##### 



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 March 31, 2006
 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 Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)14601 Highway 41 North
    
    47725Evansville, Indiana
    
    (Zip Code)(Address of Principal Executive Offices)
 (812) 867-4156
 
  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  March 31, 2006 and December 31, 2005Condensed consolidated income statements  Three months ended March 31, 2006 and 2005Condensed consolidated statements of cash flows  Three months ended March 31, 2006 and 2005Condensed consolidated statements of changes in shareholders equity  Three months ended March 31, 2006 and 2005Notes 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)
 March 31,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assetsCash and cash equivalents
    
    $
    45,074
    
    
    $
    26,182Accounts receivable, net
    
    
    265,533
    
    
    
    259,619Inventories, net
    
    
    184,476
    
    
    
    183,186Deferred tax assets
    
    
    27,383
    
    
    
    26,295Other current assets
    
    
    18,212
    
    
    
    22,123Total current assets
    
    
    540,678
    
    
    
    517,405Property, plant and equipment, net
    
    
    192,024
    
    
    
    194,600Goodwill
    
    
    166,559
    
    
    
    166,559Other intangible assets, net
    
    
    86,234
    
    
    
    87,197Deferred financing costs, net
    
    
    5,854
    
    
    
    6,177Pension and other assets
    
    
    13,002
    
    
    
    12,904Total assets
    
    $
    1,004,351
    
    
    $
    984,842Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    118,724
    
    
    $
    109,912Short-term borrowings
    
    
    319
    
    
    
    261Current maturities of long-term debt
    
    
    1
    
    
    
    12Accrued expenses and other current liabilities
    
    
    101,721
    
    
    
    96,064Total current liabilities
    
    
    220,765
    
    
    
    206,249Long-term debt, less current maturities
    
    
    442,432
    
    
    
    442,274Pension and other postretirement liabilities
    
    
    51,081
    
    
    
    49,623Deferred tax liabilities
    
    
    2,382
    
    
    
    4,380Other long-term liabilities
    
    
    1,306
    
    
    
    1,970Contingencies  Note H
    
    
    
    
    
    
    Total liabilities
    
    
    717,966
    
    
    
    704,496Shareholders equityCommon stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    264,393
    
    
    
    263,636Retained earnings
    
    
    22,299
    
    
    
    17,546Accumulated other comprehensive income (loss)
    
    
    (307
    )
    
    
    (836
    )Total shareholders equity
    
    
    286,385
    
    
    
    280,346Total liabilities and shareholders equity
    
    $
    1,004,351
    
    
    $
    984,842
 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 March 31,2006
    
    
    2005Net sales
    
    $
    263,665
    
    
    $
    245,506Cost of sales
    
    
    209,515
    
    
    
    199,420Gross profit
    
    
    54,150
    
    
    
    46,086Operating expensesSelling and warehousing
    
    
    18,923
    
    
    
    18,263General and administrative
    
    
    14,537
    
    
    
    12,419Amortization of acquired intangible assets
    
    
    1,383
    
    
    
    1,532Costs of closing facilities and
consolidating operations  Note B
    
    
    1,393
    
    
    
    Operating income
    
    
    17,914
    
    
    
    13,872Other income (expense)Interest expense, net
    
    
    (9,375
    )
    
    
    (8,772
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )Miscellaneous, net
    
    
    (77
    )
    
    
    (52
    )Income before income taxes
    
    
    7,962
    
    
    
    4,548Income tax expense
    
    
    3,209
    
    
    
    1,819Net income
    
    $
    4,753
    
    
    $
    2,729
 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)
 Three Months ended March 31,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    4,753
    
    
    $
    2,729Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization of other intangible assets
    
    
    9,545
    
    
    
    9,840Amortization of deferred financing costs and debt
issuance costs
    
    
    481
    
    
    
    493Deferred income taxes
    
    
    (3,435
    )
    
    
    595Other non-cash, net
    
    
    1,584
    
    
    
    1,774Changes in operating assets and liabilitiesAccounts receivable
    
    
    (5,752
    )
    
    
    (5,648
    )Inventories
    
    
    (1,290
    )
    
    
    (5,002
    )Other current assets
    
    
    (2,492
    )
    
    
    (1,918
    )Accounts payable
    
    
    8,729
    
    
    
    19,669Accrued expenses and other current liabilities
    
    
    12,060
    
    
    
    2,589Other assets
    
    
    (99
    )
    
    
    (1,329
    )Other long-term liabilities
    
    
    700
    
    
    
    1,319Net cash provided by operating activities
    
    
    24,784
    
    
    
    25,111Cash flows from investing activities:Capital expenditures
    
    
    (6,479
    )
    
    
    (9,687
    )Proceeds from sale of property, plant and equipment
    
    
    175
    
    
    
    112Net cash used in investing activities
    
    
    (6,304
    )
    
    
    (9,575
    )Cash flows from financing activities:Issuances of debt
    
    
    58
    
    
    
    39Debt repayments
    
    
    (11
    )
    
    
    (583
    )Shareholders equity contribution
    
    
    340
    
    
    
    600Net cash provided by financing activities
    
    
    387
    
    
    
    56Effect of exchange rate changes on cash
    
    
    25
    
    
    
    (127
    )Net increase in cash and cash equivalents
    
    
    18,892
    
    
    
    15,465Cash and cash equivalents at beginning of year
    
    
    26,182
    
    
    
    11,291Cash and cash equivalents at end of period
    
    $
    45,074
    
    
    $
    26,756
 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
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid In
    
    
    Retained
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Equity
    
    
    IncomeBalance at January 1, 2005
    
    $
    
    
    
    $
    263,120
    
    
    $
    22,074
    
    
    $
    2,726
    
    
    $
    287,920Additions to paid in capital
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    2,729
    
    
    
    
    
    
    
    2,729
    
    
    $
    2,729Other comprehensive lossInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )
    
    
    (34
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (990
    )
    
    
    (990
    )
    
    
    (990
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,705Balance at March 31, 2005
    
    $
    
    
    
    $
    263,720
    
    
    $
    24,803
    
    
    $
    1,702
    
    
    $
    290,225Balance at January 1, 2006
    
    $
    
    
    
    $
    263,636
    
    
    $
    17,546
    
    
    $
    (836
    )
    
    $
    280,346Additions to paid in capital
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    
    
    
    
    340Recognition of stock based
compensation expense
    
    
    
    
    
    
    417
    
    
    
    
    
    
    
    
    
    
    
    417Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    4,753
    
    
    
    
    
    
    
    4,753
    
    
    $
    4,753Other comprehensive incomeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    355
    
    
    
    355Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    174
    
    
    
    174Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,282Balance at March 31, 2006
    
    $
    
    
    
    $
    264,393
    
    
    $
    22,299
    
    
    $
    (307
    )
    
    $
    286,385
 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 CLOSING FACILITIES AND CONSOLIDATING OPERATIONS
  Assetwrite-downs
    
    
    Severance
    
    
    Other
    
    
    TotalClosure of Canadian facility
    
    $
    0.5
    
    
    $
    0.4
    
    
    $
    0.1
    
    
    $
    1.0Closure of Mexican facility
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    0.4$
    0.5
    
    
    $
    0.4
    
    
    $
    0.5
    
    
    $
    1.4
 Closure of Canadian facility
    Closure of Mexican facility
  2006 expenditures for 2005 loss provision
   December 31, 2005 balance
    
    $
    1.2Cash paid
    
    
    (0.2
    )March 31, 2006 balance
    
    $
    1.0
 NOTE C  SALES OF RECEIVABLES
  8




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  NOTE D  INVENTORIES
  March 31,
    
    
    December 31,2006
    
    
    2005Raw materials
    
    $
    55,186
    
    
    $
    46,185Work in process
    
    
    27,534
    
    
    
    28,231Finished products
    
    
    123,287
    
    
    
    130,747Valuation reserves
    
    
    (21,531
    )
    
    
    (21,977
    )$
    184,476
    
    
    $
    183,186
 NOTE E  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  March 31,
    
    
    December 31,2006
    
    
    2005Salaries and wages
    
    $
    3,284
    
    
    $
    3,185Bonuses
    
    
    2,744
    
    
    
    3,919Vacation pay
    
    
    6,242
    
    
    
    5,563Pension and other postretirement liabilities
    
    
    8,705
    
    
    
    8,705Product returns
    
    
    27,472
    
    
    
    26,744Rebates, credits and discounts due customers
    
    
    9,265
    
    
    
    11,447Insurance
    
    
    11,043
    
    
    
    9,693Taxes payable
    
    
    8,599
    
    
    
    7,604Interest
    
    
    8,357
    
    
    
    3,043Other
    
    
    16,010
    
    
    
    16,161$
    101,721
    
    
    $
    96,064
 NOTE F  PRODUCT RETURNS LIABILITY
  9




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   Three Months ended March 31,2006
    
    
    2005Beginning of year
    
    $
    26,744
    
    
    $
    15,291Cost of unsalvageable parts
    
    
    (9,108
    )
    
    
    (9,527
    )Additional reductions to sales
    
    
    9,837
    
    
    
    9,355End of period
    
    $
    27,473
    
    
    $
    15,119
 NOTE G  PENSION
  Three Months ended March 31,2006
    
    
    2005Service cost
    
    $
    2,300
    
    
    $
    2,217Interest cost
    
    
    3,488
    
    
    
    3,224Expected return on plan assets
    
    
    (3,715
    )
    
    
    (3,486
    )Amortization of transition asset
    
    
    
    
    
    
    6Amortization of prior services cost
    
    
    33
    
    
    
    22Amortization of unrecognized loss
    
    
    128
    
    
    
    10$
    2,234
    
    
    $
    1,993
 NOTE H  CONTINGENCIES
 Environmental
  10




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Litigation
  Product Recall
    International Asset Transfers
  NOTE I  GEOGRAPHIC INFORMATION
  Three Months ended March 31,2006
    
    
    2005United States
    
    $
    213,405
    
    
    $
    197,866Mexico
    
    
    9,558
    
    
    
    6,161United Kingdom
    
    
    9,278
    
    
    
    9,802Canada
    
    
    7,952
    
    
    
    7,830Germany
    
    
    3,802
    
    
    
    4,092France
    
    
    2,900
    
    
    
    2,865Belgium
    
    
    2,346
    
    
    
    1,874Sweden
    
    
    1,405
    
    
    
    1,703Spain
    
    
    1,031
    
    
    
    1,064Other
    
    
    11,988
    
    
    
    12,249$
    263,665
    
    
    $
    245,506
 11




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  March 31,
    
    
    December 31,2006
    
    
    2005United States
    
    $
    250,121
    
    
    $
    253,349United Kingdom
    
    
    30,357
    
    
    
    30,263Mexico
    
    
    13,025
    
    
    
    13,129Spain
    
    
    3,585
    
    
    
    3,639Canada
    
    
    26
    
    
    
    498Goodwill
    
    
    166,559
    
    
    
    166,559$
    463,673
    
    
    $
    467,437
 NOTE J  STOCK OPTIONS
 Adoption of SFAS No. 123R
    Net income as reported
    
    $
    2.7Pro forma stock-based compensation expense, net of tax
    
    
    0.4Pro forma net income
    
    $
    2.3
 Description of Plan and Valuation of Stock Options
  12




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  Number of shares under option:Outstanding at December 31, 2005
    
    
    304,040Granted
    
    
    5,000Exercised
    
    
    Cancelled
    
    
    (8,100
    )Outstanding at March 31, 2006
    
    
    300,940Exercisable at March 31, 2006
    
    
    88,468
   Three MonthsendedMarch 31, 2006Dividend yield
    
    
    0.00
    %Risk-free interest rate
    
    
    4.34
    %Volatility
    
    
    41.00
    %Expected option term in years
    
    
    8Exercise price
    
    $
    100Market value
    
    $
    100
    NOTE K  NEW ACCOUNTING PRONOUNCEMENTS
  13




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   NOTE L  OTHER INFORMATION
   Three Months ended March 31,2006
    
    2005Interest
    
    $
    4,009
    
    
    $
    2,956Income taxes (net of refunds)
    
    
    218
    
    
    
    4,709
 NOTE M  GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
    14




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M (continued)
 Consolidating Condensed Balance Sheet
March 31, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    45,074
    
    
    $
    
    
    
    $
    37,602
    
    
    $
    1,306
    
    
    $
    6,166Accounts receivable, net
    
    
    265,533
    
    
    
    
    
    
    
    75
    
    
    
    237,810
    
    
    
    27,648Inventories, net
    
    
    184,476
    
    
    
    
    
    
    
    
    
    
    
    169,398
    
    
    
    15,078Deferred tax assets
    
    
    27,383
    
    
    
    
    
    
    
    1,776
    
    
    
    24,957
    
    
    
    650Other current assets
    
    
    18,212
    
    
    
    
    
    
    
    1,261
    
    
    
    10,009
    
    
    
    6,942Total current assets
    
    
    540,678
    
    
    
    
    
    
    
    40,714
    
    
    
    443,480
    
    
    
    56,484Property, plant and equipment, net
    
    
    192,024
    
    
    
    
    
    
    
    270
    
    
    
    149,679
    
    
    
    42,075Intercompany receivables
    
    
    
    
    
    
    (118,433
    )
    
    
    5,647
    
    
    
    110,358
    
    
    
    2,428Intercompany notes receivable
    
    
    
    
    
    
    (467,000
    )
    
    
    467,000
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    (154,317
    )
    
    
    153,590
    
    
    
    727
    
    
    
    Goodwill
    
    
    166,559
    
    
    
    
    
    
    
    166,559
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    86,234
    
    
    
    
    
    
    
    15,063
    
    
    
    68,771
    
    
    
    2,400Deferred financing costs, net
    
    
    5,854
    
    
    
    
    
    
    
    5,854
    
    
    
    
    
    
    
    Pension and other assets
    
    
    13,002
    
    
    
    
    
    
    
    310
    
    
    
    12,497
    
    
    
    195Total assets
    
    $
    1,004,351
    
    
    $
    (739,750
    )
    
    $
    855,007
    
    
    $
    785,512
    
    
    $
    103,582Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    118,724
    
    
    $
    
    
    
    $
    3,249
    
    
    $
    98,455
    
    
    $
    17,020Short-term borrowings
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319Current maturities of long-term debt
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Accrued expenses and other current
liabilities
    
    
    101,721
    
    
    
    
    
    
    
    15,444
    
    
    
    78,117
    
    
    
    8,160Total current liabilities
    
    
    220,765
    
    
    
    
    
    
    
    18,693
    
    
    
    176,572
    
    
    
    25,500Long-term debt, less current maturities
    
    
    442,432
    
    
    
    
    
    
    
    442,432
    
    
    
    
    
    
    
    Pension and other postretirement liabilities
    
    
    51,081
    
    
    
    
    
    
    
    
    
    
    
    35,837
    
    
    
    15,244Deferred tax liabilities
    
    
    2,382
    
    
    
    
    
    
    
    10,283
    
    
    
    (1,194
    )
    
    
    (6,707
    )Other long-term liabilities
    
    
    1,306
    
    
    
    
    
    
    
    816
    
    
    
    1,306
    
    
    
    (816
    )Intercompany payables
    
    
    
    
    
    
    (118,433
    )
    
    
    96,398
    
    
    
    7,542
    
    
    
    14,493Intercompany notes payable
    
    
    
    
    
    
    (467,000
    )
    
    
    
    
    
    
    447,000
    
    
    
    20,000Total shareholders equity
    
    
    286,385
    
    
    
    (154,317
    )
    
    
    286,385
    
    
    
    118,449
    
    
    
    35,868Total liabilities and shareholders
equity
    
    $
    1,004,351
    
    
    $
    (739,750
    )
    
    $
    855,007
    
    
    $
    785,512
    
    
    $
    103,582
 15




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M (continued)
 Consolidating Condensed Balance Sheet
December 31, 2005  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    26,182
    
    
    $
    
    
    
    $
    20,029
    
    
    $
    1,307
    
    
    $
    4,846Accounts receivable, net
    
    
    259,619
    
    
    
    
    
    
    
    
    
    
    
    235,595
    
    
    
    24,024Inventories, net
    
    
    183,186
    
    
    
    
    
    
    
    
    
    
    
    167,807
    
    
    
    15,379Deferred tax assets
    
    
    26,295
    
    
    
    
    
    
    
    103
    
    
    
    25,633
    
    
    
    559Other current assets
    
    
    22,123
    
    
    
    
    
    
    
    7,232
    
    
    
    8,826
    
    
    
    6,065Total current assets
    
    
    517,405
    
    
    
    
    
    
    
    27,364
    
    
    
    439,168
    
    
    
    50,873Property, plant and equipment, net
    
    
    194,600
    
    
    
    
    
    
    
    302
    
    
    
    151,615
    
    
    
    42,683Intercompany receivables
    
    
    
    
    
    
    (85,721
    )
    
    
    
    
    
    
    84,029
    
    
    
    1,692Intercompany notes receivable
    
    
    
    
    
    
    (467,000
    )
    
    
    467,000
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    (141,742
    )
    
    
    141,126
    
    
    
    616
    
    
    
    Goodwill
    
    
    166,559
    
    
    
    
    
    
    
    166,559
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    87,197
    
    
    
    
    
    
    
    14,643
    
    
    
    70,154
    
    
    
    2,400Deferred financing costs, net
    
    
    6,177
    
    
    
    
    
    
    
    6,177
    
    
    
    
    
    
    
    Pension and other assets
    
    
    12,904
    
    
    
    
    
    
    
    305
    
    
    
    12,454
    
    
    
    145Total assets
    
    $
    984,842
    
    
    $
    (694,463
    )
    
    $
    823,476
    
    
    $
    758,036
    
    
    $
    97,793Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    109,912
    
    
    $
    
    
    
    $
    4,647
    
    
    $
    90,698
    
    
    $
    14,567Short-term borrowings
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261Current maturities of long-term debt
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Accrued expenses and other current
liabilities
    
    
    96,064
    
    
    
    
    
    
    
    11,097
    
    
    
    77,635
    
    
    
    7,332Total current liabilities
    
    
    206,249
    
    
    
    
    
    
    
    15,744
    
    
    
    168,333
    
    
    
    22,172Long-term debt, less current maturities
    
    
    442,274
    
    
    
    
    
    
    
    442,274
    
    
    
    
    
    
    
    Pension and other postretirement liabilities
    
    
    49,623
    
    
    
    
    
    
    
    
    
    
    
    34,406
    
    
    
    15,217Deferred tax liabilities
    
    
    4,380
    
    
    
    
    
    
    
    13,377
    
    
    
    (3,941
    )
    
    
    (5,056
    )Other long-term liabilities
    
    
    1,970
    
    
    
    
    
    
    
    816
    
    
    
    1,970
    
    
    
    (816
    )Intercompany payables
    
    
    
    
    
    
    (85,721
    )
    
    
    70,919
    
    
    
    1,532
    
    
    
    13,270Intercompany notes payable
    
    
    
    
    
    
    (467,000
    )
    
    
    
    
    
    
    447,000
    
    
    
    20,000Total shareholders equity
    
    
    280,346
    
    
    
    (141,742
    )
    
    
    280,346
    
    
    
    108,736
    
    
    
    33,006Total liabilities and
shareholders equity
    
    $
    984,842
    
    
    $
    (694,463
    )
    
    $
    823,476
    
    
    $
    758,036
    
    
    $
    97,793
 16




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M (continued)
 Consolidating Condensed Income Statement
Three Months Ended March 31, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    263,665
    
    
    $
    (4,963
    )
    
    $
    
    
    
    $
    234,829
    
    
    $
    33,799Cost of sales
    
    
    209,515
    
    
    
    (4,963
    )
    
    
    
    
    
    
    187,463
    
    
    
    27,015Gross profit
    
    
    54,150
    
    
    
    
    
    
    
    
    
    
    
    47,366
    
    
    
    6,784Operating expensesSelling and warehousing
    
    
    18,923
    
    
    
    
    
    
    
    292
    
    
    
    16,621
    
    
    
    2,010General and administrative
    
    
    14,537
    
    
    
    
    
    
    
    3,945
    
    
    
    8,011
    
    
    
    2,581Amortization
of acquired intangible assets
    
    
    1,383
    
    
    
    
    
    
    
    
    
    
    
    1,383
    
    
    
    Costs of
closing facilities and consolidating operations
    
    
    1,393
    
    
    
    
    
    
    
    
    
    
    
    402
    
    
    
    991Operating income (loss)
    
    
    17,914
    
    
    
    
    
    
    
    (4,237
    )
    
    
    20,949
    
    
    
    1,202Other income (expense)Interest expense, net
    
    
    (9,375
    )
    
    
    
    
    
    
    (9,442
    )
    
    
    3
    
    
    
    64Intercompany interest
    
    
    
    
    
    
    
    
    
    
    9,892
    
    
    
    (9,325
    )
    
    
    (567
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    Income (loss) before income taxes
    
    
    7,962
    
    
    
    
    
    
    
    (4,287
    )
    
    
    11,550
    
    
    
    699Income tax expense (benefit)
    
    
    3,209
    
    
    
    
    
    
    
    (1,507
    )
    
    
    4,425
    
    
    
    291Increase (decrease) before equity
in earnings of subsidiaries
    
    
    4,753
    
    
    
    
    
    
    
    (2,780
    )
    
    
    7,125
    
    
    
    408Equity in earnings of subsidiaries
    
    
    
    
    
    
    (7,627
    )
    
    
    7,533
    
    
    
    94
    
    
    
    Net income
    
    $
    4,753
    
    
    $
    (7,627
    )
    
    $
    4,753
    
    
    $
    7,219
    
    
    $
    408
 17




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M (continued)
 Consolidating Condensed Income Statement
Three Months Ended March 31, 2005  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    245,506
    
    
    $
    (3,272
    )
    
    $
    
    
    
    $
    214,650
    
    
    $
    34,128Cost of sales
    
    
    199,420
    
    
    
    (3,272
    )
    
    
    
    
    
    
    175,433
    
    
    
    27,259Gross profit
    
    
    46,086
    
    
    
    
    
    
    
    
    
    
    
    39,217
    
    
    
    6,869Operating expensesSelling and warehousing
    
    
    18,263
    
    
    
    
    
    
    
    
    
    
    
    16,361
    
    
    
    1,902General and administrative
    
    
    12,419
    
    
    
    
    
    
    
    3,707
    
    
    
    5,661
    
    
    
    3,051Amortization of acquired
intangible assets
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532
    
    
    
    Operating income (loss)
    
    
    13,872
    
    
    
    
    
    
    
    (3,707
    )
    
    
    15,663
    
    
    
    1,916Other income (expense)Interest expense, net
    
    
    (8,772
    )
    
    
    
    
    
    
    (8,759
    )
    
    
    2
    
    
    
    (15
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    6,174
    
    
    
    (5,667
    )
    
    
    (507
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    119
    
    
    
    (171
    )Income (loss) before income taxes
    
    
    4,548
    
    
    
    
    
    
    
    (6,792
    )
    
    
    10,117
    
    
    
    1,223Income tax expense (benefit)
    
    
    1,819
    
    
    
    
    
    
    
    (2,656
    )
    
    
    4,047
    
    
    
    428Increase (decrease) before equity
in earnings of subsidiaries
    
    
    2,729
    
    
    
    
    
    
    
    (4,136
    )
    
    
    6,070
    
    
    
    795Equity in earnings of subsidiaries
    
    
    
    
    
    
    (6,185
    )
    
    
    6,865
    
    
    
    (680
    )
    
    
    Net income
    
    $
    2,729
    
    
    $
    (6,185
    )
    
    $
    2,729
    
    
    $
    5,390
    
    
    $
    795
 18




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M (continued)
 Consolidating Condensed Statement of Cash Flows
Three Months Ended March 31, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by operating activities
    
    $
    24,784
    
    
    $
    
    
    
    $
    18,257
    
    
    $
    3,996
    
    
    $
    2,531Cash flows from investing activities:Capital expenditures
    
    
    (6,479
    )
    
    
    
    
    
    
    (1,024
    )
    
    
    (4,041
    )
    
    
    (1,414
    )Proceeds from sale of property, plant and
equipment
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    131Net cash used in investing activities
    
    
    (6,304
    )
    
    
    
    
    
    
    (1,024
    )
    
    
    (3,997
    )
    
    
    (1,283
    )Cash flows from financing activities:Issuances of debt
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58Debt repayments
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Shareholders equity contribution
    
    
    340
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    387
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    47Effect of exchange rate changes on cash
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Net increase (decrease) in cash and cash
equivalents
    
    
    18,892
    
    
    
    
    
    
    
    17,573
    
    
    
    (1
    )
    
    
    1,320Cash and cash equivalents at beginning of year
    
    
    26,182
    
    
    
    
    
    
    
    20,029
    
    
    
    1,307
    
    
    
    4,846Cash and cash equivalents at end of period
    
    $
    45,074
    
    
    $
    
    
    
    $
    37,602
    
    
    $
    1,306
    
    
    $
    6,166
 19




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE M (continued)
 Consolidating Condensed Statement of Cash Flows
Three Months Ended March 31, 2005  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by operating activities
    
    $
    25,111
    
    
    $
    
    
    
    $
    17,759
    
    
    $
    4,201
    
    
    $
    3,151Cash flows from investing activities:Capital expenditures
    
    
    (9,687
    )
    
    
    
    
    
    
    (3,514
    )
    
    
    (4,280
    )
    
    
    (1,893
    )Proceeds from sale of property, plant and
equipment
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    103Net cash used in investing activities
    
    
    (9,575
    )
    
    
    
    
    
    
    (3,514
    )
    
    
    (4,271
    )
    
    
    (1,790
    )Cash flows from financing activities:Issuances of debt
    
    
    8,039
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    39Debt repayments
    
    
    (8,583
    )
    
    
    
    
    
    
    (8,500
    )
    
    
    
    
    
    
    (83
    )Other
    
    
    600
    
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    56
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    (44
    )Effect of exchange rate changes on cash
    
    
    (127
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (127
    )Net increase (decrease) in cash and cash
equivalents
    
    
    15,465
    
    
    
    
    
    
    
    14,345
    
    
    
    (70
    )
    
    
    1,190Cash and cash equivalents at beginning of year
    
    
    11,291
    
    
    
    
    
    
    
    3,916
    
    
    
    2,114
    
    
    
    5,261Cash and cash equivalents at end of period
    
    $
    26,756
    
    
    $
    
    
    
    $
    18,261
    
    
    $
    2,044
    
    
    $
    6,451
 20




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE N  SUBSEQUENT EVENT
    21




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
    Overview
 Sales .
  22




---



##### 



Cost of Sales
  Selling and Warehousing Expenses
 23




---



##### 



General and Administrative Expenses
 Critical Accounting Policies and Estimates
   Inventory
 Revenue recognition
 Product Returns .
 24




---



##### 



Impairment of intangible assets and tangible fixed assets
  Retirement benefits
  Insurance Reserves .
 Environmental Expenditures
 Pending Acquisition of ASC Industries, Inc .
  25




---



##### 



Results of Operations
  Three Months ended March 31,2006
    
    
    2005Net sales
    
    $
    263.7
    
    
    $
    245.5Cost of sales
    
    
    209.5
    
    
    
    199.4Gross profit
    
    
    54.2
    
    
    
    46.1Operating expensesSelling and warehousing
    
    
    19.0
    
    
    
    18.3General and administrative
    
    
    14.5
    
    
    
    12.4Amortization of acquired intangible assets
    
    
    1.4
    
    
    
    1.5Costs of closing facilities and consolidating operations
    
    
    1.4
    
    
    
    Operating income
    
    
    17.9
    
    
    
    13.9Other income (expense)Interest expense, net
    
    
    (9.4
    )
    
    
    (8.8
    )Management fee expense
    
    
    (0.5
    )
    
    
    (0.5
    )Miscellaneous, net
    
    
    
    
    
    
    (0.1
    )Income before income taxes
    
    
    8.0
    
    
    
    4.5Income tax expense
    
    
    3.2
    
    
    
    1.8Net income
    
    $
    4.8
    
    
    $
    2.7
 Three Months Ended March 31, 2006 Compared with the Three Months Ended March 31, 2005
 Net sales
 26




---



##### 



Gross Profit .
   Selling and warehousing expenses
 General and administrative expenses
  Costs of closing facilities and consolidating operations
 Interest expense, net
 Income tax expense
 Net Income
 Closing of the Mexican filter manufacturing plant and transferring production to Illinois
  27




---



##### 



Liquidity and Capital Resources
  March 31,
    
    
    December 31,2006
    
    
    2005Notes payable
    
    $
    0.3
    
    
    $
    0.3Term loan
    
    
    217.0
    
    
    
    217.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Debt issuance costs
    
    
    (4.5
    )
    
    
    (4.8
    )$
    442.8
    
    
    $
    442.5
  2006
    
    $
    0.32007
    
    
    0.62008
    
    
    2.22009
    
    
    107.72010
    
    
    106.5Thereafter
    
    
    230.0$
    447.3
 28




---



##### 



Net cash provided by operating activities
  29




---



##### 



Net cash used in investing activities
  Recent Accounting Pronouncements
    30




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Foreign Currency Exposure
 Currency translation
  Currency transactions .
  Interest Rate Risk
   31




---



##### 



Treasury Policy
  Item 4. Controls and Procedures
    32




---



##### 



PART II
OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1.A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Default Upon Senior Securities
  Item 4. Submission of Matters to Vote of Security Holders
  Item 5. Other Information
  Item 6. Exhibits
 Exhibit 31.1
    
    Certification of Periodic Report by the Chief
Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.Exhibit 31.2
    
    Certification of Periodic Report by the Chief
Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.Exhibit 32
    
    Certification of Periodic Report by the Chief
Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. 1350, as created by Section 906
of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C.
1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and is not to be incorporated by reference into any filing of the Company, whether made
before or after the date hereof, regardless of any general incorporation language in such filing. 33




---



##### 



SIGNATURES
  UNITED COMPONENTS, INC.Date:
May 9, 2006
    By:

/s/ Charles T. DicksonName:
    
    Charles T. DicksonTitle:
    
    Chief Financial Officer 34