    
    
    7,754
    
    
    
    
    
    
    
    Minority interest
    
    
    3,380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,380Other long-term liabilities
    
    
    2,474
    
    
    
    
    
    
    
    
    
    
    
    1,833
    
    
    
    641Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (260,800
    )
    
    
    247,100
    
    
    
    13,700Total shareholders equity
    
    
    272,991
    
    
    
    (242,003
    )
    
    
    272,991
    
    
    
    207,736
    
    
    
    34,267Total liabilities and shareholders equity
    
    $
    1,008,943
    
    
    $
    (242,003
    )
    
    $
    518,050
    
    
    $
    647,802
    
    
    $
    85,094
 19




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Balance Sheet
December 31, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    31,523
    
    
    $
    
    
    
    $
    30,212
    
    
    $
    (1,767
    )
    
    $
    3,078Accounts receivable, net
    
    
    228,996
    
    
    
    
    
    
    
    
    
    
    
    216,472
    
    
    
    12,524Inventories, net
    
    
    158,024
    
    
    
    
    
    
    
    
    
    
    
    139,973
    
    
    
    18,051Deferred tax assets
    
    
    33,920
    
    
    
    
    
    
    
    (658
    )
    
    
    34,029
    
    
    
    549Other current assets
    
    
    29,389
    
    
    
    
    
    
    
    2,583
    
    
    
    18,380
    
    
    
    8,426Total current assets
    
    
    481,852
    
    
    
    
    
    
    
    32,137
    
    
    
    407,087
    
    
    
    42,628Property, plant and equipment, net
    
    
    164,621
    
    
    
    
    
    
    
    199
    
    
    
    132,153
    
    
    
    32,269Investment in subsidiaries
    
    
    
    
    
    
    (169,432
    )
    
    
    152,960
    
    
    
    16,472
    
    
    
    Goodwill
    
    
    239,835
    
    
    
    
    
    
    
    239,835
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    95,354
    
    
    
    
    
    
    
    14,267
    
    
    
    81,087
    
    
    
    Deferred financing costs, net
    
    
    5,310
    
    
    
    
    
    
    
    5,310
    
    
    
    
    
    
    
    Pension and other assets
    
    
    9,452
    
    
    
    
    
    
    
    303
    
    
    
    8,908
    
    
    
    241Assets held for sale
    
    
    6,077
    
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    4,477Total assets
    
    $
    1,002,501
    
    
    $
    (169,432
    )
    
    $
    445,011
    
    
    $
    647,307
    
    
    $
    79,615Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    92,720
    
    
    $
    
    
    
    $
    2,866
    
    
    $
    76,578
    
    
    $
    13,276Short-term borrowings
    
    
    8,657
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,657Current maturities of long-term debt
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    462
    
    
    
    Accrued expenses and other current liabilities
    
    
    99,039
    
    
    
    
    
    
    
    14,093
    
    
    
    81,169
    
    
    
    3,777Total current liabilities
    
    
    200,878
    
    
    
    
    
    
    
    16,959
    
    
    
    158,209
    
    
    
    25,710Long-term debt, less current maturities
    
    
    491,478
    
    
    
    
    
    
    
    490,906
    
    
    
    572
    
    
    
    Pension and other postretirement liabilities
    
    
    40,430
    
    
    
    
    
    
    
    
    
    
    
    38,159
    
    
    
    2,271Deferred tax liabilities
    
    
    17,350
    
    
    
    
    
    
    
    12,552
    
    
    
    2,174
    
    
    
    2,624Minority interest
    
    
    3,738
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,738Other long-term liabilities
    
    
    3,845
    
    
    
    
    
    
    
    
    
    
    
    3,845
    
    
    
    Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (320,188
    )
    
    
    317,588
    
    
    
    2,600Total shareholders equity
    
    
    244,782
    
    
    
    (169,432
    )
    
    
    244,782
    
    
    
    126,760
    
    
    
    42,672Total liabilities and shareholders equity
    
    $
    1,002,501
    
    
    $
    (169,432
    )
    
    $
    445,011
    
    
    $
    647,307
    
    
    $
    79,615
 20




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Income Statement
Three Months Ended September 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    230,742
    
    
    $
    (17,612
    )
    
    $
    
    
    
    $
    218,941
    
    
    $
    29,413Cost of sales
    
    
    177,185
    
    
    
    (17,612
    )
    
    
    
    
    
    
    166,638
    
    
    
    28,159Gross profit
    
    
    53,557
    
    
    
    
    
    
    
    
    
    
    
    52,303
    
    
    
    1,254Operating (expense) incomeSelling and warehousing
    
    
    (15,092
    )
    
    
    
    
    
    
    (202
    )
    
    
    (14,292
    )
    
    
    (598
    )General and administrative
    
    
    (10,790
    )
    
    
    
    
    
    
    (5,239
    )
    
    
    (4,727
    )
    
    
    (824
    )Amortization of acquired intangible assets
    
    
    (1,694
    )
    
    
    
    
    
    
    
    
    
    
    (1,694
    )
    
    
    Costs of integration of water pump operations and
resulting asset impairment losses
    
    
    (222
    )
    
    
    
    
    
    
    
    
    
    
    (222
    )
    
    
    Operating income (loss)
    
    
    25,759
    
    
    
    
    
    
    
    (5,441
    )
    
    
    31,368
    
    
    
    (168
    )Other (expense) incomeInterest expense, net
    
    
    (10,175
    )
    
    
    
    
    
    
    (10,040
    )
    
    
    20
    
    
    
    (155
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    7,565
    
    
    
    (7,314
    )
    
    
    (251
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (917
    )
    
    
    
    
    
    
    
    
    
    
    (797
    )
    
    
    (120
    )Income (loss) before income taxes
    
    
    14,167
    
    
    
    
    
    
    
    (8,416
    )
    
    
    23,277
    
    
    
    (694
    )Income tax (expense) benefit
    
    
    (5,772
    )
    
    
    
    
    
    
    3,133
    
    
    
    (8,700
    )
    
    
    (205
    )Increase (decrease) before equity in earnings of subsidiaries
    
    
    8,395
    
    
    
    
    
    
    
    (5,283
    )
    
    
    14,577
    
    
    
    (899
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (12,216
    )
    
    
    13,678
    
    
    
    (1,462
    )
    
    
    Discontinued operationsGain (loss) on sale of discontinued operations, net of tax
    
    
    2,707
    
    
    
    
    
    
    
    2,707
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    11,102
    
    
    $
    (12,216
    )
    
    $
    11,102
    
    
    $
    13,115
    
    
    $
    (899
    )
 21




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Income Statement
Three Months Ended September 30, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    238,298
    
    
    $
    (13,489
    )
    
    $
    
    
    
    $
    229,322
    
    
    $
    22,465Cost of sales
    
    
    193,173
    
    
    
    (13,489
    )
    
    
    
    
    
    
    185,043
    
    
    
    21,619Gross profit
    
    
    45,125
    
    
    
    
    
    
    
    
    
    
    
    44,279
    
    
    
    846Operating (expense) incomeSelling and warehousing
    
    
    (14,946
    )
    
    
    
    
    
    
    (425
    )
    
    
    (13,429
    )
    
    
    (1,092
    )General and administrative
    
    
    (9,670
    )
    
    
    
    
    
    
    (3,044
    )
    
    
    (5,092
    )
    
    
    (1,534
    )Amortization of acquired intangible assets
    
    
    (1,875
    )
    
    
    
    
    
    
    
    
    
    
    (1,875
    )
    
    
    Costs of integration of water pump operations and
resulting asset impairment losses
    
    
    (829
    )
    
    
    
    
    
    
    
    
    
    
    (829
    )
    
    
    Costs of closing facilities and consolidating operations
    
    
    (813
    )
    
    
    
    
    
    
    
    
    
    
    (813
    )
    
    
    Operating income (loss)
    
    
    16,992
    
    
    
    
    
    
    
    (3,469
    )
    
    
    22,241
    
    
    
    (1,780
    )Other (expense) incomeInterest expense, net
    
    
    (11,804
    )
    
    
    
    
    
    
    (11,378
    )
    
    
    (278
    )
    
    
    (148
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    12,728
    
    
    
    (12,046
    )
    
    
    (682
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    (8
    )Income (loss) before income taxes
    
    
    4,835
    
    
    
    
    
    
    
    (2,619
    )
    
    
    10,072
    
    
    
    (2,618
    )Income tax benefit (expense)
    
    
    (2,727
    )
    
    
    
    
    
    
    2,560
    
    
    
    (3,734
    )
    
    
    (1,553
    )Decrease (increase) from continuing operations before equity
in earnings of subsidiaries
    
    
    2,108
    
    
    
    
    
    
    
    (59
    )
    
    
    6,338
    
    
    
    (4,171
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    2,691
    
    
    
    2,121
    
    
    
    (4,812
    )
    
    
    Discontinued operations:Net income (loss) from discontinued operations, net of tax
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )Net (loss) income
    
    $
    2,062
    
    
    $
    2,691
    
    
    $
    2,062
    
    
    $
    1,526
    
    
    $
    (4,217
    )
 22




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Income Statement
Nine Months Ended September 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    729,159
    
    
    $
    (46,080
    )
    
    $
    
    
    
    $
    690,507
    
    
    $
    84,732Cost of sales
    
    
    566,666
    
    
    
    (46,080
    )
    
    
    
    
    
    
    532,719
    
    
    
    80,027Gross profit
    
    
    162,493
    
    
    
    
    
    
    
    
    
    
    
    157,788
    
    
    
    4,705Operating (expense) incomeSelling and warehousing
    
    
    (46,047
    )
    
    
    
    
    
    
    (574
    )
    
    
    (42,342
    )
    
    
    (3,131
    )General and administrative
    
    
    (36,900
    )
    
    
    
    
    
    
    (13,809
    )
    
    
    (19,110
    )
    
    
    (3,981
    )Amortization of acquired intangible assets
    
    
    (5,303
    )
    
    
    
    
    
    
    
    
    
    
    (5,303
    )
    
    
    Costs of integration of water pump operations
    
    
    (696
    )
    
    
    
    
    
    
    
    
    
    
    (696
    )
    
    
    Costs of closing facilities and consolidating operations
and gain from sale of assets
    
    
    1,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,546Trademark impairment loss
    
    
    (3,600
    )
    
    
    
    
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income (loss)
    
    
    71,493
    
    
    
    
    
    
    
    (14,383
    )
    
    
    86,737
    
    
    
    (861
    )Other (expense) incomeInterest expense, net
    
    
    (31,038
    )
    
    
    
    
    
    
    (30,564
    )
    
    
    (38
    )
    
    
    (436
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    23,565
    
    
    
    (22,779
    )
    
    
    (786
    )Management fee expense
    
    
    (1,500
    )
    
    
    
    
    
    
    (1,500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (1,972
    )
    
    
    
    
    
    
    
    
    
    
    (2,028
    )
    
    
    56Income (loss) before income taxes
    
    
    36,983
    
    
    
    
    
    
    
    (22,882
    )
    
    
    61,892
    
    
    
    (2,027
    )Income tax (expense) benefit
    
    
    (14,056
    )
    
    
    
    
    
    
    8,428
    
    
    
    (23,101
    )
    
    
    617Increase (decrease) from continuing operations before equity
in earnings of subsidiaries
    
    
    22,927
    
    
    
    
    
    
    
    (14,454
    )
    
    
    38,791
    
    
    
    (1.410
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (34,880
    )
    
    
    37,381
    
    
    
    (2,501
    )
    
    
    Discontinued operations
Gain (loss) on sale of discontinued operations, net of tax
    
    2,707
    
    
    
    
    
    
    
    2,707
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    25,634
    
    
    $
    (34,880
    )
    
    $
    25,634
    
    
    $
    36,290
    
    
    $
    (1,410
    )
 23




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Income Statement
Nine Months Ended September 30, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    683,371
    
    
    $
    (24,593
    )
    
    $
    
    
    
    $
    646,538
    
    
    $
    61,426Cost of sales
    
    
    546,321
    
    
    
    (24,593
    )
    
    
    
    
    
    
    516,694
    
    
    
    54,220Gross profit
    
    
    137,050
    
    
    
    
    
    
    
    
    
    
    
    129,844
    
    
    
    7,206Operating (expense) incomeSelling and warehousing
    
    
    (45,401
    )
    
    
    
    
    
    
    (1,100
    )
    
    
    (40,742
    )
    
    
    (3,559
    )General and administrative
    
    
    (31,204
    )
    
    
    
    
    
    
    (10,598
    )
    
    
    (16,099
    )
    
    
    (4,507
    )Amortization of acquired intangible assets
    
    
    (4,804
    )
    
    
    
    
    
    
    
    
    
    
    (4,804
    )
    
    
    Costs of integration of water pump operations and
resulting asset impairment losses
    
    
    (5,429
    )
    
    
    
    
    
    
    
    
    
    
    (5,429
    )
    
    
    Costs of closing facilities and consolidating operations
    
    
    (6,275
    )
    
    
    
    
    
    
    
    
    
    
    (5,021
    )
    
    
    (1,254
    )Operating income (loss)
    
    
    43,937
    
    
    
    
    
    
    
    (11,698
    )
    
    
    57,749
    
    
    
    (2,114
    )Other (expense) incomeInterest expense, net
    
    
    (31,743
    )
    
    
    
    
    
    
    (31,526
    )
    
    
    (20
    )
    
    
    (197
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    33,052
    
    
    
    (31,240
    )
    
    
    (1,812
    )Write-off of deferred financing costs
    
    
    (2,625
    )
    
    
    
    
    
    
    (2,625
    )
    
    
    
    
    
    
    Management fee expense
    
    
    (1,500
    )
    
    
    
    
    
    
    (1,500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    Income (loss) before income taxes
    
    
    8,161
    
    
    
    
    
    
    
    (14,297
    )
    
    
    26,581
    
    
    
    (4,123
    )Income tax (expense) benefit
    
    
    (4,090
    )
    
    
    
    
    
    
    5,759
    
    
    
    (9,695
    )
    
    
    (154
    )Increase (decrease) from continuing operations before
equity in earnings of subsidiaries
    
    
    4,071
    
    
    
    
    
    
    
    (8,538
    )
    
    
    16,886
    
    
    
    (4,277
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (8,855
    )
    
    
    14,504
    
    
    
    (5,649
    )
    
    
    Discontinued operationsNet income from discontinued operations, net of tax
    
    
    1,895
    
    
    
    
    
    
    
    
    
    
    
    1,509
    
    
    
    386Loss on sale of discontinued operations, net of tax
    
    
    (18,272
    )
    
    
    
    
    
    
    (18,272
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (12,306
    )
    
    $
    (8,855
    )
    
    $
    (12,306
    )
    
    $
    12,746
    
    
    $
    (3,891
    )
 24




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Statement of Cash Flows
Nine Months Ended September 30, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by (used in) operating activities
    
    $
    37,866
    
    
    $
    
    
    
    $
    20,691
    
    
    $
    15,021
    
    
    $
    2,154Cash flows from investing activitiesProceeds from sale of Mexican land and building
    
    
    6,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,685Proceeds from sale of discontinued operations, net of
transaction costs and cash sold
    
    
    2,202
    
    
    
    
    
    
    
    2,202
    
    
    
    
    
    
    
    Capital expenditures
    
    
    (25,080
    )
    
    
    
    
    
    
    (16
    )
    
    
    (14,652
    )
    
    
    (10,412
    )Proceeds from sale of other property, plant and equipment
    
    
    1,408
    
    
    
    
    
    
    
    
    
    
    
    966
    
    
    
    442Net cash (used in) provided by investing activities
    
    
    (14,785
    )
    
    
    
    
    
    
    2,186
    
    
    
    (13,686
    )
    
    
    (3,285
    )Cash flows from financing activitiesIssuances of debt
    
    
    15,367
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,367Debt repayments
    
    
    (54,556
    )
    
    
    
    
    
    
    (40,155
    )
    
    
    (344
    )
    
    
    (14,057
    )Net cash (used in) provided by financing activities
    
    
    (39,189
    )
    
    
    
    
    
    
    (40,155
    )
    
    
    (344
    )
    
    
    1,310Effect of currency exchange rate changes on cash
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Net (decrease) increase in cash and cash equivalents
    
    
    (16,127
    )
    
    
    
    
    
    
    (17,278
    )
    
    
    991
    
    
    
    160Cash and cash equivalents at beginning of year
    
    
    31,523
    
    
    
    
    
    
    
    30,212
    
    
    
    (1,767
    )
    
    
    3,078Cash and cash equivalents at end of period
    
    $
    15,396
    
    
    $
    
    
    
    $
    12,934
    
    
    $
    (776
    )
    
    $
    3,238
 25




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE T (continued)
 Consolidating Condensed Statement of Cash Flows
Nine Months Ended September 30, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by (used in) operating activities of
continuing operations
    
    $
    35,315
    
    
    $
    
    
    
    $
    15,609
    
    
    $
    10,493
    
    
    $
    9,213Cash flows from investing activities of continuing operationsAcquisition of ASC Industries, Inc., net of cash acquired
    
    
    (121,734
    )
    
    
    
    
    
    
    (121,734
    )
    
    
    
    
    
    
    Proceeds from sale of discontinued operations, net of
transaction costs and cash sold
    
    
    36,300
    
    
    
    
    
    
    
    36,300
    
    
    
    
    
    
    
    Capital expenditures
    
    
    (16,279
    )
    
    
    
    
    
    
    (2,300
    )
    
    
    (11,130
    )
    
    
    (2,849
    )Proceeds from sale of other property, plant and equipment
    
    
    1,006
    
    
    
    
    
    
    
    
    
    
    
    814
    
    
    
    192Net cash used in investing activities of continuing operations
    
    
    (100,707
    )
    
    
    
    
    
    
    (87,734
    )
    
    
    (10,316
    )
    
    
    (2,657
    )Cash flows from financing activities of continuing operationsIssuances of debt
    
    
    113,000
    
    
    
    
    
    
    
    113,000
    
    
    
    
    
    
    
    Debt repayments
    
    
    (34,538
    )
    
    
    
    
    
    
    (34,435
    )
    
    
    (103
    )
    
    
    Financing fees
    
    
    (3,636
    )
    
    
    
    
    
    
    (3,636
    )
    
    
    
    
    
    
    Shareholders equity contributions
    
    
    8,515
    
    
    
    
    
    
    
    8,515
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities of
continuing operations
    
    
    83,341
    
    
    
    
    
    
    
    83,444
    
    
    
    (103
    )
    
    
    Discontinued operationsNet cash provided by operating activities of discontinued
operations
    
    
    (298
    )
    
    
    
    
    
    
    
    
    
    
    369
    
    
    
    (667
    )Net cash used in investing activities of discontinued
operations
    
    
    (2,653
    )
    
    
    
    
    
    
    
    
    
    
    (806
    )
    
    
    (1,847
    )Effect of currency exchange rate change on cash of discontinued
operations
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137Effect of currency exchange rate changes on cash
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78Net increase in cash and cash equivalents
    
    
    15,213
    
    
    
    
    
    
    
    11,319
    
    
    
    (363
    )
    
    
    4,257Cash and cash equivalents at beginning of year
    
    
    26,182
    
    
    
    
    
    
    
    20,029
    
    
    
    1,307
    
    
    
    4,846Less cash and cash equivalents of discontinued operations at end
of period
    
    
    2,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,236Cash and cash equivalents at end of period
    
    $
    39,159
    
    
    $
    
    
    
    $
    31,348
    
    
    $
    944
    
    
    $
    6,867
 26




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
    Overview
 Sales.
   27




---



##### 



Cost of sales
  Selling and warehousing expenses
 General and administrative expenses
 Recent Developments
  Critical Accounting Policies and Estimates
  28




---



##### 



Inventory
 Revenue recognition
    Product returns.
 Impairment of intangible assets and tangible fixed assets
  Retirement benefits
  29




---



##### 



Insurance reserves.
 Environmental expenditures
  Acquisition of ASC Industries, Inc.
 30




---



##### 



Results of Operations
  Three Months ended September 30,
    
    
    Nine Months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    230,742
    
    
    $
    238,298
    
    
    $
    729,159
    
    
    $
    683,371Cost of sales
    
    
    177,185
    
    
    
    193,173
    
    
    
    566,666
    
    
    
    546,321Gross profit
    
    
    53,557
    
    
    
    45,125
    
    
    
    162,493
    
    
    
    137,050Operating (expense) incomeSelling and warehousing
    
    
    (15,092
    )
    
    
    (14,946
    )
    
    
    (46,047
    )
    
    
    (45,401
    )General and administrative
    
    
    (10,790
    )
    
    
    (9,670
    )
    
    
    (36,900
    )
    
    
    (31,204
    )Amortization of acquired intangible assets
    
    
    (1,694
    )
    
    
    (1,875
    )
    
    
    (5,303
    )
    
    
    (4,804
    )Costs of integration of water pump operations and
resulting asset impairment losses
    
    
    (222
    )
    
    
    (829
    )
    
    
    (696
    )
    
    
    (5,429
    )Costs of closing facilities and consolidating operations
and gain from sale of assets
    
    
    
    
    
    
    (813
    )
    
    
    1,546
    
    
    
    (6,275
    )Trademark impairment loss
    
    
    
    
    
    
    
    
    
    
    (3,600
    )
    
    
    Operating income
    
    
    25,759
    
    
    
    16,992
    
    
    
    71,493
    
    
    
    43,937Other (expense) incomeInterest expense, net
    
    
    (10,175
    )
    
    
    (11,804
    )
    
    
    (31,038
    )
    
    
    (31,743
    )Write-off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,625
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )
    
    
    (1,500
    )
    
    
    (1,500
    )Miscellaneous, net
    
    
    (917
    )
    
    
    147
    
    
    
    (1,972
    )
    
    
    92Income before income taxes
    
    
    14,167
    
    
    
    4,835
    
    
    
    36,983
    
    
    
    8,161Income tax expense
    
    
    (5,772
    )
    
    
    (2,727
    )
    
    
    (14,056
    )
    
    
    (4,090
    )Net income from continuing operations
    
    
    8,395
    
    
    
    2,108
    
    
    
    22,927
    
    
    
    4,071Discontinued operationsNet income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    1,895Gain (loss) on sale of discontinued operations, net of tax
    
    
    2,707
    
    
    
    
    
    
    
    2,707
    
    
    
    (18,272
    )2,707
    
    
    
    (46
    )
    
    
    2,707
    
    
    
    (16,377
    )Net income (loss)
    
    $
    11,102
    
    
    $
    2,062
    
    
    $
    25,634
    
    
    $
    (12,306
    )
 Acquisition and Sales of Operations
    31




---



##### 



Three Months Ended September 30, 2007 compared with the Three Months Ended September 30, 2006
 Net sales
 Gross profit
     Selling and warehousing expenses
 General and administrative expenses
 Costs of integration of water pump operations and resulting asset impairment losses.
 Costs of closing facilities and consolidating operations and gain from sale of assets
 Interest expense, net
 Income tax expense
 Net income from continuing operations
 32




---



##### 



Gain (loss) on sale of discontinued operations, net of tax
 Net income (loss)
 Nine Months Ended September 30, 2007 compared with the Nine Months Ended September 30, 2006
 Net sales
  Gross profit
     Selling and warehousing expenses
 33




---



##### 



General and administrative expenses
  Costs of integration of water pump operations and resulting asset impairment losses
 Costs of closing facilities and consolidating operations and gain from sale of assets
 Trademark impairment loss.
 Interest expense, net
 Write-off of deferred financing costs
 Income tax expense
 Net income from continuing operations
 Discontinued operations
 Net income
 Liquidity and Capital Resources
  September 30,
    
    
    December 31,2007
    
    
    2006Notes payable
    
    $
    10.0
    
    
    $
    8.6Capitalized lease obligations
    
    
    2.2
    
    
    
    1.1Term loan
    
    
    225.0
    
    
    
    265.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Amount of debt requiring repayment
    
    
    467.2
    
    
    
    504.7Unamortized debt discount
    
    
    (3.6
    )
    
    
    (4.1
    )$
    463.6
    
    
    $
    500.6
  34




---



##### 



Last three months of 2007
    
    $
    10.42008
    
    
    0.52009
    
    
    0.52010
    
    
    0.22011
    
    
    100.6Thereafter
    
    
    355.0$
    467.2
       35




---



##### 



Net cash provided by operating activities
 Net cash used in investing activities
  Recent Accounting Pronouncements
   36




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Foreign Currency Exposure
 Currency translation.
  Currency transactions
  Interest Rate Risk
   37




---



##### 



Treasury Policy
  Item 4. Controls and Procedures
    38




---



##### 



PART II
 OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1.A. Risk Factors
  Our relationship with AutoZone creates risks associated with a concentrated net sales source.
  If the automotive aftermarket adopts more expansive return policies or practices such as extended
payment terms, our cash flow and results of operations could be harmed.
  Our lean manufacturing, water pump integration and other cost saving plans may not be effective.
  We are subject to increasing pricing pressure from import activity, particularly from Asia.
  39




---



##### 



We could be materially adversely affected by changes or imbalances in currency exchange and other
rates.
  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. 40




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##### 



SIGNATURES
  UNITED COMPONENTS, INC.Date: November 14, 2007
    
    By:
Name:
    
    /s/ DANIEL J. JOHNSTON

Daniel J. JohnstonTitle:
    
    Chief Financial Officer
 41