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, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 333-107219
 UNITED COMPONENTS, INC.
  Delaware
    
    04-3759857(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)14601 Highway 41 NorthEvansville, Indiana
    
    47725(Address of Principal Executive Offices)
    
    (Zip Code)
 (812) 867-4156
 
 o þ
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer
þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



United Components, Inc.
 IndexPart I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheets  March 31, 2008 and December 31, 2007Condensed consolidated income statements  Three months ended March 31, 2008 and 2007Condensed consolidated statements of cash flows  Three months ended March 31, 2008 and 2007Condensed consolidated statements of changes in shareholders equity  Three months ended March
31, 2008 and 2007Notes to condensed consolidated financial statementsItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures About Market RiskItem 4.
    
    Controls and ProceduresPart II
    
    OTHER INFORMATIONItem 1.
    
    Legal ProceedingsItem 1A.
    
    Risk FactorsItem 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsItem 3.
    
    Default Upon Senior SecuritiesItem 4.
    
    Submission of Matters to Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    ExhibitsSignaturesExhibits
 2




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##### 



PART I
 FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 United Components, Inc.
 
 Condensed Consolidated Balance Sheets
 (in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assetsCash and cash equivalents
    
    $
    22,580
    
    
    $
    41,440Accounts receivable, net
    
    
    252,709
    
    
    
    253,904Inventories, net
    
    
    149,336
    
    
    
    142,621Deferred tax assets
    
    
    21,163
    
    
    
    22,837Other current assets
    
    
    24,139
    
    
    
    29,306Total current assets
    
    
    469,927
    
    
    
    490,108Property, plant and equipment, net
    
    
    169,177
    
    
    
    167,812Goodwill
    
    
    241,461
    
    
    
    241,461Other intangible assets, net
    
    
    81,376
    
    
    
    83,594Deferred financing costs, net
    
    
    3,384
    
    
    
    3,701Pension and other assets
    
    
    11,471
    
    
    
    11,478Assets held for sale
    
    
    1,300
    
    
    
    1,300Total assets
    
    $
    978,096
    
    
    $
    999,454Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    98,364
    
    
    $
    102,553Short-term borrowings
    
    
    2,342
    
    
    
    10,134Current maturities of long-term debt
    
    
    546
    
    
    
    479Accrued expenses and other current liabilities
    
    
    85,300
    
    
    
    95,169Total current liabilities
    
    
    186,552
    
    
    
    208,335Long-term debt, less current maturities
    
    
    417,789
    
    
    
    427,815Pension and other postretirement liabilities
    
    
    23,086
    
    
    
    22,871Deferred tax liabilities
    
    
    26,566
    
    
    
    27,338Due to Holdco
    
    
    14,431
    
    
    
    11,330Minority interest
    
    
    3,279
    
    
    
    3,308Other long-term liabilities
    
    
    2,787
    
    
    
    2,638Total liabilities
    
    
    674,490
    
    
    
    703,635Contingencies  Note KShareholders equityCommon stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    277,971
    
    
    
    277,741Retained earnings
    
    
    18,071
    
    
    
    11,316Accumulated other comprehensive income
    
    
    7,564
    
    
    
    6,762Total shareholders equity
    
    
    303,606
    
    
    
    295,819Total liabilities and shareholders equity
    
    $
    978,096
    
    
    $
    999,454
 The accompanying notes are an integral part of these statements.
 3




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##### 



United Components, Inc.
 
 Condensed Consolidated Income Statements
 (in thousands)
 Three Months ended March 31,2008
    
    
    2007Net sales
    
    $
    229,290
    
    
    $
    238,848Cost of sales
    
    
    178,230
    
    
    
    189,291Gross profit
    
    
    51,060
    
    
    
    49,557Operating (expense) incomeSelling and warehousing
    
    
    (15,505
    )
    
    
    (16,052
    )General and administrative
    
    
    (12,528
    )
    
    
    (14,292
    )Amortization of acquired intangible assets
    
    
    (1,593
    )
    
    
    (1,778
    )Costs of integration of water pump operations (Note B)
    
    
    (363
    )
    
    
    (730
    )Gain from sale of assets and costs of closing a facility (Note D)
    
    
    
    
    
    
    1,647Operating income
    
    
    21,071
    
    
    
    18,352Other expenseInterest expense, net
    
    
    (9,142
    )
    
    
    (10,686
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )Miscellaneous, net
    
    
    (498
    )
    
    
    (301
    )Income before income taxes
    
    
    10,931
    
    
    
    6,865Income tax expense
    
    
    4,176
    
    
    
    2,358Net income
    
    $
    6,755
    
    
    $
    4,507
 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 31,2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    6,755
    
    
    $
    4,507Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of other intangible assets
    
    
    9,072
    
    
    
    9,217Amortization of deferred financing costs and debt discount
    
    
    475
    
    
    
    791Deferred income taxes
    
    
    902
    
    
    
    (2,257
    )Gain on sale of Mexican land and building
    
    
    
    
    
    
    (1,764
    )Other non-cash, net
    
    
    503
    
    
    
    1,340Changes in operating assets and liabilitiesAccounts receivable
    
    
    1,195
    
    
    
    (6,399
    )Inventories
    
    
    (6,715
    )
    
    
    2,278Other current assets
    
    
    5,167
    
    
    
    3,045Accounts payable
    
    
    (4,189
    )
    
    
    83Accrued expenses and other current liabilities
    
    
    (9,869
    )
    
    
    6,177Other assets
    
    
    7
    
    
    
    22Due to UCI Holdco
    
    
    3,101
    
    
    
    Other long-term liabilities
    
    
    364
    
    
    
    1,825Net cash provided by operating activities
    
    
    6,768
    
    
    
    18,865Cash flows from investing activitiesCapital expenditures
    
    
    (7,886
    )
    
    
    (5,406
    )Proceeds from sale of Mexican land and building (Note D)
    
    
    
    
    
    
    6,685Proceeds from sale of other property, plant and equipment
    
    
    58
    
    
    
    492Net cash provided by (used in) investing activities
    
    
    (7,828
    )
    
    
    1,771Cash flows from financing activitiesIssuances of debt
    
    
    347
    
    
    
    839Debt repayments
    
    
    (18,256
    )
    
    
    (40,113
    )Net cash used in financing activities
    
    
    (17,909
    )
    
    
    (39,274
    )Effect of currency exchange rate changes on cash
    
    
    109
    
    
    
    (36
    )Net decrease in cash and cash equivalents
    
    
    (18,860
    )
    
    
    (18,674
    )Cash and cash equivalents at beginning of year
    
    
    41,440
    
    
    
    31,523Cash and cash equivalents at end of period
    
    $
    22,580
    
    
    $
    12,849
 The accompanying notes are an integral part of these statements.
 5




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##### 



United Components, Inc.
 
 Condensed Consolidated Statements of Changes in Shareholders Equity
 (in thousands)
 AccumulatedAdditional
    
    
    Retained
    
    
    Other
    
    
    TotalCommon
    
    
    Paid In
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    Equity
    
    
    Income (Loss)Balance at January 1, 2007
    
    $
    
    
    
    $
    273,749
    
    
    $
    (26,433
    )
    
    $
    (2,534
    )
    
    $
    244,782Effect of adopting FIN 48
    
    
    
    
    
    
    
    
    
    
    (337
    )
    
    
    
    
    
    
    (337
    )Recognition of stock based compensation expense
    
    
    
    
    
    
    1,590
    
    
    
    
    
    
    
    
    
    
    
    1,590Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    4,507
    
    
    
    
    
    
    
    4,507
    
    
    $
    4,507Other comprehensive incomeInterest rate swaps (net of $85 of income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133
    )
    
    
    (133
    )
    
    
    (133
    )Foreign currency adjustment (net of $47 of income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71
    )
    
    
    (71
    )
    
    
    (71
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,303Balance at March 31, 2007
    
    $
    
    
    
    $
    275,339
    
    
    $
    (22,263
    )
    
    $
    (2,738
    )
    
    $
    250,338Balance at January 1, 2008
    
    $
    
    
    
    $
    277,741
    
    
    $
    11,316
    
    
    $
    6,762
    
    
    $
    295,819Recognition of stock based compensation expense
    
    
    
    
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    230Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    6,755
    
    
    
    
    
    
    
    6,755
    
    
    $
    6,755Other comprehensive lossInterest rate swaps (net of $130 of income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (208
    )
    
    
    (208
    )
    
    
    (208
    )Foreign currency adjustment (net of $5 of income taxes)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,010
    
    
    
    1,010
    
    
    
    1,010Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,557Balance at March 31, 2008
    
    $
    
    
    
    $
    277,971
    
    
    $
    18,071
    
    
    $
    7,564
    
    
    $
    303,606
 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
       NOTE B  COSTS OF INTEGRATION OF WATER PUMP OPERATIONS
  7




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##### 



NOTE C  DISCONTINUED OPERATIONS
  NOTE D  GAIN FROM SALE OF ASSETS AND COSTS OF CLOSING A FACILITY
   NOTE E  SALES OF RECEIVABLES
    8




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##### 



NOTE F  INVENTORIES
  March 31,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    47.3
    
    
    $
    45.8Work in process
    
    
    33.5
    
    
    
    33.0Finished products
    
    
    83.8
    
    
    
    79.4Valuation reserves
    
    
    (15.3
    )
    
    
    (15.6
    )$
    149.3
    
    
    $
    142.6
 NOTE G  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  March 31,
    
    
    December 31,2008
    
    
    2007Salaries and wages
    
    $
    3.6
    
    
    $
    3.5Bonuses and profit sharing
    
    
    2.5
    
    
    
    8.8Vacation pay
    
    
    5.1
    
    
    
    4.7Product returns
    
    
    27.0
    
    
    
    28.1Rebates, credits and discounts due customers
    
    
    8.4
    
    
    
    10.9Insurance
    
    
    9.5
    
    
    
    9.8Taxes payable
    
    
    8.7
    
    
    
    10.4Interest
    
    
    7.8
    
    
    
    2.6Other
    
    
    12.7
    
    
    
    16.4$
    85.3
    
    
    $
    95.2
 NOTE H  PRODUCT RETURNS LIABILITY
   Three Months ended March 31,2008
    
    
    2007Beginning of year
    
    $
    28.1
    
    
    $
    28.6Cost of unsalvageable parts
    
    
    (12.0
    )
    
    
    (12.7
    )Additional reductions to sales
    
    
    10.9
    
    
    
    11.9End of period
    
    $
    27.0
    
    
    $
    27.8
 9




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##### 



NOTE I  PENSION
  Three Months ended March 31,2008
    
    
    2007Service cost
    
    $
    1.3
    
    
    $
    1.6Interest cost
    
    
    3.2
    
    
    
    3.0Expected return on plan assets
    
    
    (3.7
    )
    
    
    (3.6
    )Amortization of prior service cost and unrecognized loss
    
    
    
    
    
    
    0.1Special termination benefits
    
    
    0.2
    
    
    
    $
    1.0
    
    
    $
    1.1
 NOTE J  DEBT
  March 31,
    
    
    December 31,2008
    
    
    2007Short-term borrowings
    
    $
    2.4
    
    
    $
    10.1Capital lease obligations
    
    
    1.6
    
    
    
    1.8Term loan
    
    
    190.0
    
    
    
    200.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Unamortized debt issuance costs
    
    
    (3.3
    )
    
    
    (3.5
    )420.7
    
    
    
    438.4LessShort-term borrowing
    
    
    2.4
    
    
    
    10.1Current maturities
    
    
    0.5
    
    
    
    0.5Long-term debt
    
    $
    417.8
    
    
    $
    427.8
   NOTE K  CONTINGENCIES
 Insurance Reserves
  Environmental
  10




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##### 



Class Action Litigation
     Value-added Tax Receivable
  Other Litigation
  11




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##### 



NOTE L  GEOGRAPHIC INFORMATION
  Three Months ended March 31,2008
    
    
    2007United States
    
    $
    192.9
    
    
    $
    201.1Mexico
    
    
    8.7
    
    
    
    9.6Canada
    
    
    7.5
    
    
    
    8.2United Kingdom
    
    
    3.3
    
    
    
    3.6France
    
    
    3.1
    
    
    
    2.5Germany
    
    
    1.5
    
    
    
    1.2Spain
    
    
    1.0
    
    
    
    1.1Other
    
    
    11.3
    
    
    
    11.5$
    229.3
    
    
    $
    238.8
  March 31,
    
    
    December 31,2008
    
    
    2007United States
    
    $
    220.6
    
    
    $
    226.0China
    
    
    30.4
    
    
    
    27.0Mexico
    
    
    13.1
    
    
    
    12.2Spain
    
    
    2.6
    
    
    
    2.6Goodwill
    
    
    241.5
    
    
    
    241.5$
    508.2
    
    
    $
    509.3
 NOTE M  STOCK OPTIONS
  NOTE N  OTHER INFORMATION
     12




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##### 



NOTE O ADOPTION OF SFAS NO. 157
   Interest rate swaps
   Fair value hierarchy
  Fair Value Measurements at Reporting Date UsingQuoted Prices


Significant


SignificantFair Value


in Active Markets


Other


Unobservableat


for Identical Assets


Observable Inputs


InputsDescription

March 31, 2008


(Level 1)


(Level 2)


(Level 3)Interest rate swaps

$
0.3






$
0.3



 Fair market value disclosures
  Fair value hierarchy
   Level 1 
    
    Quoted market prices in active markets for identical assets or liabilitiesLevel 2 
    
    Inputs other than level 1 inputs that are either directly or indirectly observableLevel 3 
    
    Unobservable inputs developed using UCIs estimates and assumptions, which reflect those that market participants
would use when valuing an asset or liability
  13




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##### 



NOTE P  OTHER NEW ACCOUNTING PRONOUNCEMENTS
      NOTE Q  GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS
    14




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##### 



Consolidating Condensed Balance Sheet
March 31, 2008  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    22,580
    
    
    $
    
    
    
    $
    17,901
    
    
    $
    (626
    )
    
    $
    5,305Accounts receivable, net
    
    
    252,709
    
    
    
    
    
    
    
    
    
    
    
    236,749
    
    
    
    15,960Inventories, net
    
    
    149,336
    
    
    
    
    
    
    
    
    
    
    
    125,663
    
    
    
    23,673Deferred tax assets
    
    
    21,163
    
    
    
    
    
    
    
    161
    
    
    
    22,171
    
    
    
    (1,169
    )Other current assets
    
    
    24,139
    
    
    
    
    
    
    
    5,689
    
    
    
    9,302
    
    
    
    9,148Total current assets
    
    
    469,927
    
    
    
    
    
    
    
    23,751
    
    
    
    393,259
    
    
    
    52,917Property, plant and equipment, net
    
    
    169,177
    
    
    
    
    
    
    
    943
    
    
    
    125,282
    
    
    
    42,952Investment in subsidiaries
    
    
    
    
    
    
    (289,637
    )
    
    
    273,613
    
    
    
    16,024
    
    
    
    Goodwill
    
    
    241,461
    
    
    
    
    
    
    
    241,461
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    81,376
    
    
    
    
    
    
    
    11,006
    
    
    
    70,364
    
    
    
    6Deferred financing costs, net
    
    
    3,384
    
    
    
    
    
    
    
    3,384
    
    
    
    
    
    
    
    Pension and other assets
    
    
    11,471
    
    
    
    
    
    
    
    365
    
    
    
    11,017
    
    
    
    89Assets held for sale
    
    
    1,300
    
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    Total assets
    
    $
    978,096
    
    
    $
    (289,637
    )
    
    $
    554,523
    
    
    $
    617,246
    
    
    $
    95,964Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    98,364
    
    
    $
    
    
    
    $
    500
    
    
    $
    79,634
    
    
    $
    18,230Short-term borrowings
    
    
    2,342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,342Current maturities of long-term debt
    
    
    546
    
    
    
    
    
    
    
    485
    
    
    
    61
    
    
    
    Accrued expenses and other current liabilities
    
    
    85,300
    
    
    
    
    
    
    
    17,633
    
    
    
    63,897
    
    
    
    3,770Total current liabilities
    
    
    186,552
    
    
    
    
    
    
    
    18,618
    
    
    
    143,592
    
    
    
    24,342Long-term debt, less current maturities
    
    
    417,789
    
    
    
    
    
    
    
    417,293
    
    
    
    496
    
    
    
    Pension and other postretirement liabilities
    
    
    23,086
    
    
    
    
    
    
    
    
    
    
    
    23,086
    
    
    
    Deferred tax liabilities
    
    
    26,566
    
    
    
    
    
    
    
    15,863
    
    
    
    10,065
    
    
    
    638Due to Holdco
    
    
    14,431
    
    
    
    
    
    
    
    14,431
    
    
    
    
    
    
    
    Minority interest
    
    
    3,279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,279Other long-term liabilities
    
    
    2,787
    
    
    
    
    
    
    
    
    
    
    
    2,015
    
    
    
    772Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (215,288
    )
    
    
    189,980
    
    
    
    25,308Total shareholders equity
    
    
    303,606
    
    
    
    (289,637
    )
    
    
    303,606
    
    
    
    248,012
    
    
    
    41,625Total liabilities and shareholders equity
    
    $
    978,096
    
    
    $
    (289,637
    )
    
    $
    554,523
    
    
    $
    617,246
    
    
    $
    95,964
 15




---



##### 



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




---



##### 



Consolidating Condensed Income Statement
Three Months Ended March 31, 2008  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    229,290
    
    
    $
    (20,192
    )
    
    $
    
    
    
    $
    215,598
    
    
    $
    33,884Cost of sales
    
    
    178,230
    
    
    
    (20,192
    )
    
    
    
    
    
    
    166,342
    
    
    
    32,080Gross profit
    
    
    51,060
    
    
    
    
    
    
    
    
    
    
    
    49,256
    
    
    
    1,804Operating (expense) incomeSelling and warehousing
    
    
    (15,505
    )
    
    
    
    
    
    
    (395
    )
    
    
    (13,845
    )
    
    
    (1,265
    )General and administrative
    
    
    (12,528
    )
    
    
    
    
    
    
    (3,942
    )
    
    
    (7,199
    )
    
    
    (1,387
    )Amortization of acquired intangible assets
    
    
    (1,593
    )
    
    
    
    
    
    
    
    
    
    
    (1,593
    )
    
    
    Costs of integration of water pump operations
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    Operating income (loss)
    
    
    21,071
    
    
    
    
    
    
    
    (4,337
    )
    
    
    26,256
    
    
    
    (848
    )Other expenseInterest expense, net
    
    
    (9,142
    )
    
    
    
    
    
    
    (9,046
    )
    
    
    (7
    )
    
    
    (89
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    7,186
    
    
    
    (6,961
    )
    
    
    (225
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (498
    )
    
    
    
    
    
    
    
    
    
    
    (528
    )
    
    
    30Income (loss) before income taxes
    
    
    10,931
    
    
    
    
    
    
    
    (6,697
    )
    
    
    18,760
    
    
    
    (1,132
    )Income tax expense (benefit)
    
    
    4,176
    
    
    
    
    
    
    
    2,482
    
    
    
    (6,941
    )
    
    
    283Increase (decrease) before equity in earnings of subsidiaries
    
    
    6,755
    
    
    
    
    
    
    
    (4,215
    )
    
    
    11,819
    
    
    
    (849
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (9,898
    )
    
    
    10,970
    
    
    
    (1,072
    )
    
    
    Net income (loss)
    
    $
    6,755
    
    
    $
    (9,898
    )
    
    $
    6,755
    
    
    $
    10,747
    
    
    $
    (849
    )
 17




---



##### 



Consolidating Condensed Income Statement
Three Months Ended March 31, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    238,848
    
    
    $
    (11,529
    )
    
    $
    
    
    
    $
    224,682
    
    
    $
    25,695Cost of sales
    
    
    189,291
    
    
    
    (11,529
    )
    
    
    
    
    
    
    176,601
    
    
    
    24,219Gross profit
    
    
    49,557
    
    
    
    
    
    
    
    
    
    
    
    48,081
    
    
    
    1,476Operating (expense) incomeSelling and warehousing
    
    
    (16,052
    )
    
    
    
    
    
    
    (1,347
    )
    
    
    (13,619
    )
    
    
    (1,086
    )General and administrative
    
    
    (14,292
    )
    
    
    
    
    
    
    (4,393
    )
    
    
    (8,203
    )
    
    
    (1,696
    )Amortization of acquired intangible assets
    
    
    (1,778
    )
    
    
    
    
    
    
    
    
    
    
    (1,778
    )
    
    
    Costs of integration of water pump operations
    
    
    (730
    )
    
    
    
    
    
    
    
    
    
    
    (730
    )
    
    
    Gain from sale of assets and costs of closing a facility
    
    
    1,647
    
    
    
    
    
    
    
    
    
    
    
    (117
    )
    
    
    1,764Operating income (loss)
    
    
    18,352
    
    
    
    
    
    
    
    (5,740
    )
    
    
    23,634
    
    
    
    458Other expenseInterest expense, net
    
    
    (10,686
    )
    
    
    
    
    
    
    (10,484
    )
    
    
    (52
    )
    
    
    (150
    )Inter-company interest
    
    
    
    
    
    
    
    
    
    
    8,320
    
    
    
    (8,019
    )
    
    
    (301
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (301
    )
    
    
    
    
    
    
    
    
    
    
    (410
    )
    
    
    109Income (loss) before income taxes
    
    
    6,865
    
    
    
    
    
    
    
    (8,404
    )
    
    
    15,153
    
    
    
    116Income tax expense (benefit)
    
    
    2,358
    
    
    
    
    
    
    
    (2,963
    )
    
    
    5,256
    
    
    
    65Increase (decrease) before equity in earnings of subsidiaries
    
    
    4,507
    
    
    
    
    
    
    
    (5,441
    )
    
    
    9,897
    
    
    
    51Equity in earnings of subsidiaries
    
    
    
    
    
    
    (9,585
    )
    
    
    9,948
    
    
    
    (363
    )
    
    
    Net income (loss)
    
    $
    4,507
    
    
    $
    (9,585
    )
    
    $
    4,507
    
    
    $
    9,534
    
    
    $
    51
 18




---



##### 



Consolidating Condensed Statement of Cash Flows
Three Months Ended March 31, 2008  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by operating activities
    
    $
    6,768
    
    
    $
    
    
    
    $
    (8,680
    )
    
    $
    2,623
    
    
    $
    12,825Cash flows from investing activities:Capital expenditures
    
    
    (7,886
    )
    
    
    
    
    
    
    (1
    )
    
    
    (4,479
    )
    
    
    (3,406
    )Proceeds from sale of Mexican land and building
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from sale of other property, plant and equipment
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    47Net cash provided by (used in) investing activities
    
    
    (7,828
    )
    
    
    
    
    
    
    (1
    )
    
    
    (4,468
    )
    
    
    (3,359
    )Cash flows from financing activities:Issuances of debt
    
    
    347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    347Debt repayments
    
    
    (18,256
    )
    
    
    
    
    
    
    (10,102
    )
    
    
    (15
    )
    
    
    (8,139
    )Net cash (used in) provided by financing activities
    
    
    (17,909
    )
    
    
    
    
    
    
    (10,102
    )
    
    
    (15
    )
    
    
    (7,792
    )Effect of currency exchange rate changes on cash
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109Net (decrease) increase in cash and cash equivalents
    
    
    (18,860
    )
    
    
    
    
    
    
    (18,783
    )
    
    
    (1,860
    )
    
    
    1,783Cash and cash equivalents at beginning of year
    
    
    41,440
    
    
    
    
    
    
    
    36,684
    
    
    
    1,234
    
    
    
    3,522Cash and cash equivalents at end of period
    
    $
    22,580
    
    
    $
    
    
    
    $
    17,901
    
    
    $
    (626
    )
    
    $
    5,305
 19




---



##### 



Consolidating Condensed Statement of Cash Flows
Three Months Ended March 31, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet cash provided by operating activities
    
    $
    18,865
    
    
    $
    
    
    
    $
    18,418
    
    
    $
    6,758
    
    
    $
    (6,311
    )Cash flows from investing activities:Capital expenditures
    
    
    (5,406
    )
    
    
    
    
    
    
    
    
    
    
    (5,288
    )
    
    
    (118
    )Proceeds from sale of Mexican land and building
    
    
    6,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,685Proceeds from sale of other property, plant and equipment
    
    
    492
    
    
    
    
    
    
    
    
    
    
    
    417
    
    
    
    75Net cash provided by (used in) investing activities
    
    
    1,771
    
    
    
    
    
    
    
    
    
    
    
    (4,871
    )
    
    
    6,642Cash flows from financing activities:Issuances of debt
    
    
    839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    839Debt repayments
    
    
    (40,113
    )
    
    
    
    
    
    
    (40,000
    )
    
    
    (113
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (39,274
    )
    
    
    
    
    
    
    (40,000
    )
    
    
    (113
    )
    
    
    839Effect of currency exchange rate changes on cash
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )Net (decrease) increase in cash and cash equivalents
    
    
    (18,674
    )
    
    
    
    
    
    
    (21,582
    )
    
    
    1,774
    
    
    
    1,134Cash and cash equivalents at beginning of year
    
    
    31,523
    
    
    
    
    
    
    
    30,212
    
    
    
    (1,767
    )
    
    
    3,078Cash and cash equivalents at end of period
    
    $
    12,849
    
    
    $
    
    
    
    $
    8,630
    
    
    $
    7
    
    
    $
    4,212
 20




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
    Overview
 Sales.
    21




---



##### 



Cost of sales
  Selling and warehousing expenses
 General and administrative expenses
 Critical Accounting Policies and Estimates
   Inventory
 Revenue recognition
   22




---



##### 



Product returns.
 Impairment of intangible assets and tangible fixed assets
  Retirement benefits
  Insurance reserves.
 Environmental expenditures
  23




---



##### 



Results of Operations
  Three Months ended March 31,2008
    
    
    2007Net sales
    
    $
    229,290
    
    
    $
    238,848Cost of sales
    
    
    178,230
    
    
    
    189,291Gross profit
    
    
    51,060
    
    
    
    49,557Operating (expense) incomeSelling and warehousing
    
    
    (15,505
    )
    
    
    (16,052
    )General and administrative
    
    
    (12,528
    )
    
    
    (14,292
    )Amortization of acquired intangible assets
    
    
    (1,593
    )
    
    
    (1,778
    )Costs of integration of water pump operations
    
    
    (363
    )
    
    
    (730
    )Gain from sale of assets and costs of closing a facility
    
    
    
    
    
    
    1,647Operating income
    
    
    21,071
    
    
    
    18,352Other expenseInterest expense, net
    
    
    (9,142
    )
    
    
    (10,686
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )Miscellaneous, net
    
    
    (498
    )
    
    
    (301
    )Income before income taxes
    
    
    10,931
    
    
    
    6,865Income tax expense
    
    
    4,176
    
    
    
    2,358Net income
    
    $
    6,755
    
    
    $
    4,507
 Three Months Ended March 31, 2008 compared with the Three Months Ended March 31, 2007
 Net sales
  Gross profit.
   24




---



##### 



Selling and warehousing expenses
 General and administrative expenses
 Costs of integration of water pump operations
 Gain from sale of assets and costs of closing a facility
 Interest expense, net
 Income tax expense
 Net income
 Liquidity and Capital Resources
  March 31,
    
    
    December 31,2008
    
    
    2007Notes payable
    
    $
    2.4
    
    
    $
    10.1Capitalized leases
    
    
    1.6
    
    
    
    1.8Term loan
    
    
    190.0
    
    
    
    200.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Amount of debt requiring repayment
    
    
    424.0
    
    
    
    441.9Unamortized debt discount
    
    
    (3.3
    )
    
    
    (3.5
    )$
    420.7
    
    
    $
    438.4
    25




---



##### 



Last nine months of 2008
    
    $
    2.72009
    
    
    0.42010
    
    
    0.22011
    
    
    0.22012
    
    
    45.2Thereafter
    
    
    375.3$
    424.0
      26




---



##### 



Net cash provided by operating activities
 Net cash used in investing activities
  Net cash used in financing activities
 Recent Accounting Pronouncements
       
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Foreign Currency Exposure
 Currencytranslation .
 27




---



##### 



Currencytransactions
  Interest Rate Risk
   Treasury Policy
  
 Item 4. Controls and Procedures
    28




---



##### 



PART II
OTHER INFORMATION
 Item 1. Legal Proceedings
 T.D.S. Co. v. Champion Labs. et al. Barjan, LLC v. Champion Labs et al. Bruene v. Champion Labs. et al. S&E Quick Lube Distrib., Inc. v. Champion Labs. et al. Flash Sales, Inc. v. Champion Labs. et al. The Parts Plus Group, Inc. v. Champion Labs. et al. Wards Auto Painting &
Body Works, Inc. v. Champion Labs. et al. Werner Aero Services v. Champion Labs. et al. Central Warehouse Sales Corp. v. Champion Labs. et al. Central Warehouse Lovett Auto & Tractor Parts, Inc. v. Champion Labs. et al. Manasek Auto Parts, Inc. v. Champion Labs. et al. Neptune Warehouse Distributors, Inc. v. Champion Labs. et al. Big T Inc. v. Champion Labs. et al. Worldwide Equipment, Inc. v. Honeywell Intl et al.
 Packard Automotive, Inc. v. Honeywell International Inc. et al., Doll et al. v. Champion Labs. et al. Austin v. Honeywell Intl et al. Austin Bathea et al. v. Champion Labs.
 Jean-Paul Perrault v. Champion Labs. et al.
   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
  29




---



##### 



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. 30




---



##### 



SIGNATURES
  UNITED COMPONENTS, INC.Date: May 15, 2008
    
    By:
Name:
    
    /s/ DANIEL J. JOHNSTON

Daniel J. JohnstonTitle:
    
    Chief Financial Officer
 31