##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 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
Evansville, Indiana
(Address of Principal Executive Offices)
    
    47725
(Zip Code)
 (812) 867-4156
  
  o þ
  o þ




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##### 



United Components, Inc.
 Index
 Part I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheetsJune 30, 2005 and December 31, 2004Condensed consolidated income statementsThree and six months ended June 30, 2005 and 2004Condensed consolidated statements of cash flowsSix months ended June 30, 2005 and 2004Condensed consolidated statements of changes in shareholders equitySix months ended June 30, 2005 and 2004Notes 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 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
 FORWARD-LOOKING STATEMENTS
  2




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##### 



3




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##### 



PART I
FINANCIAL INFORMATION
 Item 1. Financial Statements
 United Components, Inc.
 Condensed Consolidated Balance Sheets  (in thousands)
 June 30,
    
    December 31,2005
    
    2004AssetsCurrent assetsCash and cash equivalents
    
    $
    8,771
    
    
    $
    11,291Accounts receivable, net
    
    
    268,713
    
    
    
    238,581Inventories, net
    
    
    182,794
    
    
    
    188,212Deferred tax assets
    
    
    20,796
    
    
    
    18,578Other current assets
    
    
    13,654
    
    
    
    12,188Total current assets
    
    
    494,728
    
    
    
    468,850Property, plant and equipment, net
    
    
    209,368
    
    
    
    216,849Goodwill
    
    
    166,559
    
    
    
    166,559Other intangible assets, net
    
    
    97,587
    
    
    
    94,229Deferred financing costs, net
    
    
    6,823
    
    
    
    7,686Pension and other assets
    
    
    12,558
    
    
    
    12,772Total assets
    
    $
    987,623
    
    
    $
    966,945Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    113,460
    
    
    $
    91,505Short-term borrowings
    
    
    3,264
    
    
    
    1,267Current maturities of long-term debt
    
    
    80
    
    
    
    228Accrued expenses and other current liabilities
    
    
    73,422
    
    
    
    67,808Total current liabilities
    
    
    190,226
    
    
    
    160,808Long-term debt, less current maturities
    
    
    441,978
    
    
    
    456,674Pension and other postretirement liabilities
    
    
    55,615
    
    
    
    53,141Deferred tax liabilities
    
    
    6,386
    
    
    
    6,430Other liabilities
    
    
    2,019
    
    
    
    1,972Contingencies  Note H
    
    
    
    
    
    
    Total liabilities
    
    
    696,224
    
    
    
    679,025Shareholders equityCommon stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    263,720
    
    
    
    263,120Retained earnings
    
    
    29,177
    
    
    
    22,074Accumulated
other comprehensive income (loss)
    
    
    (1,498
    )
    
    
    2,726Total shareholders equity
    
    
    291,399
    
    
    
    287,920Total liabilities and shareholders equity
    
    $
    987,623
    
    
    $
    966,945
 The accompanying notes are an integral part of these statements.
 4




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##### 



United Components, Inc.
 Condensed Consolidated Income Statements  (in thousands)
 Three Months ended June 30,
    
    Six Months ended June 30,2005
    
    2004
    
    2005
    
    2004Net sales
    
    $
    269,285
    
    
    $
    273,952
    
    
    $
    514,791
    
    
    $
    530,763Cost of sales
    
    
    215,993
    
    
    
    214,156
    
    
    
    415,413
    
    
    
    415,420Gross profit
    
    
    53,292
    
    
    
    59,796
    
    
    
    99,378
    
    
    
    115,343Operating expensesSelling and warehousing
    
    
    18,595
    
    
    
    19,342
    
    
    
    36,858
    
    
    
    38,387General and administrative
    
    
    12,342
    
    
    
    12,127
    
    
    
    24,761
    
    
    
    24,199Amortization of intangible assets
    
    
    1,532
    
    
    
    1,851
    
    
    
    3,064
    
    
    
    3,702Losses on abandonment
of an operation (Note K)
    
    
    2,182
    
    
    
    
    
    
    
    2,182
    
    
    
    Operating income
    
    
    18,641
    
    
    
    26,476
    
    
    
    32,513
    
    
    
    49,055Other income (expense)Interest expense, net
    
    
    (8,850
    )
    
    
    (9,022
    )
    
    
    (17,622
    )
    
    
    (18,588
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )
    
    
    (1,000
    )
    
    
    (1,000
    )Miscellaneous, net
    
    
    (91
    )
    
    
    41
    
    
    
    (143
    )
    
    
    126Income before income taxes
    
    
    9,200
    
    
    
    16,995
    
    
    
    13,748
    
    
    
    29,593Income tax expense
    
    
    4,826
    
    
    
    6,778
    
    
    
    6,645
    
    
    
    11,841Net income
    
    $
    4,374
    
    
    $
    10,217
    
    
    $
    7,103
    
    
    $
    17,752
 The accompanying notes are an integral part of these statements.
 5




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##### 



United Components, Inc.
 Condensed Consolidated Statements of Cash Flows  (in thousands)
 Six Months ended June 30,2005
    
    2004Cash flows from operating activities:Net income
    
    $
    7,103
    
    
    $
    17,752Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    16,515
    
    
    
    17,779Amortization of intangible assets
    
    
    3,064
    
    
    
    3,702Amortization of deferred financing costs
and debt issuance costs
    
    
    1,179
    
    
    
    1,670Deferred income taxes
    
    
    (1,162
    )
    
    
    3,163Other non-cash, net
    
    
    (374
    )
    
    
    (301
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    (30,884
    )
    
    
    (38,889
    )Inventories
    
    
    4,741
    
    
    
    (6,510
    )Other current assets
    
    
    (1,529
    )
    
    
    1,530Accounts payable
    
    
    21,955
    
    
    
    27,496Accrued expenses and other current liabilities
    
    
    5,614
    
    
    
    16,464Other assets
    
    
    214
    
    
    
    2,150Other liabilities
    
    
    2,521
    
    
    
    3,644Net cash provided by operating activities
    
    
    28,957
    
    
    
    49,650Cash flows from investing activities:Final Acquisition purchase price payment
    
    
    
    
    
    
    (8,000
    )Capital expenditures
    
    
    (18,891
    )
    
    
    (17,165
    )Proceeds from sale of property, plant and equipment
    
    
    211
    
    
    
    184Net cash used in investing activities
    
    
    (18,680
    )
    
    
    (24,981
    )Cash flows from financing activities:Issuances of debt
    
    
    10,500
    
    
    
    467Debt repayments
    
    
    (23,663
    )
    
    
    (40,134
    )Shareholders equity contribution
    
    
    600
    
    
    
    (28
    )Net cash used in financing activities
    
    
    (12,563
    )
    
    
    (39,695
    )Effect of exchange rate changes on cash
    
    
    (234
    )
    
    
    (27
    )Net decrease in cash and cash equivalents
    
    
    (2,520
    )
    
    
    (15,053
    )Cash and cash equivalents at beginning of year
    
    
    11,291
    
    
    
    46,130Cash and cash equivalents at end of period
    
    $
    8,771
    
    
    $
    31,077
 The accompanying notes are an integral part of these statements.
 6




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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
    
    IncomeBalance at January 1, 2004
    
    $
    
    
    
    $
    261,385
    
    
    $
    (8,755
    )
    
    $
    1,460
    
    
    $
    254,090Additions to paid in capital
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    (28
    )Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    17,752
    
    
    
    
    
    
    
    17,752
    
    
    $
    17,752Other comprehensive incomeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (405
    )
    
    
    (405
    )
    
    
    (405
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    499
    
    
    
    499
    
    
    
    499Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,846Balance at June 30, 2004
    
    $
    
    
    
    $
    261,357
    
    
    $
    8,997
    
    
    $
    1,554
    
    
    $
    271,908Balance at January 1, 2005
    
    $
    
    
    
    $
    263,120
    
    
    $
    22,074
    
    
    $
    2,726
    
    
    $
    287,920Additions to paid in capital
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    7,103
    
    
    
    
    
    
    
    7,103
    
    
    $
    7,103Other comprehensive incomeInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (279
    )
    
    
    (279
    )
    
    
    (279
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,945
    )
    
    
    (3,945
    )
    
    
    (3,945
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,879Balance at June 30, 2005
    
    $
    
    
    
    $
    263,720
    
    
    $
    29,177
    
    
    $
    (1,498
    )
    
    $
    291,399
 The accompanying notes are an integral part of these statements.
 7




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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
       8




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE B  SALES OF RECEIVABLES
   NOTE C  INVENTORIES
  June 30,
    
    December 31,2005
    
    2004Raw materials
    
    $
    29,619
    
    
    $
    34,461Work in process
    
    
    51,583
    
    
    
    49,376Finished products
    
    
    122,900
    
    
    
    125,620Valuation reserves
    
    
    (21,308
    )
    
    
    (21,245
    )$
    182,794
    
    
    $
    188,212
 NOTE D  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  June 30,
    
    December 31,2005
    
    2004Salaries and wages
    
    $
    4,580
    
    
    $
    2,756Bonuses
    
    
    2,646
    
    
    
    4,245Vacation pay
    
    
    6,594
    
    
    
    5,721Pension and other postretirement liabilities
    
    
    3,769
    
    
    
    4,039Product returns
    
    
    15,924
    
    
    
    15,291Rebates, credits and discounts due customers
    
    
    8,585
    
    
    
    6,475Insurance
    
    
    9,458
    
    
    
    9,337Interest
    
    
    2,289
    
    
    
    1,751Taxes payable
    
    
    4,159
    
    
    
    4,081Other
    
    
    15,418
    
    
    
    14,112$
    73,422
    
    
    $
    67,808
 9




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE E  PRODUCT RETURNS LIABILITY
  Six Months ended June 30,2005
    
    2004Beginning of year
    
    $
    15,291
    
    
    $
    13,999Returned parts expense
    
    
    (18,740
    )
    
    
    (17,258
    )Additional loss provision
    
    
    19,373
    
    
    
    19,963End of period
    
    $
    15,924
    
    
    $
    16,704
 NOTE F  PENSION
  Three Months ended June 30,
    
    Six Months ended June 30,2005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    2,347
    
    
    $
    2,034
    
    
    $
    4,564
    
    
    $
    4,069Interest cost
    
    
    3,224
    
    
    
    2,947
    
    
    
    6,448
    
    
    
    5,894Expected return on plan assets
    
    
    (3,486
    )
    
    
    (3,358
    )
    
    
    (6,972
    )
    
    
    (6,753
    )Amortization of transition asset
    
    
    6
    
    
    
    
    
    
    
    12
    
    
    
    Amortization of prior service cost
    
    
    22
    
    
    
    
    
    
    
    44
    
    
    
    Amortization of unrecognized gain
    
    
    10
    
    
    
    
    
    
    
    20
    
    
    
    $
    2,123
    
    
    $
    1,623
    
    
    $
    4,116
    
    
    $
    3,210
 NOTE G  DEBT
   10




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE H  CONTINGENCIES
 Environmental
  Litigation
  NOTE I  GEOGRAPHIC INFORMATION
  Three Months ended June 30,
    
    Six Months ended June 30,2005
    
    2004
    
    2005
    
    2004United States
    
    $
    218,029
    
    
    $
    227,913
    
    
    $
    415,895
    
    
    $
    437,550Canada
    
    
    8,581
    
    
    
    9,208
    
    
    
    16,411
    
    
    
    17,500United Kingdom
    
    
    10,397
    
    
    
    10,679
    
    
    
    20,199
    
    
    
    20,909Mexico
    
    
    7,643
    
    
    
    6,435
    
    
    
    13,804
    
    
    
    13,550Germany
    
    
    3,479
    
    
    
    3,155
    
    
    
    7,571
    
    
    
    6,845Spain
    
    
    1,080
    
    
    
    988
    
    
    
    2,144
    
    
    
    1,962Belgium
    
    
    1,956
    
    
    
    1,660
    
    
    
    3,830
    
    
    
    3,654France
    
    
    2,934
    
    
    
    1,029
    
    
    
    5,799
    
    
    
    4,053Sweden
    
    
    1,680
    
    
    
    1,545
    
    
    
    3,383
    
    
    
    3,113Other
    
    
    13,506
    
    
    
    11,340
    
    
    
    25,755
    
    
    
    21,627$
    269,285
    
    
    $
    273,952
    
    
    $
    514,791
    
    
    $
    530,763
 11




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  June 30,
    
    December 31,2005
    
    2004United States
    
    $
    271,660
    
    
    $
    268,947United Kingdom
    
    
    36,660
    
    
    
    43,932Mexico
    
    
    13,707
    
    
    
    13,708Spain
    
    
    3,764
    
    
    
    4,366Canada
    
    
    545
    
    
    
    583Goodwill
    
    
    166,559
    
    
    
    166,559$
    492,895
    
    
    $
    498,095
 NOTE J  STOCK OPTIONS
  Three Months ended June 30,
    
    Six Months ended June 30,2005
    
    2004
    
    2005
    
    2004Net income as reported
    
    $
    4.4
    
    
    $
    10.2
    
    
    $
    7.1
    
    
    $
    17.8Pro forma stock-based
compensation expense,
net of tax
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.7
    
    
    
    1.0Pro forma net income
    
    $
    4.1
    
    
    $
    9.7
    
    
    $
    6.4
    
    
    $
    16.8
  NOTE K  ABANDONMENT OF AN OPERATION
   12




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
    NOTE L  INCOME TAXES
  NOTE M  NEW ACCOUNTING PRONOUNCEMENTS
   13




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
     NOTE N  OTHER INFORMATION
   Three Months ended June 30,
    
    Six Months ended June 30,2005
    
    2004
    
    2005
    
    2004Interest
    
    $
    14,184
    
    
    $
    11,902
    
    
    $
    17,140
    
    
    $
    15,837Income taxes (net of refunds)
    
    
    4,600
    
    
    
    656
    
    
    
    9,309
    
    
    
    2,555
 14




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE O  GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
     15




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Consolidating Condensed Balance Sheet
June 30, 2005  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    Eliminations
    
    UCI
    
    Guarantors
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    8,771
    
    
    $
    
    
    
    $
    
    
    
    $
    1,688
    
    
    $
    7,083Accounts receivable, net
    
    
    268,713
    
    
    
    
    
    
    
    
    
    
    
    242,545
    
    
    
    26,168Inventories, net
    
    
    182,794
    
    
    
    
    
    
    
    
    
    
    
    166,941
    
    
    
    15,853Deferred tax assets
    
    
    20,796
    
    
    
    
    
    
    
    (71
    )
    
    
    19,830
    
    
    
    1,037Other current assets
    
    
    13,654
    
    
    
    
    
    
    
    1,317
    
    
    
    5,148
    
    
    
    7,189Total current assets
    
    
    494,728
    
    
    
    
    
    
    
    1,246
    
    
    
    436,152
    
    
    
    57,330Property, plant and equipment, net
    
    
    209,368
    
    
    
    
    
    
    
    833
    
    
    
    158,030
    
    
    
    50,505Intercompany receivables
    
    
    
    
    
    
    (85,506
    )
    
    
    710
    
    
    
    83,051
    
    
    
    1,745Intercompany notes receivable
    
    
    
    
    
    
    (482,000
    )
    
    
    482,000
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    (157,342
    )
    
    
    149,769
    
    
    
    7,573
    
    
    
    Goodwill
    
    
    166,559
    
    
    
    
    
    
    
    166,559
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    97,587
    
    
    
    
    
    
    
    14,088
    
    
    
    81,078
    
    
    
    2,421Deferred financing costs, net
    
    
    6,823
    
    
    
    
    
    
    
    6,823
    
    
    
    
    
    
    
    Pension and other assets
    
    
    12,558
    
    
    
    
    
    
    
    305
    
    
    
    12,088
    
    
    
    165Total assets
    
    $
    987,623
    
    
    $
    (724,848
    )
    
    $
    822,333
    
    
    $
    777,972
    
    
    $
    112,166Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    113,460
    
    
    $
    
    
    
    $
    6,651
    
    
    $
    90,332
    
    
    $
    16,477Short-term borrowings
    
    
    3,264
    
    
    
    
    
    
    
    2,500
    
    
    
    
    
    
    
    764Current maturities of long-term debt
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Accrued expenses and other current
liabilities
    
    
    73,422
    
    
    
    
    
    
    
    2,432
    
    
    
    62,285
    
    
    
    8,705Total current liabilities
    
    
    190,226
    
    
    
    
    
    
    
    11,583
    
    
    
    152,617
    
    
    
    26,026Long-term debt, less current maturities
    
    
    441,978
    
    
    
    
    
    
    
    441,957
    
    
    
    
    
    
    
    21Pension and other postretirement liabilities
    
    
    55,615
    
    
    
    
    
    
    
    
    
    
    
    39,331
    
    
    
    16,284Deferred tax liabilities
    
    
    6,386
    
    
    
    
    
    
    
    8,993
    
    
    
    (1,022
    )
    
    
    (1,585
    )Other liabilities
    
    
    2,019
    
    
    
    
    
    
    
    
    
    
    
    2,019
    
    
    
    Intercompany payables
    
    
    
    
    
    
    (85,506
    )
    
    
    68,401
    
    
    
    1,465
    
    
    
    15,640Intercompany notes payable
    
    
    
    
    
    
    (482,000
    )
    
    
    
    
    
    
    462,000
    
    
    
    20,000Total shareholders equity
    
    
    291,399
    
    
    
    (157,342
    )
    
    
    291,399
    
    
    
    121,562
    
    
    
    35,780Total liabilities and shareholders
equity
    
    $
    987,623
    
    
    $
    (724,848
    )
    
    $
    822,333
    
    
    $
    777,972
    
    
    $
    112,166
 16




---



##### 



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




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Consolidating Condensed Income Statement
Three Months Ended June 30, 2005  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    Eliminations
    
    UCI
    
    Guarantors
    
    GuarantorsNet sales
    
    $
    269,285
    
    
    $
    (3,284
    )
    
    $
    
    
    
    $
    238,258
    
    
    $
    34,311Cost of sales
    
    
    215,993
    
    
    
    (3,284
    )
    
    
    
    
    
    
    190,322
    
    
    
    28,955Gross profit
    
    
    53,292
    
    
    
    
    
    
    
    
    
    
    
    47,936
    
    
    
    5,356Operating expensesSelling and warehousing
    
    
    18,595
    
    
    
    
    
    
    
    
    
    
    
    16,522
    
    
    
    2,073General and administrative
    
    
    12,342
    
    
    
    
    
    
    
    2,962
    
    
    
    5,581
    
    
    
    3,799Amortization of intangible assets
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532
    
    
    
    Losses on abandonment of an
operation
    
    
    2,182
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,182Operating income (loss)
    
    
    18,641
    
    
    
    
    
    
    
    (2,962
    )
    
    
    24,301
    
    
    
    (2,698
    )Other income (expense)Interest expense, net
    
    
    (8,850
    )
    
    
    
    
    
    
    (8,980
    )
    
    
    51
    
    
    
    79Intercompany interest
    
    
    
    
    
    
    
    
    
    
    9,690
    
    
    
    (9,196
    )
    
    
    (494
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (91
    )
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    (134
    )Income (loss) before income taxes
    
    
    9,200
    
    
    
    
    
    
    
    (2,752
    )
    
    
    15,199
    
    
    
    (3,247
    )Income tax expense (benefit)
    
    
    4,826
    
    
    
    
    
    
    
    (985
    )
    
    
    6,202
    
    
    
    (391
    )Increase (decrease) before equity in earnings
of subsidiaries
    
    
    4,374
    
    
    
    
    
    
    
    (1,767
    )
    
    
    8,997
    
    
    
    (2,856
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (4,012
    )
    
    
    6,141
    
    
    
    (2,129
    )
    
    
    Net income
    
    $
    4,374
    
    
    $
    (4,012
    )
    
    $
    4,374
    
    
    $
    6,868
    
    
    $
    (2,856
    )
 18




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Consolidating Condensed Income Statement
Three Months Ended June 30, 2004  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    Eliminations
    
    UCI
    
    Guarantors
    
    GuarantorsNet sales
    
    $
    273,952
    
    
    $
    (3,718
    )
    
    $
    
    
    
    $
    245,791
    
    
    $
    31,879Cost of sales
    
    
    214,156
    
    
    
    (3,718
    )
    
    
    
    
    
    
    191,508
    
    
    
    26,366Gross profit
    
    
    59,796
    
    
    
    
    
    
    
    
    
    
    
    54,283
    
    
    
    5,513Operating expensesSelling and warehousing
    
    
    19,342
    
    
    
    
    
    
    
    
    
    
    
    17,526
    
    
    
    1,816General and administrative
    
    
    12,127
    
    
    
    
    
    
    
    2,563
    
    
    
    6,719
    
    
    
    2,845Amortization of intangible assets
    
    
    1,851
    
    
    
    
    
    
    
    
    
    
    
    1,851
    
    
    
    Operating income (loss)
    
    
    26,476
    
    
    
    
    
    
    
    (2,563
    )
    
    
    28,187
    
    
    
    852Other income (expense)Interest expense, net
    
    
    (9,022
    )
    
    
    
    
    
    
    (9,050
    )
    
    
    86
    
    
    
    (58
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    (27
    )Income (loss) before income taxes
    
    
    16,995
    
    
    
    
    
    
    
    (12,113
    )
    
    
    28,341
    
    
    
    767Income tax expense (benefit)
    
    
    6,778
    
    
    
    
    
    
    
    (4,769
    )
    
    
    10,902
    
    
    
    645Increase (decrease) before equity in earnings
of subsidiaries
    
    
    10,217
    
    
    
    
    
    
    
    (7,344
    )
    
    
    17,439
    
    
    
    122Equity in earnings of subsidiaries
    
    
    
    
    
    
    (16,546
    )
    
    
    17,561
    
    
    
    (1,015
    )
    
    
    Net income
    
    $
    10,217
    
    
    $
    (16,546
    )
    
    $
    10,217
    
    
    $
    16,424
    
    
    $
    122
 19




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Consolidating Condensed Income Statement
Six Months Ended June 30, 2005  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    Eliminations
    
    UCI
    
    Guarantors
    
    GuarantorsNet sales
    
    $
    514,791
    
    
    $
    (6,556
    )
    
    $
    
    
    
    $
    452,908
    
    
    $
    68,439Cost of sales
    
    
    415,413
    
    
    
    (6,556
    )
    
    
    
    
    
    
    365,755
    
    
    
    56,214Gross profit
    
    
    99,378
    
    
    
    
    
    
    
    
    
    
    
    87,153
    
    
    
    12,225Operating expensesSelling and warehousing
    
    
    36,858
    
    
    
    
    
    
    
    
    
    
    
    32,883
    
    
    
    3,975General and administrative
    
    
    24,761
    
    
    
    
    
    
    
    6,669
    
    
    
    11,242
    
    
    
    6,850Amortization of intangible assets
    
    
    3,064
    
    
    
    
    
    
    
    
    
    
    
    3,064
    
    
    
    Losses on abandonment of an
operation
    
    
    2,182
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,182Operating income (loss)
    
    
    32,513
    
    
    
    
    
    
    
    (6,669
    )
    
    
    39,964
    
    
    
    (782
    )Other income (expense)Interest expense, net
    
    
    (17,622
    )
    
    
    
    
    
    
    (17,739
    )
    
    
    53
    
    
    
    64Intercompany interest
    
    
    
    
    
    
    
    
    
    
    18,764
    
    
    
    (17,763
    )
    
    
    (1,001
    )Management fee expense
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (143
    )
    
    
    
    
    
    
    
    
    
    
    162
    
    
    
    (305
    )Income (loss) before income taxes
    
    
    13,748
    
    
    
    
    
    
    
    (6,644
    )
    
    
    22,416
    
    
    
    (2,024
    )Income tax expense (benefit)
    
    
    6,645
    
    
    
    
    
    
    
    (2,458
    )
    
    
    9,066
    
    
    
    37Increase (decrease) before equity in earnings
of subsidiaries
    
    
    7,103
    
    
    
    
    
    
    
    (4,186
    )
    
    
    13,350
    
    
    
    (2,061
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (8,480
    )
    
    
    11,289
    
    
    
    (2,809
    )
    
    
    Net income
    
    $
    7,103
    
    
    $
    (8,480
    )
    
    $
    7,103
    
    
    $
    10,541
    
    
    $
    (2,061
    )
 20




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Consolidating Condensed Income Statement
Six Months Ended June 30, 2004  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    Eliminations
    
    UCI
    
    Guarantors
    
    GuarantorsNet sales
    
    $
    530,763
    
    
    $
    (7,741
    )
    
    $
    
    
    
    $
    473,333
    
    
    $
    65,171Cost of sales
    
    
    415,420
    
    
    
    (7,741
    )
    
    
    
    
    
    
    370,130
    
    
    
    53,031Gross profit
    
    
    115,343
    
    
    
    
    
    
    
    
    
    
    
    103,203
    
    
    
    12,140Operating expensesSelling and warehousing
    
    
    38,387
    
    
    
    
    
    
    
    
    
    
    
    34,696
    
    
    
    3,691General and administrative
    
    
    24,199
    
    
    
    
    
    
    
    5,154
    
    
    
    13,322
    
    
    
    5,723Amortization of intangible assets
    
    
    3,702
    
    
    
    
    
    
    
    
    
    
    
    3,702
    
    
    
    Operating income (loss)
    
    
    49,055
    
    
    
    
    
    
    
    (5,154
    )
    
    
    51,483
    
    
    
    2,726Other income (expense)Interest expense, net
    
    
    (18,588
    )
    
    
    
    
    
    
    (18,663
    )
    
    
    182
    
    
    
    (107
    )Management fee expense
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    126
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    57Income (loss) before income
taxes
    
    
    29,593
    
    
    
    
    
    
    
    (24,817
    )
    
    
    51,734
    
    
    
    2,676Income tax expense (benefit)
    
    
    11,841
    
    
    
    
    
    
    
    (9,751
    )
    
    
    20,205
    
    
    
    1,387Increase (decrease) before equity
in earnings of subsidiaries
    
    
    17,752
    
    
    
    
    
    
    
    (15,066
    )
    
    
    31,529
    
    
    
    1,289Equity in earnings of subsidiaries
    
    
    
    
    
    
    (31,366
    )
    
    
    32,818
    
    
    
    (1,452
    )
    
    
    Net income
    
    $
    17,752
    
    
    $
    (31,366
    )
    
    $
    17,752
    
    
    $
    30,077
    
    
    $
    1,289
 21




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Consolidating Condensed Statement of Cash Flows
Six Months Ended June 30, 2005  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    Eliminations
    
    UCI
    
    Guarantors
    
    GuarantorsNet cash provided by operating activities
    
    $
    28,957
    
    
    $
    
    
    
    $
    15,177
    
    
    $
    8,811
    
    
    $
    4,969Cash flows from investing activities:Capital expenditures
    
    
    (18,891
    )
    
    
    
    
    
    
    (6,693
    )
    
    
    (9,298
    )
    
    
    (2,900
    )Proceeds from sale of property, plant
and equipment
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    150Net cash used in investing activities
    
    
    (18,680
    )
    
    
    
    
    
    
    (6,693
    )
    
    
    (9,237
    )
    
    
    (2,750
    )Cash flows from financing activities:Issuances of debt
    
    
    10,500
    
    
    
    
    
    
    
    10,500
    
    
    
    
    
    
    
    Debt repayments
    
    
    (23,663
    )
    
    
    
    
    
    
    (23,500
    )
    
    
    
    
    
    
    (163
    )Shareholders equity contribution
    
    
    600
    
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (12,563
    )
    
    
    
    
    
    
    (12,400
    )
    
    
    
    
    
    
    (163
    )Effect of exchange rate changes on cash
    
    
    (234
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (234
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (2,520
    )
    
    
    
    
    
    
    (3,916
    )
    
    
    (426
    )
    
    
    1,822Cash and cash equivalents at beginning of year
    
    
    11,291
    
    
    
    
    
    
    
    3,916
    
    
    
    2,114
    
    
    
    5,261Cash and cash equivalents at end of period
    
    $
    8,771
    
    
    $
    
    
    
    $
    
    
    
    $
    1,688
    
    
    $
    7,083
 22




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Consolidating Condensed Statement of Cash Flows
Six Months Ended June 30, 2004  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    Eliminations
    
    UCI
    
    Guarantors
    
    GuarantorsNet cash provided by operating activities
    
    $
    49,650
    
    
    $
    
    
    
    $
    38,943
    
    
    $
    9,194
    
    
    $
    1,513Cash flows from investing activities:Final Acquisition purchase price
payment
    
    
    (8,000
    )
    
    
    
    
    
    
    (8,000
    )
    
    
    
    
    
    
    Capital expenditures
    
    
    (17,165
    )
    
    
    
    
    
    
    (110
    )
    
    
    (13,772
    )
    
    
    (3,283
    )Proceeds from sale of property,
plant and equipment
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    104Net cash used in investing activities
    
    
    (24,981
    )
    
    
    
    
    
    
    (8,110
    )
    
    
    (13,692
    )
    
    
    (3,179
    )Cash flows from financing activities:Issuances of debt
    
    
    467
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    467Debt repayments
    
    
    (40,134
    )
    
    
    
    
    
    
    (40,000
    )
    
    
    
    
    
    
    (134
    )Other
    
    
    (28
    )
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (39,695
    )
    
    
    
    
    
    
    (40,028
    )
    
    
    
    
    
    
    333Effect of exchange rate changes on cash
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )Net decrease in cash and cash equivalents
    
    
    (15,053
    )
    
    
    
    
    
    
    (9,195
    )
    
    
    (4,498
    )
    
    
    (1,360
    )Cash and cash equivalents at beginning of year
    
    
    46,130
    
    
    
    
    
    
    
    33,164
    
    
    
    4,448
    
    
    
    8,518Cash and cash equivalents at end of period
    
    $
    31,077
    
    
    $
    
    
    
    $
    23,969
    
    
    $
    (50
    )
    
    $
    7,158
 23




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
 Sales.
    Cost of Sales
 24




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##### 



Selling and Warehousing Expenses
  General and Administrative Expenses
 Critical Accounting Policies and Estimates
   Accounts receivable
 25




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##### 



Inventory
 Revenue recognition
  Product returns.
 Impairment of intangible assets and tangible fixed assets
  Retirement benefits
  26




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##### 



Insurance reserves.
 Environmental expenditures
 Income taxes.
 27




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##### 



Results of Operations
  Three Months ended June 30,
    
    Six Months ended June 30,2005
    
    2004
    
    2005
    
    2004Net sales
    
    $
    269.3
    
    
    $
    274.0
    
    
    $
    514.8
    
    
    $
    530.8Cost of sales
    
    
    216.0
    
    
    
    214.2
    
    
    
    415.4
    
    
    
    415.4Gross profit
    
    
    53.3
    
    
    
    59.8
    
    
    
    99.4
    
    
    
    115.4Operating expensesSelling and warehousing
    
    
    18.6
    
    
    
    19.3
    
    
    
    36.8
    
    
    
    38.4General and administrative
    
    
    12.3
    
    
    
    12.1
    
    
    
    24.8
    
    
    
    24.2Amortization of intangible assets
    
    
    1.6
    
    
    
    1.9
    
    
    
    3.1
    
    
    
    3.7Losses on abandonment of an operation
    
    
    2.2
    
    
    
    
    
    
    
    2.2
    
    
    
    Operating income
    
    
    18.6
    
    
    
    26.5
    
    
    
    32.5
    
    
    
    49.1Other income (expense)Interest expense, net
    
    
    (8.8
    )
    
    
    (9.0
    )
    
    
    (17.6
    )
    
    
    (18.6
    )Management fee expense
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (1.0
    )
    
    
    (1.0
    )Miscellaneous, net
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.2
    )
    
    
    0.1Income before income taxes
    
    
    9.2
    
    
    
    17.0
    
    
    
    13.7
    
    
    
    29.6Income tax expense
    
    
    4.8
    
    
    
    6.8
    
    
    
    6.6
    
    
    
    11.8Net income
    
    $
    4.4
    
    
    $
    10.2
    
    
    $
    7.1
    
    
    $
    17.8
 Three Months Ended June 30, 2005 Compared with the Three Months Ended June 30, 2004
 Net sales
 Gross Profit.
  28




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##### 



Selling and warehousing expenses
 General and administrative expenses
 Losses on abandonment of an operation.
 Interest expense, net
 Income tax expense
 Net Income
 Six Months Ended June 30, 2005 Compared with the Six Months Ended June 30, 2004
 Net sales
 Gross Profit.
  29




---



##### 



Selling and warehousing expenses
 General and administrative expenses
 Losses on abandonment of an operation.
 Interest expense, net
 Income tax expense
 Net Income
 30




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##### 



Liquidity and Capital Resources
  June 30,
    
    December 31,2005
    
    2004Short-term borrowings
    
    $
    0.8
    
    
    $
    1.3Capitalized leases
    
    
    0.1
    
    
    
    0.3Revolving credit facility
    
    
    2.5
    
    
    
    Term loan
    
    
    217.0
    
    
    
    232.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Debt issuance costs
    
    
    (5.1
    )
    
    
    (5.4
    )$
    445.3
    
    
    $
    458.2
  2005
    
    $
    3.32006
    
    
    2007
    
    
    0.62008
    
    
    2.32009
    
    
    107.7Thereafter
    
    
    336.5$
    450.4
   31




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##### 



Net cash provided by operating activities
  Net cash used in investing activities
  32




---



##### 



Recent Accounting Pronouncements
      33




---



##### 



34




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##### 



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




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##### 



Treasury Policy
  Item 4. Controls and Procedures
    36




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##### 



PART II
OTHER INFORMATION
 Item 1. Legal Proceedings
  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.*
 37




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##### 



SIGNATURES
  UNITED COMPONENTS, INC.Date:
 August 15, 2005
    
    By:
    /s/ Charles T. DicksonName:
    Charles T. DicksonTitle:

    Chief Financial Officer
 38