##### 



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, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 333-107219
 UNITED COMPONENTS, INC.
  Delaware
    
    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
  o o þ
  o þ




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##### 



United Components, Inc.
 IndexPart I
    
    FINANCIAL INFORMATION
    3Item 1.
    
    Financial Statements (unaudited)
    3Condensed consolidated balance sheets  March 31, 2007 and December 31, 2006
    3Condensed consolidated income statements  Three months ended March 31, 2007 and 2006
    4Condensed consolidated statements of cash flows  Three months ended March 31, 2007 and 2006
    5Condensed consolidated statements of changes in shareholders equity  Three months ended March 31, 2007 and 2006
    6Notes to condensed consolidated financial statements
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    25Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    35Item 4.
    
    Controls and Procedures
    36Part II
    
    OTHER INFORMATION
    37Item 1.
    
    Legal Proceedings
    37Item 1A.
    
    Risk Factors
    37Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    37Item 3.
    
    Default Upon Senior Securities
    37Item 4.
    
    Submission of Matters to Vote of Security Holders
    37Item 5.
    
    Other Information
    37Item 6.
    
    Exhibits
    37Signatures
    38Exhibits
 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 31,2007
    
    
    2006AssetsCurrent assetsCash and cash equivalents
    
    $
    12,849
    
    
    $
    31,523Accounts receivable, net
    
    
    235,395
    
    
    
    228,996Inventories, net
    
    
    155,746
    
    
    
    158,024Deferred tax assets
    
    
    34,919
    
    
    
    33,920Other current assets
    
    
    26,344
    
    
    
    29,389Total current assets
    
    
    465,253
    
    
    
    481,852Property, plant and equipment, net
    
    
    163,032
    
    
    
    164,621Goodwill
    
    
    239,908
    
    
    
    239,835Other intangible assets, net
    
    
    92,936
    
    
    
    95,354Deferred financing costs, net
    
    
    4,677
    
    
    
    5,310Pension and other assets
    
    
    8,916
    
    
    
    9,452Assets held for sale
    
    
    1,600
    
    
    
    6,077Total assets
    
    $
    976,322
    
    
    $
    1,002,501Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    92,802
    
    
    $
    92,720Short-term borrowings
    
    
    9,496
    
    
    
    8,657Current maturities of long-term debt
    
    
    364
    
    
    
    462Accrued expenses and other current liabilities
    
    
    105,621
    
    
    
    99,039Total current liabilities
    
    
    208,283
    
    
    
    200,878Long-term debt, less current maturities
    
    
    451,621
    
    
    
    491,478Pension and other postretirement liabilities
    
    
    40,105
    
    
    
    40,430Deferred tax liabilities
    
    
    16,310
    
    
    
    17,350Due to Holdco
    
    
    2,191
    
    
    
    Minority interest
    
    
    3,697
    
    
    
    3,738Other long-term liabilities
    
    
    3,777
    
    
    
    3,845Total liabilities
    
    
    725,984
    
    
    
    757,719Contingencies  Note MShareholders equityCommon stock
    
    
    
    
    
    
    Additional paid in capital
    
    
    275,339
    
    
    
    273,749Retained earnings (deficit)
    
    
    (22,263
    )
    
    
    (26,433
    )Accumulated other comprehensive income (loss)
    
    
    (2,738
    )
    
    
    (2,534
    )Total shareholders equity
    
    
    250,338
    
    
    
    244,782Total liabilities and shareholders equity
    
    $
    976,322
    
    
    $
    1,002,501
 The accompanying notes are an integral part of these statements.
 3




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##### 



United Components, Inc.
 Condensed Consolidated Income Statements  (in thousands)
 Three Months ended March 31,2007
    
    
    2006Net sales
    
    $
    238,848
    
    
    $
    214,591Cost of sales
    
    
    189,291
    
    
    
    169,478Gross profit
    
    
    49,557
    
    
    
    45,113Operating (expense) incomeSelling and warehousing
    
    
    (16,052
    )
    
    
    (15,489
    )General and administrative
    
    
    (14,292
    )
    
    
    (11,805
    )Amortization of acquired intangible assets
    
    
    (1,778
    )
    
    
    (1,184
    )Costs of integration of water pump operations (Note C)
    
    
    (730
    )
    
    
    Gain from
sale of assets and costs of closing facilities and
consolidating operations (Note E)
    
    
    1,647
    
    
    
    (1,393
    )Operating income
    
    
    18,352
    
    
    
    15,242Other expenseInterest expense, net
    
    
    (10,686
    )
    
    
    (9,304
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )Miscellaneous, net
    
    
    (301
    )
    
    
    (64
    )Income before income taxes
    
    
    6,865
    
    
    
    5,374Income tax expense
    
    
    2,358
    
    
    
    1,996Net income from continuing operations
    
    
    4,507
    
    
    
    3,378Discontinued operations (Note D)Net income from discontinued operations, net of tax
    
    
    
    
    
    
    1,375Net income
    
    $
    4,507
    
    
    $
    4,753
 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 31,2007
    
    
    2006Cash flows from operating activities of continuing operationsNet income
    
    $
    4,507
    
    
    $
    4,753Less net income from discontinued operations, net of tax
    
    
    
    
    
    
    1,375Net income from continuing operations
    
    
    4,507
    
    
    
    3,378Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization of other intangible assets
    
    
    9,217
    
    
    
    8,187Amortization of deferred financing costs and debt discount
    
    
    791
    
    
    
    481Deferred income taxes
    
    
    (2,257
    )
    
    
    (4,594
    )Gain on sale of Mexican land and building
    
    
    (1,764
    )
    
    
    Other non-cash, net
    
    
    1,340
    
    
    
    1,816Changes in operating assets and liabilitiesAccounts receivable
    
    
    (6,399
    )
    
    
    (307
    )Inventories
    
    
    2,278
    
    
    
    (990
    )Other current assets
    
    
    3,045
    
    
    
    (2,936
    )Accounts payable
    
    
    83
    
    
    
    7,528Accrued expenses and other current liabilities
    
    
    6,177
    
    
    
    12,365Other assets
    
    
    22
    
    
    
    (236
    )Other long-term liabilities
    
    
    1,825
    
    
    
    743Net cash provided by operating activities of continuing operations
    
    
    18,865
    
    
    
    25,435Cash flows from investing activities of continuing operationsCapital expenditures
    
    
    (5,406
    )
    
    
    (5,653
    )Proceeds from sale of Mexican land and building (Note E)
    
    
    6,685
    
    
    
    Proceeds from sale of other property, plant and equipment
    
    
    492
    
    
    
    92Net cash provided by (used in) investing activities of continuing
operations
    
    
    1,771
    
    
    
    (5,561
    )Cash flows from financing activities of continuing operationsIssuances of debt
    
    
    839
    
    
    
    47Debt repayments
    
    
    (40,113
    )
    
    
    Shareholders equity contributions
    
    
    
    
    
    
    340Net cash
(used in) provided by financing activities of continuing
operations
    
    
    (39,274
    )
    
    
    387Discontinued operations:Net cash used in operating activities of discontinued operations
    
    
    
    
    
    
    (651
    )Net cash used in investing activities of discontinued operations
    
    
    
    
    
    
    (743
    )Effect of currency exchange rate change on cash of discontinued operations
    
    
    
    
    
    
    27Effect of currency exchange rate changes on cash
    
    
    (36
    )
    
    
    (2
    )Net
(decrease) increase  in cash and cash equivalents
    
    
    (18,674
    )
    
    
    18,892Cash and cash equivalents at beginning of year
    
    
    31,523
    
    
    
    26,182Less cash and cash equivalents of discontinued operations at end of period
    
    
    
    
    
    
    2,728Cash and cash equivalents at end of period of continuing operations
    
    $
    12,849
    
    
    $
    42,346
 The accompanying notes are an integral part of these statements.
 5




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##### 



United Components, Inc.
 Condensed Consolidated Statements of Changes in Shareholders Equity  (in thousands)
 AccumulatedAdditional
    
    
    Retained
    
    
    Other
    
    
    TotalCommon
    
    
    Paid In
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    Equity
    
    
    Income (Loss)Balance at January 1, 2006
    
    $
    
    
    
    $
    263,636
    
    
    $
    17,546
    
    
    $
    (836
    )
    
    $
    280,346Additions to paid in capital
    
    
    
    
    
    
    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
    )
    
    $
    286,385Balance 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 lossInterest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133
    )
    
    
    (133
    )
    
    
    (133
    )Foreign currency adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71
    )
    
    
    (71
    )
    
    
    (71
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,303Balance at March 31, 2007
    
    $
    
    
    
    $
    275,339
    
    
    $
    (22,263
    )
    
    $
    (2,738
    )
    
    $
    250,338
 The accompanying notes are an integral part of these statements.
 6




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##### 



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




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   NOTE B  ACQUISITION OF ASC INDUSTRIES, INC.
      Pro Forma Information
   8




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  Net sales
    
    $
    240.9Operating income
    
    
    18.1Net income from continuing operations
    
    
    4.2Net income
    
    
    5.6
 NOTE C  COSTS OF INTEGRATION OF WATER PUMP OPERATIONS
   2007 Update
  Accrued
    
    
    Otherseverance
    
    
    liabilitiesDecember 31, 2006 balance
    
    $
    1.4
    
    
    $
    0.2Additional loss provision
    
    
    0.7
    
    
    
    Payments
    
    
    (0.3
    )
    
    
    (0.2
    )March 31, 2007 balance
    
    $
    1.8
    
    
    $
    
  9




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE D  DISCONTINUED OPERATIONS
    Three Months endedMarch 31, 2006Net sales
    
    $
    49.0Income before income taxes
    
    
    2.6
  NOTE E
 GAIN FROM SALE OF ASSETS AND 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
  10




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
   Closure of Mexican facility
    NOTE F  2007 EXPENDITURES FOR 2005 LOSS PROVISION
   NOTE G  SALES OF RECEIVABLES
    11




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE H  INVENTORIES
  March 31,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    48.1
    
    
    $
    47.2Work in process
    
    
    32.3
    
    
    
    32.7Finished products
    
    
    93.7
    
    
    
    97.8Valuation reserves
    
    
    (18.4
    )
    
    
    (19.7
    )$
    155.7
    
    
    $
    158.0
 NOTE I  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  March 31,
    
    
    December 31,2007
    
    
    2006Salaries and wages
    
    $
    2.9
    
    
    $
    2.9Bonuses
    
    
    2.5
    
    
    
    7.5Vacation pay
    
    
    5.2
    
    
    
    4.5Product returns
    
    
    27.8
    
    
    
    28.6Rebates, credits and discounts due customers
    
    
    12.1
    
    
    
    10.2Insurance
    
    
    11.1
    
    
    
    10.2Taxes payable
    
    
    12.7
    
    
    
    9.3Interest
    
    
    8.4
    
    
    
    3.7Other
    
    
    22.9
    
    
    
    22.1$
    105.6
    
    
    $
    99.0
 NOTE J  PRODUCT RETURNS LIABILITY
  12




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  Three Months ended March 31,2007
    
    
    2006Beginning of year
    
    $
    28.6
    
    
    $
    26.2Cost of unsalvageable parts
    
    
    (12.7
    )
    
    
    (8.6
    )Additional reductions to sales
    
    
    11.9
    
    
    
    9.4End of period
    
    $
    27.8
    
    
    $
    27.0
 NOTE K  PENSION
  Three Months ended March 31,2007
    
    
    2006Service cost
    
    $
    1.6
    
    
    $
    1.9Interest cost
    
    
    3.0
    
    
    
    2.9Expected return on plan assets
    
    
    (3.6
    )
    
    
    (3.2
    )Amortization of prior service cost and
unrecognized loss
    
    
    0.1
    
    
    
    0.1$
    1.1
    
    
    $
    1.7
 NOTE L  DEBT
  March 31,
    
    
    December 31,2007
    
    
    2006Short-term borrowings
    
    $
    9.5
    
    
    $
    8.6Capital lease obligations
    
    
    0.9
    
    
    
    1.1Term loan
    
    
    225.0
    
    
    
    265.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Unamortized debt discount
    
    
    (3.9
    )
    
    
    (4.1
    )461.5
    
    
    
    500.6LessShort-term borrowing
    
    
    9.5
    
    
    
    8.6Current maturities
    
    
    0.4
    
    
    
    0.5Long-term debt
    
    $
    451.6
    
    
    $
    491.5
  13




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
  NOTE M  CONTINGENCIES
 Environmental
  Litigation
  Product Recall
    14




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE N  INCOME TAXES
 Adoption of FIN 48
      Intercompany payable to Holdco and net operating loss utilization
  15




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##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE O  OTHER COMPREHENSIVE INCOME (LOSS)
  2007
    
    2006Net of
    
    
    
    
    
    
    
    
    
    
    Net ofPre-tax
    
    
    Tax
    
    
    tax
    
    
    Pre-tax
    
    
    Tax
    
    
    taxamount
    
    
    benefit
    
    
    amount
    
    
    amount
    
    
    benefit
    
    
    amountInterest rate swaps
    
    $
    (0.2
    )
    
    $
    0.1
    
    
    $
    (0.1
    )
    
    $
    0.6
    
    
    $
    (0.2
    )
    
    $
    0.4Foreign currency adjustment
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    0.2
    
    
    
    (0.1
    )
    
    
    0.1$
    (0.3
    )
    
    $
    0.1
    
    
    $
    (0.2
    )
    
    $
    0.8
    
    
    $
    (0.3
    )
    
    $
    0.5
 NOTE P  GEOGRAPHIC INFORMATION
  Three Months ended March 31,2007
    
    
    2006United States
    
    $
    201.1
    
    
    $
    181.7Mexico
    
    
    9.6
    
    
    
    9.3Canada
    
    
    8.2
    
    
    
    6.9United Kingdom
    
    
    3.6
    
    
    
    2.5France
    
    
    2.5
    
    
    
    2.1Venezuela
    
    
    2.0
    
    
    
    1.0Germany
    
    
    1.2
    
    
    
    1.3Spain
    
    
    1.1
    
    
    
    1.0Other
    
    
    9.5
    
    
    
    8.8$
    238.8
    
    
    $
    214.6
  March 31,
    
    
    December 31,2007
    
    
    2006United States
    
    $
    239.6
    
    
    $
    244.4China
    
    
    20.9
    
    
    
    20.8Mexico
    
    
    7.7
    
    
    
    12.4Spain
    
    
    3.0
    
    
    
    3.2Goodwill
    
    
    239.9
    
    
    
    239.8$
    511.1
    
    
    $
    520.6
 16




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 NOTE Q  STOCK OPTIONS
   NOTE R  OTHER INFORMATION
   Three Months ended March 31,2007
    
    2006Interest
    
    $
    5.5
    
    
    $
    4.0Income taxes paid (net of refunds)
    
    
    (1.0
    )
    
    
    0.2
   NOTE S  NEW ACCOUNTING PRONOUNCEMENTS
   17




---



##### 



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




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Balance Sheet
March 31, 2007  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsAssetsCurrent assetsCash and cash equivalents
    
    $
    12,849
    
    
    $
    
    
    
    $
    8,630
    
    
    $
    7
    
    
    $
    4,212Accounts receivable, net
    
    
    235,395
    
    
    
    
    
    
    
    
    
    
    
    221,759
    
    
    
    13,636Inventories, net
    
    
    155,746
    
    
    
    
    
    
    
    
    
    
    
    137,417
    
    
    
    18,329Deferred tax assets
    
    
    34,919
    
    
    
    
    
    
    
    834
    
    
    
    33,523
    
    
    
    562Other current assets
    
    
    26,344
    
    
    
    
    
    
    
    1,348
    
    
    
    16,385
    
    
    
    8,611Total current assets
    
    
    465,253
    
    
    
    
    
    
    
    10,812
    
    
    
    409,091
    
    
    
    45,350Property, plant and equipment, net
    
    
    163,032
    
    
    
    
    
    
    
    150
    
    
    
    131,077
    
    
    
    31,805Investment in subsidiaries
    
    
    
    
    
    
    (171,155
    )
    
    
    157,200
    
    
    
    13,955
    
    
    
    Goodwill
    
    
    239,908
    
    
    
    
    
    
    
    239,908
    
    
    
    
    
    
    
    Other intangible assets, net
    
    
    92,936
    
    
    
    
    
    
    
    13,643
    
    
    
    79,293
    
    
    
    Deferred financing costs, net
    
    
    4,677
    
    
    
    
    
    
    
    4,677
    
    
    
    
    
    
    
    Pension and other assets
    
    
    8,916
    
    
    
    
    
    
    
    290
    
    
    
    8,403
    
    
    
    223Assets held for sale
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    1,600
    
    
    
    Total assets
    
    $
    976,322
    
    
    $
    (171,155
    )
    
    $
    426,680
    
    
    $
    643,419
    
    
    $
    77,378Liabilities and shareholders equityCurrent liabilitiesAccounts payable
    
    $
    92,802
    
    
    $
    
    
    
    $
    848
    
    
    $
    79,863
    
    
    $
    12,091Short-term borrowings
    
    
    9,496
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,496Current maturities of long-term debt
    
    
    364
    
    
    
    
    
    
    
    
    
    
    
    364
    
    
    
    Accrued expenses and other current
liabilities
    
    
    105,621
    
    
    
    
    
    
    
    13,718
    
    
    
    86,102
    
    
    
    5,801Total current liabilities
    
    
    208,283
    
    
    
    
    
    
    
    14,566
    
    
    
    166,329
    
    
    
    27,388Long-term debt, less current maturities
    
    
    451,621
    
    
    
    
    
    
    
    451,064
    
    
    
    557
    
    
    
    Pension and other postretirement liabilities
    
    
    40,105
    
    
    
    
    
    
    
    
    
    
    
    38,759
    
    
    
    1,346Deferred tax liabilities
    
    
    16,310
    
    
    
    
    
    
    
    14,081
    
    
    
    304
    
    
    
    1,925Due to Holdco
    
    
    2,191
    
    
    
    
    
    
    
    2,191
    
    
    
    
    
    
    
    Minority interest
    
    
    3,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,697Other long-term liabilities
    
    
    3,777
    
    
    
    
    
    
    
    
    
    
    
    3,777
    
    
    
    Intercompany payables (receivables)
    
    
    
    
    
    
    
    
    
    
    (305,560
    )
    
    
    301,668
    
    
    
    3,892Total shareholders equity
    
    
    250,338
    
    
    
    (171,155
    )
    
    
    250,338
    
    
    
    132,025
    
    
    
    39,130Total liabilities and shareholders
equity
    
    $
    976,322
    
    
    $
    (171,155
    )
    
    $
    426,680
    
    
    $
    643,419
    
    
    $
    77,378
 19




---



##### 



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




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Income Statement
Three Months Ended 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 facilities
and consolidating operations
    
    
    1,647
    
    
    
    
    
    
    
    
    
    
    
    (117
    )
    
    
    1,764Operating income (loss)
    
    
    18,352
    
    
    
    
    
    
    
    (5,740
    )
    
    
    23,634
    
    
    
    458Other expenseInterest expense, net
    
    
    (10,686
    )
    
    
    
    
    
    
    (10,484
    )
    
    
    (52
    )
    
    
    (150
    )Intercompany 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
 21




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 Consolidating Condensed Income Statement
Three Months Ended March 31, 2006  (in thousands)
 UCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Consolidated
    
    
    Eliminations
    
    
    UCI
    
    
    Guarantors
    
    
    GuarantorsNet sales
    
    $
    214,591
    
    
    $
    (4,963
    )
    
    $
    
    
    
    $
    201,944
    
    
    $
    17,610Cost of sales
    
    
    169,478
    
    
    
    (4,963
    )
    
    
    
    
    
    
    160,091
    
    
    
    14,350Gross profit
    
    
    45,113
    
    
    
    
    
    
    
    
    
    
    
    41,853
    
    
    
    3,260Operating (expense) incomeSelling and warehousing
    
    
    (15,489
    )
    
    
    
    
    
    
    (292
    )
    
    
    (13,943
    )
    
    
    (1,254
    )General and administrative
    
    
    (11,805
    )
    
    
    
    
    
    
    (3,945
    )
    
    
    (6,438
    )
    
    
    (1,422
    )Amortization of acquired
intangible assets
    
    
    (1,184
    )
    
    
    
    
    
    
    
    
    
    
    (1,184
    )
    
    
    Gain from
sale of assets and costs of closing facilities and
consolidating
operations
    
    
    (1,393
    )
    
    
    
    
    
    
    
    
    
    
    (402
    )
    
    
    (991
    )Operating income (loss)
    
    
    15,242
    
    
    
    
    
    
    
    (4,237
    )
    
    
    19,886
    
    
    
    (407
    )Other expenseInterest expense, net
    
    
    (9,304
    )
    
    
    
    
    
    
    (9,442
    )
    
    
    143
    
    
    
    (5
    )Intercompany interest
    
    
    
    
    
    
    
    
    
    
    9,892
    
    
    
    (9,325
    )
    
    
    (567
    )Management fee expense
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    Miscellaneous, net
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    13Income (loss) before income taxes
    
    
    5,374
    
    
    
    
    
    
    
    (4,287
    )
    
    
    10,627
    
    
    
    (966
    )Income tax expense (benefit)
    
    
    1,996
    
    
    
    
    
    
    
    (1,507
    )
    
    
    4,065
    
    
    
    (562
    )Increase (decrease) from
continuing operations before
equity in earnings of
subsidiaries
    
    
    3,378
    
    
    
    
    
    
    
    (2,780
    )
    
    
    6,562
    
    
    
    (404
    )Equity in earnings of subsidiaries
    
    
    
    
    
    
    (7,627
    )
    
    
    7,533
    
    
    
    94
    
    
    
    Discontinued operations:Net income from discontinued
operations, net of tax
    
    
    1,375
    
    
    
    
    
    
    
    
    
    
    
    563
    
    
    
    812Net income (loss)
    
    $
    4,753
    
    
    $
    (7,627
    )
    
    $
    4,753
    
    
    $
    7,219
    
    
    $
    408
 22




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (continued)
 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
 23




---



##### 



United Components, Inc.
 Notes to Condensed Consolidated Financial Statements
 Note T (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 of continuing operations
    
    $
    25,435
    
    
    $
    
    
    
    $
    18,257
    
    
    $
    5,449
    
    
    $
    1,729Cash flows from investing activities of
continuing operations:Capital expenditures
    
    
    (5,653
    )
    
    
    
    
    
    
    (1,024
    )
    
    
    (3,817
    )
    
    
    (812
    )Proceeds from sale of property, plant
and equipment
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    48Net cash used in investing activities of
continuing operations
    
    
    (5,561
    )
    
    
    
    
    
    
    (1,024
    )
    
    
    (3,773
    )
    
    
    (764
    )Cash flows from financing activities of
continuing operations:Issuances of debt
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47Shareholders equity contributions
    
    
    340
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities of continuing operations
    
    
    387
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    47Discontinued operations:Net cash used in operating activities
of discontinued operations
    
    
    (651
    )
    
    
    
    
    
    
    
    
    
    
    (1,453
    )
    
    
    802Net cash used in investing activities of
discontinued operations
    
    
    (743
    )
    
    
    
    
    
    
    
    
    
    
    (224
    )
    
    
    (519
    )Effect of currency exchange rate on
cash of discontinued operations
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Effect of currency exchange rate changes on
cash
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Net 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
    
    
    
    4,846Less cash and cash equivalents of
discontinued operations at end of period
    
    
    2,728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,728Cash and cash equivalents at end of period
    
    $
    42,346
    
    
    $
    
    
    
    $
    37,602
    
    
    $
    1,306
    
    
    $
    3,438
 24




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
    Overview
 Sales .
  25




---



##### 



Cost of sales
  Selling and warehousing expenses
 General and administrative expenses
 26




---



##### 



Recent Developments
  Critical Accounting Policies and Estimates
   Inventory
 Revenue recognition
    27




---



##### 



Product returns .
 Impairment of intangible assets and tangible fixed assets
 Retirement benefits
  Insurance reserves .
 Environmental expenditures
  28




---



##### 



Acquisition of ASC Industries, Inc.
 Results of Operations
  Three Months ended March 31,2007
    
    
    2006Net sales
    
    $
    238,848
    
    
    $
    214,591Cost of sales
    
    
    189,291
    
    
    
    169,478Gross profit
    
    
    49,557
    
    
    
    45,113Operating (expense) incomeSelling and warehousing
    
    
    (16,052
    )
    
    
    (15,489
    )General and administrative
    
    
    (14,292
    )
    
    
    (11,805
    )Amortization of acquired intangible assets
    
    
    (1,778
    )
    
    
    (1,184
    )Costs of integration of water pump
operations
    
    
    (730
    )
    
    
    Gain from
sale of assets and costs of closing facilities and
consolidating operations
    
    
    1,647
    
    
    
    (1,393
    )Operating income
    
    
    18,352
    
    
    
    15,242Other expenseInterest expense, net
    
    
    (10,686
    )
    
    
    (9,304
    )Management fee expense
    
    
    (500
    )
    
    
    (500
    )Miscellaneous, net
    
    
    (301
    )
    
    
    (64
    )Income before income taxes
    
    
    6,865
    
    
    
    5,374Income tax expense
    
    
    2,358
    
    
    
    1,996Net income from continuing operations
    
    
    4,507
    
    
    
    3,378Discontinued operationsNet income from discontinued operations,
net of tax
    
    
    
    
    
    
    1,375Net income
    
    $
    4,507
    
    
    $
    4,753
 29




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##### 



Acquisition and Sales of Operations
    Three Months Ended March 31, 2007 compared with the Three Months Ended March 31, 2006
 Net sales
  Gross profit .
    30




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##### 



Selling and warehousing expenses
 General and administrative expenses
  Costs of integration of water pump operations
 Gain
from sale of assets and costs of closing facilities and consolidating operations
 Interest expense, net
 Income tax expense
 Net income from continuing operations
 Discontinued operations
 Net
income
 31




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##### 



Liquidity and Capital Resources
  March 31,
    
    
    December 31,2007
    
    
    2006Notes payable
    
    $
    9.5
    
    
    $
    8.6Capitalized leases
    
    
    0.9
    
    
    
    1.1Term loan
    
    
    225.0
    
    
    
    265.0Senior subordinated notes
    
    
    230.0
    
    
    
    230.0Amount of debt requiring repayment
    
    
    465.4
    
    
    
    504.7Unamortized debt discount
    
    
    (3.9
    )
    
    
    (4.1
    )$
    461.5
    
    
    $
    500.6
     Last nine months of 2007
    
    $
    9.82008
    
    
    0.12009
    
    
    0.12010
    
    
    0.12011
    
    
    100.0Thereafter
    
    
    355.3$
    465.4
  32




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##### 



Net
cash provided by operating activities
 33




---



##### 



Net cash used in investing activities
  Recent Accounting Pronouncements
     34




---



##### 



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




---



##### 



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




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##### 



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 UCI, whether made before or after the
date hereof, regardless of any general incorporation language in such filing. 37




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##### 



SIGNATURES
  UNITED COMPONENTS, INC.Date: May 15, 2007
    
    By:
Name:
    
    /s/ DAVID BARRON

David BarronTitle:
    
    Chief Financial Officer
 38