<PAGE>



===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 --------------
                                    FORM 10-Q

(Mark One)

|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the Quarterly period ended June 30, 2003

                                       Or

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                        Commission File Number 333-58675


                               KEY COMPONENTS, LLC
                               -------------------
             (Exact name of Registrant as Specified in its charter)

               Delaware                                  04-3425424
               --------                                  ----------
    (State or Other Jurisdiction of           (IRS Employer Identification No.)
     Incorporation or Organization)

      200 White Plains Road, Tarrytown NY                  10591
    ---------------------------------------                -----
    (Address of Principal Executive Offices)            (Zip Code)

                                 (914) 332-8088
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

                       Commission File Number 333-58675-01

                         KEY COMPONENTS FINANCE CORP. *
                         ----------------------------
             (Exact name of Registrant as specified in its charter)

               Delaware                                  14-1805946
               --------                                  ----------
    (State or Other Jurisdiction of           (IRS Employer Identification No.)
     Incorporation or Organization)

      200 White Plains Road, Tarrytown NY                  10591
    ---------------------------------------                -----
    (Address of Principal Executive Offices)            (Zip Code)

                                 (914) 332-8088
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               |x| Yes   |_| No

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                               |_| Yes   |x| No

     As of August 14, 2003, all of the membership interests in Key Components,
LLC were owned by Key Components, Inc., a privately held New York corporation.
All of the shares of common stock of Key Components Finance Corp. were owned by
Key Components, LLC.

     *Key Components Finance Corp. meets the conditions set forth in General
Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this Form
with reduced disclosure format.

===============================================================================


<PAGE>


                               KEY COMPONENTS, LLC

                                 Form 10-Q Index

                                  June 30, 2003
<TABLE>
<CAPTION>

                                                                                              Page
                                                                                             Number
                                                                                             ------
<S>          <C>                                                                             <C>
PART I

Item 1. --   Consolidated Financial Statements:

             Balance Sheets.............................................................        2
             Statements of Operations...................................................        3
             Statements of Member's Equity..............................................        4
             Statements of Cash Flows...................................................        5
             Notes to Consolidated Financial Statements.................................        6

Item 2. --   Management's Discussion and Analysis of Financial Condition
             and Results of Operations..................................................       11

Item 3.--    Quantitative and Qualitative Disclosures about Market Risk.................       23

Item 4.--    Controls and Procedures....................................................       23


PART  II

Item 6.--    Exhibits and Reports on Form 8-K...........................................       23

Signatures   ...........................................................................       24

</TABLE>


                                       1

<PAGE>

                         PART I -- FINANCIAL INFORMATION

Item 1 -- Consolidated Financial Statements

                      KEY COMPONENTS, LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------
                                                                     June 30,   December 31,
                                                                      2003          2002
---------------------------------------------------------------------------------------------
                                                                   (Unaudited)
<S>                                                                <C>            <C>
Assets:
Current
   Cash                                                            $  3,452       $  2,879
   Accounts receivable, net of allowance for doubtful
    accounts of  $1,640 and $1,459 in 2003 and 2002,
     respectively                                                    23,348         21,447
  Inventories                                                        31,493         29,623
  Prepaid expenses and other current assets                           1,843          2,800
  Prepaid income taxes                                                    -          3,400
  Deferred income taxes                                               5,401          5,295
---------------------------------------------------------------------------------------------
     Total current assets                                            65,537         65,444
Property, plant and equipment, net                                   24,831         23,883
Goodwill, net                                                        97,539         95,554
Deferred financing costs, net                                         3,886          4,364
Prepaid pension cost                                                  2,780          3,021
Other assets                                                            757            448
---------------------------------------------------------------------------------------------
     Total assets                                                  $195,330       $192,714
=============================================================================================

Liabilities and Member's Equity:
Current
  Current portion of long-term debt                                $ 11,644       $  7,225
  Accounts payable                                                    9,953          9,940
  Accrued compensation                                                4,122          4,098
  Accrued expenses                                                    7,822          7,087
  Accrued interest                                                      823            713
---------------------------------------------------------------------------------------------
     Total current liabilities                                       34,364         29,063

Long-term debt                                                      128,866        136,619
Accrued lease costs                                                     437            469
Deferred income taxes                                                   579            579
Other long-term liabilities                                             862            940
---------------------------------------------------------------------------------------------
     Total liabilities                                              165,108        167,670

Commitments and contingencies                                             -              -

Member's equity                                                      30,222         25,044
---------------------------------------------------------------------------------------------
     Total liabilities and member's equity                         $195,330       $192,714
=============================================================================================
</TABLE>



   The accompanying notes are an integral part of these financial statements.



                                       2

<PAGE>


                      KEY COMPONENTS, LLC AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            (Unaudited, in thousands)

<TABLE>
<CAPTION>

                                                       Six Months Ended       Three Months Ended
                                                           June 30,                June 30,
                                                      -------------------    --------------------
                                                        2003       2002        2003       2002
-------------------------------------------------------------------------------------------------
<S>                                                   <C>        <C>         <C>        <C>
Net sales                                             $ 98,084   $ 96,397    $ 49,247   $ 49,778
Cost of goods sold                                      62,027     60,741      30,740     31,026
-------------------------------------------------------------------------------------------------
           Gross profit                                 36,057     35,656      18,507     18,752

Selling, general and administrative expenses            20,081     19,161      10,108      9,579
Other                                                      444        350         227        240
-------------------------------------------------------------------------------------------------
Income from operations                                  15,532     16,145       8,172      8,933
Interest expense                                         6,278      6,772       3,135      3,362
-------------------------------------------------------------------------------------------------
Income before provision for income taxes and
  cumulative effect of change in accounting
  principle                                              9,254      9,373       5,037      5,571
Provision for income taxes                               3,976      4,281       2,163      2,541
-------------------------------------------------------------------------------------------------
Income before cumulative effect in change in
   accounting principle                                  5,278      5,092       2,874      3,030
Cumulative effect in change of accounting
   principle, net of taxes of $3,007                         -     (8,157)          -          -
-------------------------------------------------------------------------------------------------
                 Net income (loss)                    $  5,278   $ (3,065)   $  2,874   $  3,030
=================================================================================================

</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                        3

<PAGE>


                      KEY COMPONENTS, LLC AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>

                                                 For the Six Months              For the Year
                                                 Ended June 30, 2003        Ended December 31, 2002
----------------------------------------------------------------------------------------------------
                                                     (unaudited)
<S>                                                  <C>                           <C>
Member's Equity, beginning of period                 $  25,044                     $31,675

Net income (loss)                                        5,278                      (6,631)
Member withdrawals                                        (100)                          -
----------------------------------------------------------------------------------------------------
Member's Equity, end of period                         $30,222                     $25,044
====================================================================================================

</TABLE>


   The accompanying notes are an integral part of these financial statements.




                                       4
<PAGE>


                      KEY COMPONENTS, LLC AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Unaudited, in thousands)

<TABLE>
<CAPTION>

For the Six Months Ended June 30,                                              2003          2002
----------------------------------------------------------------------------------------------------
<S>                                                                         <C>            <C>
Cash flows from operating activities:
     Net income (loss)                                                      $  5,278       $ (3,065)
     Adjustments to reconcile net income (loss) to net cash
        provided by operating activities:
        Cumulative effect of change in accounting principle                        -          8,157
        Depreciation and amortization                                          2,378          2,521
        Amortization of deferred finance costs                                   478            468
             Writedown of deferred finance costs                                   -            145
             Provision for bad debts                                             133            313
        Deferred taxes                                                             -             64
        Changes in operating assets and liabilities:
            Accounts receivable                                               (1,120)          (932)
            Inventories                                                       (1,113)           682
            Prepaid expenses and other assets                                  4,638          4,468
            Accounts payable                                                    (252)          (332)
            Accrued expenses                                                     119           (784)
---------------------------------------------------------------------------------------------------
          Net cash provided by operating activities                           10,539         11,705
---------------------------------------------------------------------------------------------------

Cash flows from investing activities:
     Business acquisition                                                     (4,548)             -
     Capital expenditures                                                     (1,984)        (1,307)
     Proceeds from assets held for sale                                            -            364
---------------------------------------------------------------------------------------------------
          Net cash used in investing activities                               (6,532)          (943)
---------------------------------------------------------------------------------------------------

Cash flows from financing activities:
     Payments of long-term debt and capital lease obligations                 (5,334)       (12,028)
     Proceeds from debt issued                                                 2,000              -
     Member withdrawals                                                         (100)             -
---------------------------------------------------------------------------------------------------
         Net cash used in financing activities                                (3,434)       (12,028)
---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                             573         (1,266)
Cash and cash equivalents, beginning of period                                 2,879          5,080
---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                                    $  3,452       $  3,814
===================================================================================================

</TABLE>




                                       5

<PAGE>


                      KEY COMPONENTS, LLC AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. Basis of Presentation

The consolidated financial statements include the financial statements of Key
Components, LLC ("KCLLC"), and its subsidiaries, all of which are wholly owned
(collectively, the "Company"). All significant intercompany transactions have
been eliminated.

The Company is in the business of the manufacture and sale of custom engineered
essential componentry in a diverse array of end use markets. Through its two
business segments, mechanical engineered components and electrical components,
the Company targets its products to original equipment manufacturers. The
Company's electrical components business product offerings include power
conversion products, specialty electrical components and high-voltage utility
switches. The Company's mechanical engineered components business product
offerings consist primarily of flexible shaft and remote valve control
components, turbocharger components and medium security lock products and
accessories.

KCLLC's assets are limited to the Company's corporate office and its investments
in its subsidiaries. KCLLC's financial statements include the related expenses
of operating the Company's corporate office. KCLLC is wholly-owned by Key
Components, Inc. ("KCI"), a New York corporation. KCI holds no other assets
other than its investments in KCLLC and has no operations.

The accompanying unaudited financial statements of the Company contain all
adjustments that are, in the opinion of management, necessary for a fair
statement of results for the interim periods presented. While certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted, the Company
believes that the disclosures herein are adequate to make the information not
misleading. The results of operations for the interim periods are not
necessarily indicative of the results for full years. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended December 31, 2002 included in the Company's
Annual Report on Form 10-K.

Certain reclassifications were made to conform the prior periods to the current
presentation.

2. Acquisitions and Dispositions

Arens Controls, LLC

On March 3, 2003, the Company acquired the mechanical components business of
Arens Controls, LLC for a purchase price of approximately $4.5 million and
assumed liabilities of approximately $642,000. The Company recorded the
estimated excess purchase price over net assets acquired of approximately $2.0
million as goodwill. The value ascribed to the estimated excess purchase price
over net assets acquired is preliminary and is subject to change. Other
intangibles acquired in the transaction were not significant. The product line,
which manufactures mechanical push-pull control solutions, is being integrated
into the Company's Binghamton, New York manufacturing facility. The Company
borrowed $2.0 million on its revolving credit facility to partially finance this
acquisition. The product line acquired has historical annual revenues of
approximately $7.5 million (unaudited).

Acme Electric Corporation

On November 21, 2000, the Company acquired all of the outstanding shares of Acme
Electric Corporation ("Acme") for a purchase price of approximately $47.3
million and assumed liabilities of approximately $28.8 million. In conjunction
with the acquisition the Company decided to sell the electronics division of
Acme ("Electronics"). Electronics is a contract electronics manufacturer for
data storage, telecommunications and medical electronic applications.



                                       6
<PAGE>


On February 15, 2002 the Company sold the Electronics division for $100,000 in
cash and a 7% per annum, $300,000 note that was due on February 15, 2006. The
agreement also provided for additional consideration to be paid to the Company
if certain future operating targets were achieved. In March 2003, Electronics
was sold to a new buyer and the Company collected the entire $300,000 note. The
Company does not anticipate receiving any additional consideration.

3.   Inventories

Inventories consist of the following:


(In thousands)                         June 30,       December 31,
                                         2003             2002
-------------------------------------------------------------------------
                                             (unaudited)

Raw materials                          $16,806          $14,342
Work-in-process                          8,036            7,734
Finished goods                           6,651            7,547
-------------------------------------------------------------------------
         Total inventory               $31,493          $29,623
=========================================================================

4. Provision for Income Taxes

For the six months and three months ended June 30, 2003 and 2002, the Company's
provision for income taxes primarily relates to the federal and state income
taxes of its sole member, KCI. Deferred income taxes have been recorded to
reflect the tax consequences on future years of temporary differences between
the tax bases of assets and liabilities and their financial reporting amounts at
year-end. Valuation allowances are recorded when necessary to reduce deferred
tax assets to expected realizable amounts.

5. Member withdrawals

During the six months ended June 30, 2003, KCLLC distributed approximately
$100,000 to its member, KCI, which used the funds to repurchase common stock
from a KCI shareholder.

6. Warranty Costs

The Company records a liability for its expected claims under existing product
warranty policies. The accrual is based on the Company's historical warranty
experience. For the six months ended June 30, 2003 and 2002, the Company's
warranty accrual changed as follows:

Six Months ended June 30,                  2003             2002
-----------------------------------------------------------------
(In thousands)                                  (unaudited)
Balance, beginning of period              $ 985             $821
Additions                                    65               46
Charges                                       -              (11)
-----------------------------------------------------------------
Balance, end of period                   $1,050             $856
=================================================================




                                       7
<PAGE>


7.   Operating Segments

The Company conducts its operations through its two businesses, the manufacture
and sale of electrical components and mechanical engineered components. The
electrical components business ("EC") product offerings include power conversion
products, specialty electrical components and high-voltage utility switches. The
mechanical engineered components business ("MEC") manufactures flexible shaft
products, turbo charger actuators and related componentry and specialty locks
and related accessories.


The Company evaluates its operating segments' performance and allocates
resources among them based on profit or loss from operations before interest,
taxes, depreciation and amortization ("EBITDA"). EBITDA is not based on
accounting principles generally accepted in the United States of America, but is
the performance measure used by Company management to analyze and monitor the
Company and is commonly used by investors and financial analysts to compare and
analyze companies. Corporate overhead expenses are not allocated to the
segments. In computation of all the financial maintenance covenants under the
Company's credit facility, the Company is allowed to adjust EBITDA for certain
charges as defined in the agreement. Segment information is as follows:

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
(In thousands)                                                                  Mechanical
                                                             Electrical         Engineered
                                                             Components         Components             Total
----------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                <C>                <C>
Six months ended June 30, 2003:
   Net sales to external customers                           $  58,633           $ 39,451           $  98,084
   Intersegment net sales                                            -                 34                  34
   Segment profit - EBITDA                                      11,021              8,451              19,472
   Segment assets                                              108,895             83,827             192,722
   Goodwill                                                     59,192             38,373              97,565
   Depreciation and amortization                                 1,250              1,109               2,359

================================================================================================================
Six months ended June 30, 2002:
   Net sales to external customers                           $  62,966           $ 33,431           $  96,397
   Intersegment net sales                                            -                 75                  75
   Segment profit - EBITDA                                      11,233              9,202              20,435
   Segment assets                                              113,300             88,777             202,077
   Goodwill                                                     59,192             48,711             107,903
   Depreciation and amortization                                 1,290              1,213               2,503

================================================================================================================
Three months ended June 30, 2003:
   Net sales to external customers                           $  29,187           $ 20,060           $  49,247
   Intersegment net sales                                            -                 20                  20
   Segment profit - EBITDA                                       5,859              4,421              10,280
   Segment assets                                              108,895             83,827             192,722
   Goodwill                                                     59,192             38,373              97,565
   Depreciation and amortization                                   624                582               1,206

================================================================================================================
Three months ended June 30, 2002:
   Net sales to external customers                           $  32,734           $ 17,044           $  49,778
   Intersegment net sales                                            -                 43                  43
   Segment profit - EBITDA                                       6,187              4,801              10,988
   Segment assets                                              113,300             88,777             202,077
   Goodwill                                                     59,192             48,711             107,903
   Depreciation and amortization                                   638                601               1,239
================================================================================================================

</TABLE>




                                       8
<PAGE>


Reconciliation of Selected Segment Information to the Company's Consolidated
Totals:

<TABLE>
<CAPTION>

(In thousands)                                                    Six Months Ended              Three Months Ended
                                                                      June 30,                      June 30,
-------------------------------------------------------------------------------------------------------------------
                                                                 2003           2002            2003        2002
-------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>            <C>          <C>
Profit or loss:
  Total profit from reportable segments- EBITDA                  $19,472       $20,435         $10,280      $10,988
  Reconciling items:
     Corporate expenses                                           (1,562)       (1,769)           (892)        (805)
     Depreciation and amortization                                (2,378)       (2,521)         (1,216)      (1,250)
     Interest expense                                             (6,278)       (6,772)         (3,135)      (3,362)
-------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes and cumulative
   effect of change in accounting principle                       $9,254        $9,373          $5,037       $5,571
===================================================================================================================

June 30,                                                                                        2003        2002
-------------------------------------------------------------------------------------------------------------------
Assets:
   Total assets for reportable segments                                                       $192,722     $202,077
   Corporate assets                                                                              2,608        4,381
-------------------------------------------------------------------------------------------------------------------
 Total consolidated assets                                                                    $195,330     $206,458
===================================================================================================================

<CAPTION>

-------------------------------------------------------------------------------------------------------------------
(In thousands)                                                   Six Months Ended             Three Months Ended
                                                                      June 30,                      June 30,
-------------------------------------------------------------------------------------------------------------------
                                                                 2003           2002            2003        2002
-------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>            <C>          <C>
Geographical Sales Information:
  United States                                                  $86,273       $84,821        $43,541      $43,705
  England                                                          2,815         2,070          1,524        1,128
  Canada                                                           2,325         1,712          1,207          795
  China                                                            2,090         2,368            926        1,203
  Taiwan                                                             924           658            225          430
  Netherlands                                                        785         1,298            315          637
  Japan                                                              713           474            456          266
  Mexico                                                             351         1,035            199          607
  Other                                                            1,808         1,961            854        1,007
--------------------------------------------------------------------------------------------------------------------
Total                                                            $98,084       $96,397        $49,247      $49,778
=====================================================================================================================
</TABLE>

8.  Goodwill

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets" effective for fiscal years
beginning after December 15, 2001.

The provisions of SFAS 141 provide specific criteria for the initial recognition
and measurement of intangible assets apart from goodwill. SFAS 141 also required
that upon adoption of SFAS 142 the Company reclassify the carrying amount of
certain intangible assets.

The provisions of SFAS 142 (i) prohibit the amortization of goodwill and
indefinite-lived intangible assets, (ii) require that goodwill and
indefinite-lived intangible assets be tested annually for impairment (and in
interim periods if certain events occur which would impact the carrying value of
such assets), and (iii) require that the Company's operations be formally
identified into reporting units for the purpose of assessing potential future
impairments of goodwill.



                                        9
<PAGE>

Upon the adoption of SFAS 142, the Company stopped recording goodwill
amortization effective January 1, 2002. In June 2002, the Company completed the
assessment of its reporting units and its initial assessment of impairment upon
adoption. As a result, the Company identified one reporting unit in the MEC
business with a book value of goodwill that exceeded its fair market value,
which was estimated using a valuation methodology that triangulates the
discounted cash flows, market multiples and transactional multiples of the
reporting units. In accordance with SFAS 142, the Company, during the second
quarter 2002, estimated the amount of the impairment and recorded a cumulative
effect of change in accounting principle, as of January 1, 2002, of
approximately $7.8 million, net of taxes of approximately $3.4 million, to write
down the goodwill associated with the Company's lock product line resulting from
the market conditions of that product line. The Company, as prescribed by SFAS
142, finalized its impairment testing by comparing the implied fair value of the
reporting unit's goodwill to its carrying value during the third quarter to
determine the amount of the final impairment upon adoption of SFAS 142. As a
result, the Company reduced the tax impact of the charge by approximately
$353,000 to reflect the proper deferred tax basis of the adjusted goodwill.

9. Stock Options

On January 1, 2003, the Company adopted the disclosure provisions of SFAS 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure," which
amended SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation, effective as of the beginning of the fiscal year. The Company
continues to apply the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB 25") in accounting for
stock-based compensation. In accordance with APB No. 25, compensation costs for
stock options is recognized in income based on the excess, if any, of the quoted
market price over the exercise price of the stock on the date of grant. The
exercise price for all stock option grants equals the fair market value on the
date of grant, therefore no compensation expense is recorded.

The following table illustrates the effect on net income (loss) as if the
Company had applied the fair value recognition provisions for the six and three
months ended June 30, 2003 and 2002:


                                 Six Months ended      Three Months Ended
                                     June 30,                June 30,
---------------------------------------------------------------------------
                                 2003         2002        2003       2002
---------------------------------------------------------------------------
(unaudited)                                  (in thousands)
Net income (loss):
   As reported                  $5,278      $(3,065)     $2,874     $3,030
   Pro forma                    $5,072      $(3,291)     $2,771     $2,917
---------------------------------------------------------------------------


10.  New Accounting Pronouncements

In July 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities". This statement sets forth various modifications to
existing accounting guidance which prescribes the conditions which must be met
in order for costs associated with contract terminations, facility
consolidations, employee relocations and terminations to be accrued and recorded
as liabilities in financial statements. This statement is effective for exit or
disposal activities initiated after December 31, 2002. The adoption of SFAS 146
did not have a material effect on the Company's consolidated results of
operations and financial position.



                                       10
<PAGE>
In November 2002, the FASB released Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." This Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees it has issued. The Interpretation also
clarifies that a guarantor is required to recognize, at the inception of a
guarantee for guarantees issued or modified after December 31, 2002, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
Company's adoption of the interpretation and valuation of future guarantees had
no material impact on the Company's consolidated results of operations and
financial position. See Note 6 regarding disclosures about the Company's
warranty costs.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This Statement is effective for contracts entered into or modified
after June 30, 2003, except as defined in the SFAS. The adoption of this SFAS is
not expected to have a material impact on the consolidated operations or
financial condition of the Company.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.". This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were classified as equity. SFAS 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of this SFAS is not expected to have a material impact on the
consolidated operations or financial condition of the Company.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." FIN 46 requires variable interest entities be
consolidated by their primary beneficiaries. A primary beneficiary is the party
that absorbs a majority of the entity's expected losses or residual benefits.
FIN 46 applies immediately to variable interest entities created after January
31, 2003 and to existing variable interest entities in the periods beginning
after June 15, 2003. The adoption of this FIN is not expected to have a material
impact on the consolidated operations or financial condition of the Company.

Item 2-- Management's Discussion and Analysis of Financial Condition and Results
of Operations

Introduction

GENERAL

Key Components, Inc. ("KCI"), the sole member of KCLLC, holds no other assets
other than its investment in Key Components, LLC ("KCLLC") and has no
operations. KCLLC is the holding company of wholly owned subsidiaries, which
make up the Company's two operating business segments, its electrical components
("EC") business and mechanical engineered components business ("MEC"). Through
its two businesses, the Company is a leading manufacturer of custom-engineered
essential componentry for application in a diverse array of end-use products.
The Company targets original equipment manufacturer ("OEM") markets where the
Company believes its value-added engineering and manufacturing capabilities,
along with its timely delivery, reliability and customer service, enable it to
differentiate the Company from its competitors and enhance profitability. The EC
business' product offerings include power conversion products, specialty
electrical components and high-voltage utility switches. The product offerings
of the MEC business consist of flexible shaft and remote valve control
components, turbo-charger actuators and medium security lock products and
accessories.

The Company has historically acquired complementary or related manufacturing
businesses and sought to integrate them into existing operations. Following an
acquisition, management seeks to rationalize operations, reduce overhead costs,
develop additional cross-selling opportunities and establish new customer
relationships. As a result of its integration efforts and internal growth, the
Company's consolidated net sales have increased from approximately $9.1 million
in fiscal year 1992 to approximately $187.9 million for fiscal year 2002.

The Company continues to seek to make selective acquisitions of light industrial
manufacturing companies, but there are no agreements regarding any such
acquisitions existing as of the date hereof.

                                       11
<PAGE>


Results of Operations

The following table sets forth, for the periods indicated, consolidated
statement of operations data for the Company expressed in dollar amounts (in
thousands) and as a percentage of net sales. The financial data set forth
includes the results of operations of its wholly owned subsidiaries from their
respective dates of acquisition. The data set forth below should be read in
conjunction with the Company's consolidated financial statements and notes
thereto contained elsewhere in this Form 10-Q.

<TABLE>
<CAPTION>

                                          Six months ended June 30,                    Three months ended June 30,
                                   ----------------------------------------       ---------------------------------------
                                          2003                2002                       2003                2002
                                   ------------------- --------------------       ------------------- -------------------
(In thousands)                                 % of                   % of                      % of                % of
                                                Net                    Net                        Net                Net
                                    Amount    Sales        Amount     Sales           Amount     Sales    Amount    Sales
                                   ----------------------------------------       ---------------------------------------
<S>                                <C>          <C>      <C>           <C>         <C>          <C>    <C>          <C>
Net Sales                          $ 98,084     100.0%   $ 96,397      100.0%      $ 49,247     100.0% $ 49,778     100.0%

Cost of Goods Sold                   62,027      63.2      60,741       63.0         30,740      62.4    31,026      62.3
---------------------------------------------------------------------------------------------------------------------------
Gross Profit                         36,057      36.8      35,656       37.0         18,507      37.6    18,752      37.7

Selling, general and
administrative expenses              20,081      20.5      19,161       19.9         10,108      20.5     9,579      19.2
Other                                   444       0.5         350        0.4            227       0.5       240       0.5
---------------------------------------------------------------------------------------------------------------------------
Income from operations               15,532      15.8      16,145       16.7          8,172      16.6     8,933      17.9

Interest expense                      6,278       6.4       6,772        7.0          3,135       6.4     3,362       6.8
---------------------------------------------------------------------------------------------------------------------------
Income before provision for
income taxes and cumulative
effect in change of accounting        9,254       9.4       9,373        9.7          5,037      10.2     5,571      11.2
principle
Provision for income taxes            3,976       4.1       4,281        4.4          2,163       4.4     2,541       5.1
---------------------------------------------------------------------------------------------------------------------------
Income before change in
accounting principle                  5,278       5.4       5,092        5.3          2,874       5.8     3,030       6.1
Change in accounting principle,
net of taxes of $3,007                    -         -      (8,157)      (8.5)             -         -         -         -
---------------------------------------------------------------------------------------------------------------------------
Net income (loss)                  $  5,278       5.4%   $ (3,065)      (3.2%)     $  2,874       5.8% $  3,030       6.1%
===========================================================================================================================

</TABLE>



                                       12
<PAGE>


A summary of the Company's segments is as follows:

Electrical Components
Business

<TABLE>
<CAPTION>

                                            Six Months Ended June 30,                   Three Months Ended June 30,
                                   -------------------------------------------    ------------------------------------------
                                           2003                  2002                    2003                  2002
                                   -------------------------------------------    ------------------------------------------
                                                 % of                  % of                    % of                  % of
                                                  Net                   Net                     Net                   Net
                                     Amount      Sales     Amount      Sales       Amount      Sales      Amount     Sales
---------------------------------------------------------------------------------------------------------------------------
(In thousands)
---------------------------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>         <C>        <C>          <C>        <C>        <C>       <C>
Net Sales                            $58,633   100.0%      $62,966    100.0%       $29,187    100.0%     $32,734   100.0%
Cost of Sales                         35,647    60.8        39,742     63.1         17,436     59.7       20,470    62.5
---------------------------------------------------------------------------------------------------------------------------
Gross Profit                          22,986    39.2        23,224     36.9         11,751     40.3       12,264    37.5

Selling, general and
administrative expenses               13,215    22.5        13,281     21.1          6,516     22.3        6,715    20.5
---------------------------------------------------------------------------------------------------------------------------
Income from operations                $9,771    16.7%      $ 9,943     15.8%        $5,235     17.9%     $ 5,549    17.0%
===========================================================================================================================

</TABLE>


Mechanical Engineered
Components Business

<TABLE>
<CAPTION>

                                            Six Months Ended June 30,                     Three Months Ended June 30,
                                   -------------------------------------------     ------------------------------------------
                                           2003                  2002                    2003                  2002
                                   --------------------- ----------------------    --------------------- --------------------
                                                 % of                   % of                    % of                 % of
                                                  Net                    Net                     Net                 Net
                                     Amount      Sales     Amount      Sales       Amount      Sales      Amount     Sales
----------------------------------------------------------------------------------------------------------------------------
(In thousands)
----------------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>       <C>        <C>          <C>        <C>        <C>       <C>
Net Sales                           $39,451      100.0%    $33,431    100.0%       $20,060    100.0%     $17,044   100.0%
Cost of Sales                        26,380       66.9      20,999     62.8         13,304     66.3       10,556    61.9
----------------------------------------------------------------------------------------------------------------------------
Gross Profit                         13,071       33.1      12,432     37.2          6,756     33.7        6,488    38.1

Selling, general and
administrative expenses               5,285       13.4       4,093     12.2          2,690     13.4        2,048    12.0
Other                                   444        1.1         350      1.0            227      1.1          240     1.4
----------------------------------------------------------------------------------------------------------------------------
Income from operations               $7,342       18.6%    $ 7,989     23.9%        $3,839     19.1%     $ 4,200    24.6%
============================================================================================================================
</TABLE>


Six months ended June 30, 2003 compared to the Six months ended June 30, 2002


Net Sales: Net sales for the Six Months ended June 30, 2003 ("Six Months 2003")
increased by approximately $1.7 million, or 1.8%, from net sales for the Six
Months ended June 30, 2002 ("Six Months 2002"). This increase was the sum of the
approximately $4.3 million, or 6.9%, decline in the net sales of the EC business
and the approximately $6.0 million, or 18.0%, increase in net sales of the MEC
business.

The approximately $4.3 million decline in net sales of the EC business for the
Six Months 2003 as compared to the Six Months 2002 was driven by continuing soft
economic conditions, which impacted the three product lines of the EC business.
The Company's specialty electrical components group experienced a decline in net
sales for the Six Months 2003 of approximately $1.1 million or 4.4%, as both
industrial and recreational channels were soft compared to the Six Months 2002.
The Company's power conversion product line was down approximately $1.6 million,
or 5.6% for the Six Months 2003 as compared to the Six Months 2002 as its
construction and industrial end markets remain soft. The Company's utility
product line, which began to experience a decline in orders during the later
half of the year ended December 31, 2002, resulting from utilities reducing
spending on new and replacement infrastructure projects continued to experience
this trend as net sales for the Six Months 2003 were below the Six Months 2002
by approximately $1.6 million or 17.5%.


                                       13
<PAGE>

The approximately $6.0 million increase in net sales of the MEC business for the
Six Months 2003 as compared to the Six Months 2002 was driven by increased sales
of the flexible shaft and the turbocharger product lines. Net sales of the
flexible shaft product line increased by approximately $2.8 million, or 27.3%,
for the Six Months 2003 as compared to the Six Months 2002. This increase was
driven by new product introductions as well as the acquisition of the mechanical
components business of Arens Controls, LLC ("Arens Controls"). The Company
completed this acquisition on March 3, 2003 (See Liquidity and Capital
Resources), which increased net sales of the flexible shaft product line by
approximately $2.3 million for the Six Months 2003 as compared to the Six Months
2002. Net sales of the turbocharger components product line increased by
approximately $5.2 million, or 42.9%, for the Six Months 2003 as compared to the
Six Months 2002. This increase was driven primarily by a new product
introduction. The net sales of the lock product line declined by approximately
$2.0 million, or 17.7%, driven by continued softness in their end markets as
well as a fire, at its Massachusetts facility, which closed production for the
last week in May 2003 and impacted order fulfillment in June.

Gross Profit: Gross profit increased by approximately $401,000, or 1.1%, for Six
Months 2003 as compared to Six Months 2002, resulting from the sum of the
approximately $238,000, or 1.0%, decline in the gross profit of the EC business
and the approximately $639,000, or 5.1%, increase in gross profit of the MEC
business for the Six Months 2003.

The approximately $238,000, or 1.0% decline in gross profit of the EC business
for the Six Months 2003 as compared to the Six Months 2002 resulted primarily
from the loss of net sales during the Six Months 2003, mostly offset by changes
in product mix as well as productivity improvement flow-through which improved
gross margin for the Six Months 2003 as compared to the Six Months 2002.

The approximately $639,000, or 5.1%, increase in gross profit of the MEC
business for Six Months 2003 as compared to Six Months 2002 was driven by volume
increases of the flexible shaft and turbocharger components product lines offset
by the volume decline of the lock product line. In addition, the gross profit of
the flexible shaft product line did not grow in line with its net sales growth
as its results were negatively impacted by a change in the product mix sold as
compared to the Six Months 2002. Further, the acquisition of the mechanical
components product line of Arens Controls negatively impacted the gross margin
of the flexible shaft product line as the Company is currently working under an
interim operating agreement with the seller until that product line has been
fully integrated into the Company's Binghamton, New York facility, which is not
anticipated to occur until October 2003 (See Liquidity and Capital Resources).
While sales of the flexible shaft product line increased by approximately $2.8
million for the Six Months 2003 as compared to the Six Months 2002, gross profit
only increased by approximately $410,000. The increase in gross profit for the
Six Months 2003 as compared to the Six Months 2002 resulting from the
turbocharger components product line was approximately $1.7 million, or 39.7%.
The lock product line experienced a decline in gross profit of approximately
$1.5 million, or 42.2%, resulting from lower revenues as well as the impact of
the fire in May 2003.

The gross profit, as a percentage of net sales ("GP percentage"), for the EC
business increased by approximately 2.3% for the Six Months 2003 as compared to
the Six Months 2002. For the MEC business, the GP percentage declined by
approximately 4.1% during the Six Months 2003 as compared to the Six Months
2002. The change in GP percentage for the EC business is the result of a change
in product mix and the productivity gains as described above. The change in GP
percentage for the MEC business is primarily related to the impact of the
acquisition of the mechanical components product line of Arens Controls, as well
as the volume and margin decline of the lock product line, as described above.

Selling, General and Administrative Expenses: Selling, general and
administrative ("SG&A") expenses increased approximately $920,000, or 4.8%, for
the Six Months 2003 as compared to the Six Months 2002. As a percentage of net
sales, SG&A increased to 20.5% for the Six Months 2003 from 19.9% of net sales
for the Six Months 2002. SG&A of the EC business decreased by approximately
$66,000, or 0.5%, for the Six Months 2003 as compared to the Six Months 2002 and
as a percentage of net sales, increased approximately 1.4%. SG&A of the MEC
business increased by approximately $1.2 million, or 29.1%, for the Six Months
2003 as compared to the Six Months 2002 and increased as a percentage of net
sales by approximately 1.2%.


                                       14
<PAGE>

The increase in SG&A expenses for the Six Months 2003 as compared to the Six
Months 2002 is primarily related to the increase in SG&A of the MEC business.
The increase in SG&A of the MEC business is primarily the result of the Company
operating under an interim operating agreement relating to the acquisition of
the mechanical components product line of Arens Controls, which was completed on
March 3, 2003 (see Liquidity and Capital Resources). The Company will be
operating under the interim operating agreement with the seller until that
product line has been integrated into the Company's Binghamton, New York
facility, which is not expected to occur until October 2003. In addition, higher
compensation costs drove the increase in SG&A of the turbocharger product line,
as a result of the growth in the operating performance of that product line
during the Six Months 2003 as compared to the Six Months 2002, as well as
additional staffing requirements related to getting its new operation in China
ready to start production. The lock product line had an increase in SG&A
resulting from the increased costs of operating its Mexico production facility
as compared to the Six Months 2002. Commission and freight expense related to a
change in product sales mix drove the increase in SG&A for the EC business for
the Six Months 2003 as compared to the Six Months 2002. Higher insurance costs
for the Six Months 2003 as compared to the Six Months 2002 also impacted the
SG&A of the businesses.

Other Expenses: Other expenses increased by approximately $94,000 for the Six
Months 2003 as compared to the Six Months 2002. The increase is related to the
expenses incurred in moving manufacturing to the new lock production facility in
Mexico as well as start up expenses related to establishing a production
facility in China.

Income from Operations: The decline in income from operations of approximately
$613,000, or 3.8%, for the Six Months 2003 as compared to the Six Months 2002,
resulted from the increase in gross profit of approximately $401,000, offset by
the increases in SG&A expenses of approximately $920,000 and other expenses of
approximately $94,000.

Interest Expense: Interest expense decreased by approximately $494,000, or 7.3%,
during the Six Months 2003 as compared to the Six Months 2002. This decrease is
primarily due to lower levels of outstanding borrowings during the Six Months
2003 as compared to the Six Months 2002.

Provision for Income Taxes: The provision for income taxes decreased by
approximately $305,000, or 7.1%, for the Six Months 2003 as compared to the Six
Months 2002. The Company's effective tax rate on income before provision for
income taxes and cumulative effect of change in accounting principle for the Six
Months 2003 was approximately 43.0%. The effective rate on income before
provision for income taxes and cumulative effect of change in accounting
principle for the Six Months 2002 was approximately 45.7%. The decline in the
effective rate from the Six Months 2002 to the Six Months 2003 was primarily
driven by the Company's foreign tax credits.

Income before cumulative effect in change in accounting principle: Income before
cumulative effect in change in accounting principle increased by approximately
$186,000, or 3.7%, during the Six Months 2003 as compared to the Six Months
2002. The increase resulted from the decrease in income from operations of
approximately $613,000 offset by the declines in interest expense and provision
for taxes of approximately $494,000 and $305,000, respectively, due to the
factors discussed above.

Cumulative effect in Change of Accounting Principle: In July 2001, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations"
and SFAS No. 142, which were effective for fiscal years beginning after December
15, 2001. In June 2002, the Company completed the assessment of its reporting
units and its initial step one impairment test on January 1, 2002 financial
information. As a result, the Company identified one reporting unit in the MEC
business with a book value of goodwill that exceeded its fair market value,
which was estimated using valuation methodology involving discounted cash flows
and market and transactional multiples of the reporting units. In accordance
with SFAS 142, the Company estimated the amount of the impairment and recorded a
cumulative effect in change of accounting principle, as of January 1, 2002, of
approximately $7.8 million, net of taxes of approximately $3.4 million, to write
down the goodwill associated with the Company's lock product line resulting from
the current market conditions of that product line. The Company finalized its
impairment testing, as prescribed by SFAS 142, during the third quarter of 2002
to determine the amount of final impairment. As a result, the Company reduced
the tax impact of the charge by approximately $353,000 to reflect the proper
deferred tax basis of the adjusted goodwill.

Net Income (loss): Net income (loss) increased by approximately $8.3 million for
the Six Months 2003, from a net loss of approximately $3.1 million for the Six
Months 2002 to a net income of approximately $5.3 million for the Six Months
2003. Income before cumulative effect in change in accounting principle
increased by approximately $186,000, as described above. The remainder of the
approximately $8.2 million increase in net income for the Six Months 2003 as
compared to the Six Months 2002 resulted from the Company's cumulative effect in
change of accounting principle recorded during 2002.



                                       15
<PAGE>

Three months ended June 30, 2003 compared to the three months ended June 30,
2002

Net Sales: Net sales for the three months ended June 30, 2003 ("Quarter 2003")
declined by approximately $531,000, or 1.1%, from net sales for the three months
ended June 30, 2002 ("Quarter 2002"). This decline was the sum of the
approximately $3.5 million, or 10.8%, decline in the net sales of the EC
business and the approximately $3.0 million, or 17.7%, increase in net sales of
the MEC business.

The approximately $3.5 million decline in net sales of the EC business for the
Quarter 2003 as compared to the Quarter 2002 was driven by continuing soft
economic conditions, which impacted the three product lines of the EC business.
The Company's specialty electrical components group experienced a decline in net
sales for the Quarter 2003 of approximately $1.1 million or 8.4%, as both
industrial and recreational channels were soft compared to the Quarter 2002. The
Company's power conversion product line was down approximately $1.8 million, or
12.0% for the Quarter 2003 as compared to the Quarter 2002 as its construction
and industrial end markets remain soft. The Company's utility product line,
which began to experience a decline in orders during the later half of the year
ended December 31, 2002, resulting from utilities reducing spending on new and
replacement infrastructure projects, continued to experience this trend as net
sales for the Quarter 2003 were below the Quarter 2002 by approximately $693,000
or 14.0%.

The approximately $3.0 million increase in net sales of the MEC business for the
Quarter 2003 as compared to the Quarter 2002 was driven by increased sales of
the flexible shaft and the turbocharger product lines. Net sales of the flexible
shaft product line increased by approximately $1.6 million, or 30.4%, for the
Quarter 2003 as compared to the Quarter 2002. This increase was driven by new
product introductions as well as the acquisition of the mechanical components
business of Arens Controls. The Company completed this acquisition on March 3,
2003 (See Liquidity and Capital Resources), which increased net sales of the
flexible shaft product line by approximately $1.8 million for the Quarter 2003
as compared to the Quarter 2002. Net sales of the turbocharger components
product line increased by approximately $2.7 million, or 41.3%, for the Quarter
2003 as compared to the Quarter 2002. This increase was driven primarily by a
new product introduction. The net sales of the lock product line declined by
approximately $1.2 million or 22.7% resulting from continuing soft conditions in
its end markets as well as a fire at its Massachusetts manufacturing facility,
which closed production for the last week in May 2003 and impacted order
fulfillment in June.

Gross Profit: Gross profit declined by approximately $245,000, or 1.3%, for
Quarter 2003 as compared to Quarter 2002, resulting from the sum of the
approximately $513,000, or 4.2%, decline in the gross profit of the EC business
and the approximately $268,000, or 4.1%, increase in gross profit of the MEC
business for the Quarter 2003.

The approximately $513,000, or 4.2% decline in gross profit of the EC business
for the Quarter 2003 as compared to the Quarter 2002 resulted primarily from the
loss of net sales during the Quarter 2003, mostly offset by changes in product
mix as well as productivity improvement flow-through which improved gross margin
for the Quarter 2003 as compared to the Quarter 2002.

The approximately $268,000, or 4.1%, increase in gross profit of the MEC
business for Quarter 2003 as compared to Quarter 2002 was driven by volume
increases of the flexible shaft and turbocharger components product lines offset
by the volume decline of the lock product line. In addition, the gross profit of
the flexible shaft product line did not grow in line with its net sales growth
as its results were negatively impacted by a change in the product mix sold as
compared to the Quarter 2002. Further, the acquisition of the mechanical
components product line of Arens Controls negatively impacted the gross margin
of the flexible shaft product line as the Company is currently working under an
interim operating agreement with the seller until that product line has been
fully integrated into the Company's Binghamton, New York facility, which is not
anticipated to occur until October 2003 (See Liquidity and Capital Resources).
While sales of the flexible shaft product line increased by approximately $1.6
million for the Quarter 2003 as compared to the Quarter 2002, gross profit only
increased by approximately $301,000. The increase in gross profit for the
Quarter 2003 as compared to the Quarter 2002 resulting from the turbocharger
components product line was approximately $907,000, or 39.1%. The lock product
line experienced a decline in gross profit of approximately $800,000, or 48.9%,
resulting from lower revenues as well as the impact of the fire in May 2003.


                                       16
<PAGE>

The gross profit, as a percentage of net sales ("GP percentage"), for the EC
business increased by approximately 2.8% for the Quarter 2003 as compared to the
Quarter 2002. For the MEC business, the GP percentage declined by approximately
4.4% during the Quarter 2003 as compared to the Quarter 2002. The change in GP
percentage for the EC business is the result of a change in product mix and the
productivity gains as described above. The change in GP percentage for the MEC
business is primarily related to the impact of the acquisition of the mechanical
components product line of Arens Controls, as well as the volume and margin
decline of the lock product line, as described above.

Selling, General and Administrative Expenses: Selling, general and
administrative ("SG&A") expenses increased approximately $529,000, or 5.5%, for
the Quarter 2003 as compared to the Quarter 2002. As a percentage of net sales,
SG&A increased to 20.5% for the Quarter 2003 from 19.2% of net sales for the
Quarter 2002. SG&A of the EC business declined by approximately $199,000, or
3.0%, for the Quarter 2003 as compared to the Quarter 2002 and as a percentage
of net sales, increased approximately 1.8%. SG&A of the MEC business increased
by approximately $642,000, or 31.3%, for the Quarter 2003 as compared to the
Quarter 2002 and increased as a percentage of net sales by approximately 1.4%.

The increase in SG&A expenses for the Quarter 2003 as compared to the Quarter
2002 is primarily related to the increase in SG&A of the MEC business. The
increase in SG&A of the MEC business is primarily the result of the Company
operating under an interim operating agreement relating to the acquisition of
the mechanical components product line of Arens Controls, which was completed on
March 3, 2003 (see Liquidity and Capital Resources). The Company will be
operating under the interim operating agreement with the seller until that
product line has been integrated into the Company's Binghamton, New York
facility, which is not expected to occur until October 2003. In addition, higher
compensation costs drove the increase in SG&A of the turbocharger product line,
as a result of the growth in the operating performance of that product line
during the Quarter 2003 as compared to the Quarter 2002 as well as additional
staffing requirements related to getting its new operation in China ready to
start production. Commission and freight expense related to a change in product
sales mix drove the increase in SG&A as a percentage of sales for the EC
business for the Quarter 2003 as compared to the Quarter 2002. Higher insurance
costs for the Quarter 2003 as compared to the Quarter 2002 also impacted the
SG&A of the businesses.

Other Expenses: Other expenses declined by approximately $13,000 for the Quarter
2003 as compared to the Quarter 2002. The other expenses represent non-benefit
costs related to moving production to Mexico for the Company's lock product line
as well as administrative startup expenses related to commencing a production
facility in China.

Income from Operations: The decrease in income from operations of approximately
$761,000, or 8.5%, for the Quarter 2003 as compared to the Quarter 2002,
resulted from the sum of the decrease in gross profit of approximately $245,000,
the increase in SG&A expenses of approximately $529,000 and decline in other
expenses of approximately $13,000.

Interest Expense: Interest expense decreased by approximately $227,000, or 6.8%,
during the Quarter 2003 as compared to the Quarter 2002. This decrease is
primarily due to lower levels of outstanding borrowings during the Quarter 2003
as compared to the Quarter 2002.

Provision for Income Taxes: The provision for income taxes declined by
approximately $378,000, or 14.9%, for the Quarter 2003 as compared to the
Quarter 2002. The Company's effective tax rate on income before provision for
income taxes for the Quarter 2003 was approximately 42.9%. The effective rate on
income before provision for income taxes for the Quarter 2002 was approximately
45.6%. The decline in the effective rate from the Quarter 2002 to the Quarter
2003 was primarily driven by the Company's foreign tax credits.

Net Income: Net income decreased by approximately $156,000 for the Quarter 2003,
from approximately $3.0 million for the Quarter 2002 to approximately $2.9
million for the Quarter 2002. This decline was the sum of the decline in income
from operations of approximately $761,000, reduced by the declines in interest
expense and provision for income taxes of approximately $227,000 and $378,000,
respectively, as discussed above.



                                       17
<PAGE>
Liquidity and Capital Resources

The Company has historically generated funds from its operations and its working
capital requirements generally have not materially fluctuated from quarter to
quarter. The Company's other main sources of liquidity have historically been
the Company's $80.0 million of uncollateralized 10.5% senior notes due 2008 and
its outstanding credit facilities. The credit facility provides for a six-year
$40.0 million revolving credit facility, which as a result of the amendment
discussed below was reduced to $25.0 million through 2003, and a six-year $100.0
million term loan facility. The obligations under the credit agreement,
governing the credit facilities are guaranteed by the Company's subsidiaries and
KCI, is collateralized by all of the capital stock of the subsidiaries,
receivables, inventories, equipment and certain intangible property. There were
no amounts outstanding under the revolving credit facility at June 30, 2003. The
term loan is payable in quarterly installments through September 2006. Both the
term loan and revolving credit facility bear interest at fluctuating interest
rates determined by reference to a base rate or the London interbank offered
rate ("LIBOR") plus an applicable margin which will vary from 1.0% to 3.5% and
require the payment of a commitment fee of 0.5% on the unused portion of the
facility as well as quarterly commitment fees.

The credit facility also allows for up to $5.0 million of outstanding letters of
credit. At June 30, 2003, the Company had one letter of credit outstanding for
approximately $443,000. The letter of credit primarily relates to outstanding
workman's compensation claims.

The credit agreement contains certain covenants and restrictions, which require
the maintenance of financial ratios and restrict or limit dividends and other
shareholder distributions, transactions with affiliates, capital expenditures,
rental obligations and the incurrence of indebtedness.

In June 2002, the Company amended its credit agreement (the "Amendment") to
provide for revised financial covenant ratios from September 30, 2002 through
March 30, 2004 from the original covenant ratios stipulated in the credit
agreement. The Company anticipated that certain of the original covenants, which
became more stringent over the term of the agreement, would not be met due to
the general decline in the economy. In addition, the Amendment revised the
Company's applicable margin on borrowings, the maximum allowable capital
expenditures through March 29, 2004 and reduced the amount allowed for permitted
acquisitions (as defined in the credit agreement) from $15 million to $7.5
million through March 30, 2004. Concurrent with the Amendment, the Company
voluntarily reduced the availability under its revolving credit facility by $15
million from $40 million to $25 million until March 30, 2004. At June 30, 2003,
the Company was in compliance with the covenants of the credit agreement set
forth in the Amendment.

The Company's remaining liquidity demands will be for capital expenditures,
general corporate purposes, and principal and interest payments on its
outstanding debt. The Company's senior notes require semiannual interest
payments on the outstanding principal. The term loan requires quarterly
principal payments. At June 30, 2003, the Company had prepaid its next principal
payment. Principal payments required for the next 12 months will be
approximately $11.6 million. Under the revolving credit facility and term loan,
the Company has the option to lock in a specified interest rate by entering into
a contract, for different periods, which cannot exceed 180 days. As the
underlying contract comes up for renewal, the interest associated with the
contract becomes due. The Company's outstanding commitments for capital
expenditures at June 30, 2003 were not material. The Company anticipates its
capital expenditures for the year ended December 31, 2003 to be approximately
$3.5 million. The expenditures are primarily needed to maintain its facilities,
expand its production capacity for new product introduction as well as fund the
Company's ongoing plan to expand foreign operations in order to take advantage
of profitable market opportunities. To the extent cash flow from operations is
insufficient to cover the Company's capital expenditures, debt service and other
general requirements, the Company would seek to utilize its borrowing
availability under its existing revolving credit facility.

KCI has no operations and is dependent on KCLLC for financial resources in the
form of capital distributions to meet its obligations. KCI obligations include
the liquidation preferences of $107.0 million for its preferred stock plus any
dividends payable in arrears (at June 30, 2003 there were approximately $3.4
million in cumulative dividends in arrears, payable in kind), which are
redeemable for cash at the option of the holder after June 2, 2009, the
requirement to purchase shares from its common shareholders under certain
circumstances and its tax obligations. Repurchases of KCI Common Stock are made
at fair market value as defined in KCI's shareholder agreement. At June 30, 2003
approximately 1.3 million KCI common shares plus potentially 192,000 shares
covered by stock options were subject to repurchase by KCI. The ability of KCLLC
to make such capital distributions will be limited by its available resources
and is limited by restrictions of debt and other agreements. KCLLC reflects the
tax obligations of KCI in its tax provision.

                                       18
<PAGE>
Cash flows provided by operating activities were approximately $10.5 million and
$11.7 million for the Six Months 2003 and the Six Months 2002, respectively. The
net decrease of approximately $1.2 million for the Six Months 2003 resulted
primarily from the increase in use of cash by the operating assets of the
business. For the Six Months 2003, the Company's working capital accounts
(accounts receivable, inventory and accounts payable) used net cash of
approximately $2.5 million as compared to the Six Months 2002, when the working
capital accounts used net cash of approximately $582,000. The change in the cash
provided by the working capital accounts is primarily the result of servicing
the demand for new product introduction in certain product lines. In addition,
as a result of relocating production to Mexico, inventory levels of the
Company's lock product line slightly increased.

Cash flows used in investing activities were approximately $6.5 million and
$943,000 for the Six Months 2003 and Six Months 2002, respectively. Capital
expenditures for the Six Months 2003 and the Six Months 2002 were approximately
$2.0 million and $1.3 million, respectively. The increase in capital
expenditures from the Six Months 2002 to the Six Months 2003 was primarily
related to new tooling and machinery to service demand related to new product
introduction, add facility capacity for the product line acquisition of Arens
Controls and expand foreign manufacturing operations. Proceeds from the assets
held for sale was approximately $364,000 for the Six Months 2002, which was
related to the sold electronics division of Acme Electric Corporation compared
to none for the Six Months 2003.

On March 3, 2003, the Company acquired the mechanical components business of
Arens Controls for a purchase price of approximately $4.5 million and assumed
liabilities of approximately $642,000. The Company recorded the estimated excess
purchase price over net assets acquired of approximately $2.0 million as
goodwill. The value ascribed to the estimated excess purchase price over net
assets acquired is preliminary and is subject to change. Other intangibles
acquired in the transaction were not material. The product line, which
manufactures push pull cable and related components, is being integrated into
the Company's Binghamton, New York manufacturing facility. The Company borrowed
$2.0 million on its revolving credit facility to partially finance this
acquisition. The product line acquired has historical annual revenues of
approximately $7.5 million.

Cash flows from financing activities used net cash of approximately $3.4 million
and $12.0 million during the Six Months 2003 and the Six Months 2002,
respectively. The net cash used by financing activities was driven primarily by
repayment of debt of approximately $5.3 million and $12.0 million during the Six
Months 2003 and the Six Months 2002, respectively. During the Six Months 2003,
the Company borrowed $2.0 million under the Company's revolver to partially
finance the acquisition of the mechanical components product line of Arens
Controls. During the Six Months 2003, KCLLC distributed approximately $100,000
to its member, KCI, in order for KCI to repurchase common stock from a
shareholder.

Management believes that the Company's cash flow from operations, together with
its borrowing availability under its existing credit facilities, will be
adequate to meet its anticipated capital requirements for the next twelve
months.

Critical Accounting Policies

Financial Reporting Release No. 60, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 of the consolidated financial statements, included
elsewhere in this Form 10-K, includes a summary of the significant accounting
policies and methods used in the preparation of the Company's consolidated
financial statements. The following is a brief discussion of the more
significant accounting policies and methods used by the Company.

      Revenue recognition: The Company recognizes revenue upon shipment of
      products to customers, when title passes and all risks and rewards of
      ownership have transferred. The Company considers revenue realized or
      realizable and earned when the product has been shipped, the sales price
      is fixed or determinable and collectibility is reasonably assured. The
      Company reduces revenue for estimated customer returns.

      Inventory: Inventories are stated at the lower of cost or market, on a
      first-in, first-out basis. The Company purchases materials for the
      manufacture of inventory for sale in its various markets. The decision to
      purchase a set quantity of a particular inventory item is influenced by
      several factors including current and projected cost, future estimated
      availability and existing and projected sales to produce certain items.
      The Company evaluates the net realizable value of its inventories and
      establishes allowances to reduce the carrying amount of these inventories
      as deemed necessary.

                                       19
<PAGE>
      Goodwill and other intangible assets: At June 30, 2003, the Company has
      recorded approximately $97.6 million in goodwill and other intangible
      assets related to acquisitions made in 2003 and prior years. The
      recoverability of these assets is subject to an impairment test based on
      the estimated fair value of the underlying businesses. These estimated
      fair values are determined using a valuation methodology that triangulates
      the discounted cash flows, market multiples and transactional multiples of
      the reporting units. Factors affecting these future cash flows include:
      the continued market acceptance of the products and services offered by
      the businesses; the development of new products and services by the
      businesses and the underlying cost of development; the future cost
      structure of the businesses; and future technological changes.

      Pension Plans: The Company's assets and liabilities recorded in connection
      with the Company's pension plans using estimates that include but are not
      limited to expected return on assets and life expectancy of participants.
      In preparation of the consolidated financial statements the Company
      reviews these estimates by reviewing current market conditions and
      internal information at its disposal.

Management's Estimates

The Company's discussion and analysis of its financial condition and results of
operations are based on the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to product returns, bad debts,
inventories, intangible assets, pensions and post retirement benefits, warranty
obligations and contingencies and litigation. The Company bases its estimates on
historical experience, the use of external resources and various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

Significant estimates used by the Company that are subject to change include,
but are not limited to the following:

         (i)      The Company's allowance for doubtful accounts for estimated
                  losses resulting from the inability of its customers to make
                  required payments for their open accounts receivable with the
                  Company; if the financial condition of the Company's customers
                  were to deteriorate, resulting in an impairment of their
                  ability to make payments, additional allowances could be
                  required;

         (ii)     Allowances established against its inventory carrying value to
                  record its inventories at net realizable value; if actual
                  market conditions are less favorable than those projected by
                  management, additional inventory allowances may be required;

         (iii)    The Company records as necessary, valuation allowances against
                  its deferred tax assets; if the Company were to determine that
                  it would not be able to realize its deferred tax assets in the
                  future, additional valuation allowances could be required;

         (iv)     The Company evaluates the carrying amounts of its long-lived
                  assets for recoverability; if the Company were to determine
                  that the value ascribed to any of its long-lived assets was
                  not recoverable an allowance could be required;

         (v)      The Company records the effects of its existing pension plans
                  in its financial statements using various assumptions and the
                  use of independent actuaries; if any of the underlying
                  assumptions were to change, the carrying value of the pension
                  assets and obligations may require adjustment; and,

         (vi)     The Company's financial covenants, as defined in its credit
                  facilities, were based, in part, by estimates of future
                  results of the Company's operations; if actual results were
                  not to meet those expectations, the Company may not meet its
                  financial covenants and may be required to obtain waivers for
                  those covenants.

Inflation

Inflation has not been material to the Company's operations for the periods
presented.
                                       20
<PAGE>


Backlog

The Company's backlog of orders as of June 30, 2003, was approximately $23.7
million. The Company includes in its backlog only accepted purchase orders.
However, backlog is not necessarily indicative of future sales. In addition,
purchase orders can generally be cancelled at any time without penalty.

New Accounting Pronouncements
In July 2002, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement sets forth various
modifications to existing accounting guidance which prescribes the conditions
which must be met in order for costs associated with contract terminations,
facility consolidations, employee relocations and terminations to be accrued and
recorded as liabilities in financial statements. This statement is effective for
exit or disposal activities initiated after December 31, 2002. The adoption of
the SFAS did not have a material effect on the Company's consolidated results of
operations and financial position.

In November 2002, the FASB released Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." This Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees it has issued. The Interpretation also
clarifies that a guarantor is required to recognize, at the inception of a
guarantee for guarantees issued or modified after December 31, 2002, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
Company's adoption of the interpretation and valuation of future guarantees had
no material impact on the Company's consolidated results of operations and
financial position.

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS 148 amends SFAS No.123 "Accounting for Stock-Based Compensation," to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation prescribed by SFAS 123. SFAS 148 also amends the disclosure
provisions of SFAS 123 to require disclosure in both annual and interim
financial statements about the effects on reported net income of an entity's
accounting policy decisions with respect to stock-based employee compensation.
The amendment relating to the additional disclosure requirements in the interim
financial statements are effective for interim periods beginning after December
15, 2002. The adoption of SFAS 148 did not have a material impact on the
operations or cash flows of the Company. However, additional disclosures have
been incorporated into the Company's interim consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This Statement is effective for contracts entered into or modified
after June 30, 2003, except as defined in the SFAS. The adoption of this SFAS is
not expected to have a material impact on the consolidated operations or
financial condition of the Company.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.". This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were classified as equity. SFAS 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of this SFAS is not expected to have a material impact on the
consolidated operations or financial condition of the Company.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." FIN 46 requires variable interest entities be
consolidated by their primary beneficiaries. A primary beneficiary is the party
that absorbs a majority of the entity's expected losses or residual benefits.
FIN 46 applies immediately to variable interest entities created after January
31, 2003 and to existing variable interest entities in the periods beginning
after June 15, 2003. The adoption of this FIN is not expected to have a material
impact on the consolidated operations or financial condition of the Company.



                                       21
<PAGE>

Forward-Looking Statements
This report contains forward-looking statements based on current expectations
that involve a number of risks and uncertainties. Generally, forward-looking
statements include words or phrases such as "management anticipates," "the
Company believes," "the Company anticipates," and words and phrases of similar
impact, and include but are not limited to statements regarding future
operations and business environment. The forward-looking statements are made
pursuant to safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. The factors that could cause actual results to differ materially
from the forward-looking statements include the following: (i) industry
conditions and competition, (ii) operational risks and insurance, (iii)
environmental liabilities which may arise in the future and not covered by
insurance or indemnity, (iv) the impact of current and future laws and
government regulations, and (v) the risks described from time to time in the
Company's reports to the Securities and Exchange Commission.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company's primary exposure to market risk is related to the variability in
interest rates associated with the $59.7 million outstanding under its term loan
and with any amounts outstanding under its $25 million revolving credit
facility. Under both the term loan and the revolving credit facility, the
Company has the option to lock in a certain interest rate based on either the
base rate, which is equivalent to prime, or LIBOR plus an applicable margin
specified in the agreement. Principally all of the borrowings under the term
loan are locked in at approximately 4.18% until August 27, 2003, when the
underlying LIBOR contract is up for renewal. At June 30, 2003, the Company had
no amounts outstanding under its line of credit and was one payment ahead of
schedule on its term debt. A 1% change in the interest rate for the Company's
credit facilities in place at December 31, 2002 would have resulted in a change
in the Company's annual interest expense of approximately $736,000. The senior
notes bear a fixed rate of interest and therefore are not subject to market
risk. The Company does not hold derivative financial instruments or believe that
material imbedded derivatives exist within its contracts.

As the Company has operations outside the United States of America, it is
subject to foreign currency exchange risk. To date those risks have not had a
material impact on the Company's results of operations or financial position.

Item 4. Controls and Procedures

The management of KCLLC carried out an evaluation, with the participation of its
Chief Executive Officer and Chief Financial Officer, of the effectiveness of its
disclosure controls and procedures as of June 30, 2003. Based upon that
evaluation, KCLLC's Chief Executive Officer and Chief Financial Officer
concluded that KCLLC's disclosure controls and procedures were effective to
ensure that information required to be disclosed by KCLLC in reports that it
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the Securities and Exchange Commission.

There has not been any change in KCLLC's internal control over financial
reporting in connection with the evaluation required by Rule 15d-15(d) under the
Exchange Act that occurred during the quarter ended June 30, 2003 that has
materially affected, or is reasonably likely to materially affect, KCLLC's
internal control over financial reporting.

The management of Key Components Finance Corp. ("Finance Corp.") carried out an
evaluation, with the participation of its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of its disclosure controls and
procedures as of June 30, 2003. Based upon that evaluation, Finance Corp.'s
Chief Executive Officer and Chief Financial Officer concluded that Finance
Corp.'s disclosure controls and procedures were effective to ensure that
information required to be disclosed by Finance Corp. in reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the Securities and Exchange Commission.



                                       22
<PAGE>

There has not been any change in Finance Corp.'s internal control over financial
reporting in connection with the evaluation required by Rule 15d-15(d) under the
Exchange Act that occurred during the quarter ended June 30, 2003 that has
materially affected, or is reasonably likely to materially affect, Finance
Corp.'s internal control over financial reporting.

Part II - Other Information

Item 6 -- Exhibits and Reports on Form 8-K

              (a) Exhibits

       Exhibit Number   Exhibit Description
       --------------   -------------------

            31.1        Rule 13a-14(a)/15d-14(a) Certifications of KCLLC
            31.2        Rule 13a-14(a)/15d-14(a) Certifications of Finance Corp.

            32          Section 1350 Certifications of KCLLC and Finance Corp.


         (b) Reports on Form 8-K

        During the quarter ended June 30, 2003, KCLLC and Finance Corp. filed or
furnished the following current reports on Form 8-K with the Securities and
Exchange Commission:

        Current report on Form 8-K, dated May 14, 2003, was furnished on May 15,
2003. The items reported were:

o        Item 7 - Financial Statements and Exhibits, which identified the
         exhibit furnished with the Form 8-K; and

o        Item 9 - Regulation FD Disclosure, which reported the issuance of a
         press release announcing KCLLC's financial results for the quarter
         ended March 31, 2003.

        Current report on Form 8-K, dated May 14, 2003, was furnished on May 15,
2003. The item reported was:

o        Item 9 - Regulation FD Disclosure, which furnished the Section 906
         certification that accompanied KCLLC's and Finance Corp.'s quarterly
         report on Form 10-Q for the quarter ended March 31, 2003.


                                       23
<PAGE>

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                              KEY COMPONENTS, LLC
                                     ------------------------------------------

Date: August 14, 2003                By: /s/Clay B. Lifflander
                                        ----------------------
                                           Clay B. Lifflander
                                           Chief Executive Officer


Date: August 14, 2003                By:  /s/ Robert B. Kay
                                        --------------------
                                           Robert B. Kay
                                           President


Date: August 14, 2003                By: /s/Keith A. McGowan
                                        --------------------
                                           Keith A. McGowan
                                           Chief Financial Officer


                                   Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                            KEY COMPONENTS FINANCE CORP.
                                     ------------------------------------------


Date: August 14, 2003                By: /s/ Clay B. Lifflander
                                        -----------------------
                                           Clay B. Lifflander
                                           Chief Executive Officer


Date: August 14, 2003                By:  /s/ Robert B. Kay
                                        --------------------
                                           Robert B. Kay
                                           President

Date: August 14, 2003                By: /s/ Keith A. McGowan
                                        ---------------------
                                           Keith A. McGowan
                                           Chief Financial Officer



                                       24