8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 12, 2006

United Components, Inc.

(Exact name of registrant as specified in its chapter)

Delaware	333-107219	04-3759857
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

14601 Highway 41 North
Evansville, Indiana 47725
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (812) 867-4156

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure*

United Components, Inc. (the “Company”) is furnishing certain financial information regarding its parent company, UCI Holdco, Inc. (“UCI Holdco”) that it believes will be useful to investors. Because all of UCI Holdco’s operations are conducted through the Company and its subsidiaries, the financial information for UCI Holdco is substantially the same as that of the Company. The information regarding UCI Holdco is included in Exhibits 99.1, 99.2, 99.3 and 99.4 hereto and is incorporated by reference herein. The Company is furnishing the information in this Current Report on Form 8-K and in the exhibits hereto to comply with Regulation FD.

Cautionary Statement Regarding Forward Looking Statements

      This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and should be evaluated as such. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “should” or “will” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about (1) general market conditions, competition and pricing; and (2) our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this Item 7.01 and Exhibits 99.1, 99.2, 99.3 and 99.4 are forward-looking statements.

      We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this Item 7.01 and Exhibits 99.1, 99.2, 99.3 and 99.4 may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

•  our relationship with AutoZone;

•  expansive return policies or practices such as extended payment terms or pay-on-scan programs;

•  our ability to implement lean manufacturing and integrate our water pump operations with ASC and implement other cost saving plans;

•  our failure to achieve our estimated cost savings related to the ASC Acquisition;

•  our ability to recruit and retain the highly-skilled employees we need to remain competitive;

•  work stoppages at our or our customers’ facilities;

•  increasing pricing pressures from import activity, particularly from China;

•  risks related to the automotive business;

•  increased crude oil and energy prices;

•  risks related to our acquisition strategy;

•  environmental compliance costs and liabilities;

•  potential product liability claims;

•  increases in the cost of our raw materials or the loss of one or more of our suppliers;

•  competition in our markets;

•  our ability to meet our future capital requirements;

•  the introduction of new and improved products and services;

•  risks associated with changing manufacturing techniques;

•  risks related to the international markets we operate in; and

•  the misappropriation of our intellectual property or suits against us for infringement.

      Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

Basis of Presentation

      The historical consolidated financial statements included herein are of UCI Holdco, Inc. and its subsidiaries. On June 30, 2006, we sold our driveline components operation (“Neapco”) and our specialty distribution operation (“Pioneer”). In the historical financial statements included herein, the results of Neapco and Pioneer have been reflected as discontinued operations, and except as otherwise indicated are not reflected in Exhibits 99.1, 99.2, 99.3 and 99.4.

      We completed the acquisition of ASC Industries, Inc. and its subsidiaries on May 25, 2006 (the “ASC Acquisition Date”). In connection with the ASC Acquisition, our subsidiary, United Components, Inc., amended and restated its credit agreement to provide for a total of up to $405.0 million in available credit facilities. We refer to our acquisition of ASC, together with the related financing, as the “ASC Acquisition.”

      On November 30, 2006, we completed the sale of our lighting systems operation (“Flexible Lamps”), which we refer to as the “Flexible Lamps Sale.”

      We intend to use the net proceeds from an assumed issuance of Senior Floating Rate PIK Notes (the “notes”) in December 2006, together with cash on hand, to pay a special dividend to our stockholders in the amount of $260.0 million. The portion of the special dividend to be paid from cash on hand is subject to the completion of an amendment to the senior credit facilities of United Components, Inc. We refer to the issuance of the notes and the payment of the dividend collectively herein as the “Transactions.”

      Except as otherwise indicated herein or required by the context, the financial information identified herein as “pro forma:”

•  in the case of the unaudited pro forma condensed combined income statements for the year ended December 31, 2005 and for the twelve months ended September 30, 2006 (“LTM”), reflect adjustments to our historical consolidated income statements for such periods to give effect to:

°	the consummation of the Transactions;
°	the ASC Acquisition; and
°	the Flexible Lamps Sale,
as if such transactions had occurred at the beginning of such period; except the unaudited pro forma condensed combined income statement for the twelve months ended September 30, 2006 does not include the results of ASC for the three months ended December 31, 2005. Calculations of our pro forma net sales by sales channel and product line for the LTM period include management’s estimate of ASC’s net sales for such period.

•  in the case of the unaudited pro forma condensed combined balance sheet data as of December 31, 2005, reflect adjustments to our historical consolidated balance sheets as of such date to give effect to:

°	the consummation of the Transactions;
°	the ASC Acquisition;
°	the sales of Neapco and Pioneer; and
°	the Flexible Lamps Sale,
as if such transactions had occurred on such date; and

•  in the case of the unaudited pro forma condensed combined balance sheet data as of September 30, 2006, reflect adjustments to our historical consolidated balance sheets as of such date to give effect to:

°	the consummation of the Transactions; and
°	the Flexible Lamps Sale,
as if such transactions had occurred on such date.

      The pro forma financial information contained herein is based on certain assumptions and adjustments and does not purport to reflect what our actual results of operations would have been had these transactions occurred as of or on such dates, nor are they necessarily indicative of the results of operations that we may achieve in the future. For additional information, you should refer to Exhibits 99.2, 99.3 and 99.4.

      Unless the context otherwise requires, references herein to “we,” “us,” “our” and “Company” refer to UCI Holdco, Inc., together with its subsidiaries; references to “UCI Holdco” or the “issuer” refer only to UCI Holdco, Inc., the issuer of the notes by; references to “UCI” refer to United Components, Inc., together with its subsidiaries; and references to “UCI Acquisition” refer to UCI Acquisition Holdings, Inc., a wholly owned subsidiary of UCI Holdco and the parent company of UCI.

Item 9.01. Exhibits*

(c) Exhibits.

Exhibit No.	Description
99.1	Unaudited Pro Forma Condensed Combined Financial Information
99.2	Managements Discussion and Analysis of Results of Operations and Financial Condition
99.3	Consolidated Financial Statements as of December 31, 2005 and for each of the years in the 2 year period ended December 31, 2005
99.4	Other Data

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 hereunto duly authorized this 12^th day of December, 2006.

UNITED COMPONENTS, INC.
By:	/s/ Charles T. Dickson
Name:	Charles T. Dickson
Title:	Chief Financial Officer

EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

      The following unaudited pro forma condensed combined financial information has been derived by applying pro forma adjustments to the historical audited and unaudited financial statements of UCI Holdco, Inc. (“UCI Holdco”). We derived the unaudited pro forma condensed combined income statement data for the twelve months ended September 30, 2006 by (i) adding the income statement data from our audited historical consolidated financial statements for the fiscal year ended December 31, 2005 to the income statement data from our unaudited condensed consolidated financial statements for the nine months ended September 30, 2006 and subtracting the income statement data from our unaudited condensed consolidated income statement for the nine months ended September 30, 2005, and (ii) giving pro forma effect to (a) the assumed issuance of the notes we intend to issue on December 19, 2006 (the “notes”), and (b) the payment of a dividend to our stockholders in December of 2006 with the net proceeds from the notes and cash on hand (together, the “Transactions”), (c) the acquisition of ASC Industries, Inc. (“ASC”) and the related financing in May 2006 (the “ASC Acquisition”) and (d) our disposition of Flexible Lamps Ltd., in December 2006 (the “Flexible Lamps Sale”) as if they had occurred on January 1, 2005. Note, however, that the unaudited pro forma condensed combined income statement for the twelve months ended September 30, 2006 does not include the pro forma results of ASC for the three months ended December 31, 2005.

      The unaudited pro forma condensed combined balance sheet at September 30, 2006 gives effect to the following as if they had occurred on September 30, 2006:

•  the Flexible Lamps Sale;

•  the issuance of the notes; and

•  the December 2006 payment of a $260.0 million cash dividend to UCI Holdco’s common stockholders.

The effects of the ASC Acquisition are reflected in UCI Holdco’s historical consolidated balance sheet as of September 30, 2006.

      The unaudited pro forma condensed combined balance sheet at December 31, 2005 gives effect to the following as if they had occurred on December 31, 2005:

•  the ASC Acquisition;

•  the sales of the driveline components operation (“Neapco”) and the specialty distribution operation (“Pioneer”) and the related repayment of debt;

•  the Flexible Lamps Sale;

•  the issuance of the notes; and

•  the December 2006 payment of a $260.0 million cash dividend to UCI Holdco’s common stockholders.

      The unaudited pro forma condensed combined income statements for the twelve months ended September 30, 2006 and for the year ended December 31, 2005 give effect to the following as if they had occurred on January 1, 2005:

•  the Flexible Lamps Sale;

•  the issuance of the notes; and

•  the ASC Acquisition.

      The pro forma adjustments and their underlying assumptions are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.

      The pro forma adjustments presented are based on available information and assumptions that we believe are reasonable under the circumstances and are subject to revision as additional information becomes available. The actual adjustments to our historical financial statements upon the closing of the Transactions will depend on a number of factors, including additional information available on the closing date of the Transactions. Therefore, the actual adjustments will differ from the pro forma adjustments, and the differences

may be material. The unaudited pro forma condensed combined financial information is presented for informational purposes only. The unaudited pro forma condensed combined financial information does not purport to represent what our results of operations or financial condition would have been had (i) the Transactions, (ii) the sales of the driveline components operation and the specialty distribution operation and the related repayment of debt, (iii) the ASC Acquisition, and (iv) the Flexible Lamps Sale actually occurred on the dates indicated and does not purport to project our results of operations or financial condition for any future period or as of any future date. The unaudited pro forma condensed combined financial information should be read in conjunction with Exhibits 99.2 and 99.3 to this Form 8-K.

      Regarding the ASC Acquisition, the pro forma adjustments give effect to (i) the preliminary allocation of the ASC Acquisition purchase price, (ii) the related financing and (iii) the changes to the capital structure of ASC. The information included herein has been prepared based on a preliminary allocation of the preliminary ASC Acquisition purchase price. This preliminary allocation was based on preliminary estimates of the fair value of the assets acquired and liabilities assumed. The purchase price allocation is subject to change until all pertinent information regarding the ASC Acquisition and the assets and liabilities of ASC are obtained and fully evaluated. Additional pertinent information that we are in the process of obtaining includes, but is not limited to, internal and independent consultant evaluations of environment-related risks and independent third-party appraisals of property, plant and equipment and intangible assets, other than goodwill. Finalization of the allocation of the ASC Acquisition purchase price could result in material changes to the unaudited pro forma condensed combined financial information presented herein. The allocation of the ASC Acquisition purchase price will be finalized within one year after the close of the ASC Acquisition (the “ASC Acquisition Date”). The ASC Acquisition is accounted for under the purchase method of accounting, and accordingly, the results of operations of ASC have been included in UCI Holdco’s results beginning on the date of the ASC Acquisition.

UCI Holdco, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

September 30, 2006

(in thousands)

							Pro Forma Adjustments
										Issuance						UCI
					UCI Holdco		Flexible			of the			Dividend			Holdco Pro
					Historical		Lamps Sale			Notes			Payment			Forma
ASSETS
Current assets
	Cash and cash equivalents				$	41,395	$	(2,236	)(a)	$	224,750	(e)	$	(260,000	)(g)	$	40,424	(1)
								36,515	(b)
	Accounts receivable, net					253,641		(16,310	)(a)		—			—			237,331
	Inventories, net					179,131		(6,272	)(a)		—			—			172,859
	Deferred tax assets					26,261		(231	)(c)		—			—			26,030
	Prepaid and other current assets					33,692		(794	)(a)		—			—			32,898
			Total current assets			534,120		10,672			224,750			(260,000	)		509,542
Property, plant and equipment, net						191,412		(25,925	)(a)		—			—			165,487
Goodwill						236,078		—			—			—			236,078
Other intangible assets, net						100,083		(2,400	)(a)		—			—			97,683
Deferred financing costs, net						5,887		—			7,900	(f)		—			13,787
Pension and other assets						13,676		—			—			—			13,676
Assets held for sale						4,477		—			—			—			4,477
		Total assets			$	1,085,733	$	(17,653	)	$	232,650		$	(260,000	)	$	1,040,730
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
	Accounts payable				$	97,335	$	(6,625	)(a)	$	—		$	—		$	90,710
	Short-term borrowings					10,516		—			—			—			10,516
	Current maturities of long-term debt					407		—			—			—			407
	Accrued expenses and other current liabilities					109,841		(5,994	)(a)		—			—			105,911
								2,064	(c)
			Total current liabilities			218,099		(10,555	)		—			—			207,544
Long-term debt, less current maturities						521,831		—			232,650	(d)		—			754,481	(1)
Pension and other postretirement liabilities						46,372		(12,754	)(a)		—			—			33,618
Deferred tax liabilities						12,590		4,546	(c)		—			—			17,136
Other long-term liabilities						6,616		—			—			—			6,616
			Total liabilities			805,508		(18,763	)		232,650			—			1,019,395
Shareholders’ equity						280,225		2,798	(c)		—			(260,000	)(g)		21,335
								(1,688	)(c)
				Total liabilities and shareholders’ equity	$	1,085,733	$	(17,653	)	$	232,650		$	(260,000	)	$	1,040,730

(1)  In October 2006, $30.4 million of debt was voluntarily repaid. As a result, our cash and cash equivalents at September 30, 2006 would have been $10.0 million and long-term debt, less current maturities, would have been $724.1 million. Cash is further adjusted by $1.0 million to reflect the net effect of the Transactions and the Flexible Lamps Sale.

See accompanying Notes to the September 30, 2006 Unaudited Pro Forma Condensed Combined Balance Sheet.

UCI Holdco, Inc.

Notes to the September 30, 2006

Unaudited Pro Forma Condensed Combined Balance Sheet

      The pro forma adjustments are presented below and are grouped by transaction.

Flexible Lamps Sale

      (a) Reflects the elimination of the Flexible Lamps assets and liabilities sold.

      (b) Reflects the receipt of $36.5 million of net proceeds from the Flexible Lamps Sale.

      (c) Reflects the recognition of the gain on the sale as follows:

	(in millions)
Net proceeds (reflected in (b) above)	$	36.5
Write-off net assets and liabilities sold (reflected in (a) above)		(28.6	)
Cash tax expense		(2.1	)
Non-cash tax expense related to the reversal of book/tax temporary differences		(4.7	)
Foreign currency gain		1.7
After-tax gain on sale	$	2.8

Issuance of the Notes

      (d) Reflects the incurrence of $232.7 million principal amount of debt, net of an assumed 1.0%, or $2.3 million, discount.

      (e) Reflects the receipt of the net cash proceeds from the sale of the notes:

	(in millions)
Principal amount	$	235.0
Assumed discount		(2.3	)
Estimated deferred financing costs		(7.9	)
	$	224.8

      (f) Reflects estimated deferred financing costs:

	(in millions)
Underwriting fee	$	(5.9	)
Other fees and expenses		(2.0	)
	$	(7.9	)

Payment of Dividend

      (g) Reflects the payment of the $260.0 million cash dividend payment.

UCI Holdco, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

December 31, 2005

(in thousands)

								Pro Forma Adjustments
											Sales of Neapco
											and Pioneer
			UCI Holdco		ASC			ASC			and Repayment			Flexible			Issuance of			Dividend			UCI Holdco
			Historical		Historical			Acquisition			of Debt			Lamps Sale			the Notes			Payment			Pro Forma
ASSETS
Current assets
	Cash and cash equivalents		$	26,182	$	1,552		$	113,000	(l)	$	36,312	(i)	$	(2,418	)(a)	$	224,750	(f)	$	(260,000	) (g)	$	20,455
									(3,636	)(m)		(34,625	)(k)		36,515	(b)
									(117,177	)(o)
	Accounts receivable, net			233,007		16,770			—			—			(12,333	)(a)		—			—			237,444
	Inventories, net			150,190		34,799			6,631	(p)		—			(4,248	)(a)		—			—			187,372
	Deferred tax assets			22,529		1,504			(1,399	)(p)		—			(12	)(c)		—			—			22,622
	Prepaid and other current assets			21,634		2,101			—			1,319	(i)		(1,043	)(a)		—			—			27,286
												3,275	(j)
	Assets of discontinued operations			63,863		—			—			(63,863	)(h)		—			—			—			—
		Total current assets		517,405		56,726			(2,581	)		(57,582	)		16,461			224,750			(260,000	)		495,179
Property, plant and equipment, net				180,647		23,509			3,200	(p)		—			(24,031	)(a)		—			—			183,325
Goodwill				166,559		9,331			47,246	(p)		—			—			—			—			223,136
Other intangible assets, net				87,197		20,276			7,969	(p)		—			(2,400	)(a)		—			—			113,042
Deferred financing costs, net				6,177		881			(881	)(p)		—			—			7,900	(e)		—			15,088
									1,011	(m)
Pension and other assets				12,904		840			—			—			—			—			—			13,744
Assets of discontinued operations				13,953		—			—			(13,953	)(h)		—			—			—			—
		Total assets	$	984,842	$	111,563		$	55,964		$	(71,535	)	$	(9,970	)	$	232,650		$	(260,000	)	$	1,043,514
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
	Accounts payable		$	94,613	$	17,171		$	—		$	—		$	(6,615	)(a)	$	—		$	—		$	105,169
	Short-term borrowings			261		32,453			(22,602	)(p)		—			—			—			—			10,112
	Current maturities of long-term debt			12		411			—			—			—			—			—			423
	Accrued expenses and other current liabilities			93,585		4,030			4,068	(p)		—			(197	)(a)		—			—			102,526
									(1,024	)(n)					2,064	(c)
	Liabilities of discontinued operations			17,778		—			—			(17,778	)(h)		—			—			—			—
		Total current liabilities		206,249		54,065			(19,558	)		(17,778	)		(4,748	)		—			—			218,230
Long-term debt, less current maturities				442,274		20,193			(19,184	)(p)		(34,625	)(k)		—			232,650	(d)		—			754,308
									113,000	(l)
Pension and other postretirement liabilities				49,623		—			—			—			(12,727	)(a)		—			—			36,896
Deferred tax liabilities				3,554		4,543			3,078	(p)		—			5,773	(c)		—			—			16,948
Other long-term liabilities				1,936		6,724			(2,033	)(p)		—			—			—			—			6,627
Put option obligation				—		26,000			(26,000	)(p)		—			—			—			—			—
Redeemable preferred stock				—		7,202			(7,202	)(p)		—			—			—			—			—
Liabilities of discontinued operations				860		—			—			(860	)(h)		—			—			—			—
		Total liabilities		704,496		118,727			42,101			(53,263	)		(11,702	)		232,650			—			1,033,009
Shareholders’ equity				280,346		(7,164	)		8,300	(o)		(18,272	)(j)		2,798	(c)		—			(260,000	)(g)		10,505
									(1,601	)(n)					(1,066	)(c)
									7,164	(p)
		Total liabilities and shareholders’ equity	$	984,842	$	111,563		$	55,964		$	(71,535	)	$	(9,970	)	$	232,650		$	(260,000	)	$	1,043,514

See accompanying Notes to the December 31, 2005 Unaudited Pro Forma Condensed Combined Balance Sheet.

UCI Holdco, Inc.

Notes to the December 31, 2005

Unaudited Pro Forma Condensed Combined Balance Sheet

      The pro forma adjustments are presented below and are grouped by transaction.

Flexible Lamps Sale

      (a) Reflects the elimination of the Flexible Lamps assets and liabilities sold.

      (b) Reflects the receipt of $36.5 million of net proceeds from the sale.

      (c) Reflects the recognition of the gain on the sale as follow:

	(In millions)
Net proceeds (reflected in (b) above)	$	36.5
Write-off of net assets and liabilities sold (reflected in (a) above)		(26.9	)
Cash tax expense		(2.1	)
Non-cash tax expense related to the reversal of book/tax temporary differences		(5.8	)
Foreign currency gain		1.1
After-tax gain on sale	$	2.8

Issuance of the Notes

      (d) Reflects the incurrence of $232.7 million principal amount of debt, net of an assumed 1%, or $2.3 million, discount.

      (e) Reflects estimated deferred financing costs:

	(In millions)
Underwriting fee	$	(5.9	)
Other fees and expenses		(2.0	)
	$	(7.9	)

      (f) Reflects the receipt of the net cash proceeds form the sale of the notes by:

	(In millions)
Principal amount	$	235.0
Assumed discount		(2.3	)
Estimated deferred financing costs		(7.9	)
	$	224.8

Payment of Dividend

      (g) Reflects the $260.0 million cash dividend payment.

Sales of Driveline Components Operation and Specialty Distribution Operation and Subsequent Repayment of Debt

      (h) Reflects the elimination of the driveline components operation and the specialty distribution operation assets and liabilities sold.

      (i) Reflects the receipt of proceeds from the sales of $36.3 million of cash and a $1.3 million receivable.

UCI Holdco, Inc.

Notes to the December 31, 2005

Unaudited Pro Forma Condensed Combined Balance Sheet — (Continued)

(j)  Reflects the $18.3 million after-tax loss on the sales and the recognition of the $3.3 million which is the combined effect of (i) income taxes receivable due to the loss and (ii) the difference between the December 31, 2005 amount of net assets of the operations sold and the June 30, 2006 amount of net assets actually sold when the sales and the $18.3 million after-tax loss actually occurred.

      (k) Reflects the $34.6 million repayment of debt.

Acquisition of ASC

      The following pro forma adjustments are based on management’s preliminary estimate of the ASC Acquisition purchase price and on management’s preliminary estimates of the fair values of the assets acquired and liabilities assumed. Finalization of the allocation of the ASC Acquisition purchase price could result in material changes to these pro forma adjustments.

(l)  Represents the net proceeds from borrowing $330.0 million under UCI’s senior credit agreement and repaying $217.0 million of outstanding borrowings under UCI’s previously existing credit agreement, as follows:

	(in millions)
Cash received from borrowings under the senior credit agreement	$	330.0
Repayment of debt outstanding under UCI’s previously existing credit agreement		(217.0	)
Net cash received (used to partially finance the ASC Acquisition)	$	113.0

(m)  Represents (i) the payment of $3.6 million of fees in connection with the senior credit agreement and (ii) the net change in UCI’s unamortized deferred financing fees resulting from the payment of these fees and the loss recognized to write off UCI’s unamortized deferred financing fees related to the extinguishment of UCI’s previously outstanding debt.

	(in millions)
Cash paid for fees related to the senior credit agreement	$	3.6
To recognize the write-off of UCI’s unamortized deferred financing fees related to the extinguishment of debt		(2.6	)
Net increase in UCI’s unamortized deferred financing fees	$	1.0

(n)  Represents the impact that the aforementioned loss related to the write-off of the unamortized deferred financing fees has on December 31, 2005 income taxes payable and retained earnings. It is calculated as follows:

	(in millions)
To recognize the write-off of UCI’s unamortized deferred financing fees related to the extinguishment of debt	$	2.6
Income taxes payable (receivable)		(1.0	)
Adjustment to retained earnings	$	1.6

UCI Holdco, Inc.

Notes to the December 31, 2005

Unaudited Pro Forma Condensed Combined Balance Sheet — (Continued)

(o)  Represents the cash payment portion and the rollover equity portion of the preliminary ASC Acquisition purchase price. The consideration is as follows:

	(in millions)
Cash paid	$	117.2
Rollover equity		8.3
	$	125.5

(p)  The following table reflects (i) the pro forma adjustments to record the difference between the preliminary estimated fair values and the December 31, 2005 historical amounts of ASC’s assets acquired and liabilities assumed and (ii) repayment of the redeemable preferred stock, put option, certain debt and other acquisition related obligations in connection with the ASC Acquisition.

      The following table does not include assets and assumed liabilities for which the estimated fair values equal the historical amounts.

				Preliminary
				Estimated Fair
				Value after
				Repayment of Put
				Option, Preferred
				Stock, Certain
				Debt, and Other
				Acquisition Related			Pro Forma
	ASC Historical			Obligations			Adjustments
	(in millions)
Inventories, net	$	34.8		$	41.4		$	6.6
Property, plant and equipment, net		23.5			26.7			3.2
Other intangible assets, net		9.3			17.3			8.0
Goodwill		20.2			67.5			47.3
Deferred financing costs, net		0.8			—			(0.8	)
Accrued expenses and other liabilities		(4.0	)		(8.1	)		(4.1	)
Debt repaid upon the closing of the ASC Acquisition		(53.1	)		(11.3	)		41.8
Put option obligation repaid upon the closing of the ASC Acquisition		(26.0	)		—			26.0
Redeemable preferred stock repaid upon the closing of the ASC Acquisition		(7.2	)		—			7.2
Other long-term liabilities		(6.7	)		(4.7	)		2.0
Deferred income tax liabilities, net		(3.0	)		(7.5	)		(4.5	)
Shareholders’ equity adjusted to eliminate ASC’s historical amounts		7.2			—			(7.2	)
							$	125.5

UCI Holdco, Inc.

Unaudited Pro Forma Condensed Combined Income Statement

Twelve Months Ended September 30, 2006 (1)

(in thousands)

			UCI Holdco						ASC
			Historical			UCI Holdco			Historical			Pro Forma Adjustments
			(Three			Historical			(January 1
			Months			(Nine Months			to May 25,			ASC Acquisition
			Ended			Ended			2006			(Nine Months Ended			Flexible Lamps Sale			Issuance of the Notes			UCI
			December 31,			September 30,			Acquisition			September 30,			(Twelve Months Ended			(Twelve Months Ended			Holdco
			2005)			2006)			Date)			2006) (1)			September 30, 2006)			September 30, 2006)			Pro Forma
Net sales			$	205,819		$	729,012		$	41,954		$	—		$	(60,592	)(a)	$	—		$	916,193
Cost of sales				176,743			584,216			34,711			(8,097	)(d)		(51,109	)(a)		—			735,978
													(486	)(e)
		Gross profit		29,076			144,796			7,243			8,583			(9,483	)		—			180,215
Operating expenses
	Selling and warehousing			14,727			47,826			1,172			—			(3,336	)(a)		—			60,389
	General and administrative			10,646			34,721			1,727			—			(4,262	)(a)		—			42,832
	Amortization of acquired intangible assets			1,116			4,773			1,272			(477	)(f)		(153	)(a)		—			6,531
	Costs of integration of water pump operations and resulting asset impairment losses			—			5,429			—			(5,429	)(i)		—			—			—
	Costs of closing facilities and consolidating operations			—			6,275			—			—			—			—			6,275
	Asset impairments and other costs			18,771			—			—			—			—			—			18,771
		Operating income		(16,184	)		45,772			3,072			14,489			(1,732	)		—			45,417
Other income (expense)
	Interest expense, net			(9,489	)		(31,935	)		(2,533	)		(903	)(g)		189	(a)		(34,877	)(b)		(79,548	)
	Write-off of deferred financing costs			—			(2,625	)		—			2,625	(c)		—			—			—
	Management fee expense			(500	)		(1,500	)		(140	)		140	(h)		—			—			(2,000	)
	Miscellaneous, net			(788	)		92			(234	)		(803	)(d)		4	(a)		—			(1,186	)
													(57	)(e)
													600	(h)
Income (loss) before income taxes				(26,961	)		9,804			165			16,091			(1,539	)		(34,877	)		(37,317	)
Income tax expense (benefit)				(8,662	)		5,347			(339	)		6,276	(j)		(1,848	)(a)		(12,934	)(b)		(12,160	)
		Net income (loss) from continuing operations	$	(18,299	)	$	4,457		$	504		$	9,815		$	309		$	(21,943	)	$	(25,157	)

(1)  The unaudited pro forma condensed combined income statement for the twelve months ended September 30, 2006 does not include the pro forma results of ASC for the three months ended December 31, 2005.

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Income Statement for the Twelve Months Ended September 30, 2006.

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Twelve Months Ended September 30, 2006

      The pro forma adjustments are presented below and are grouped by transaction.

Flexible Lamps Sale

      (a) Reflects the elimination of the results of operations of Flexible Lamps.

Issuance of the Notes

      (b) Reflects (i) the additional interest expense related to $235.0 million of new debt, (ii) the amortization net of an assumed 1.0%, or $2.3 million, discount over the life of the notes, and (iii) the amortization of the $7.9 million of deferred financing costs over the life of the notes.

      The additional interest expense related to the $235.0 million of debt is calculated at an assumed rate of three-month LIBOR of 5.39% plus an assumed spread of 7.0%. A 0.25% change in the rate would change interest expense by $0.6 million.

	(In millions)
Additional interest expense to reflect the additional debt outstanding	$	33.5
Increase in interest expense for the amortization of the debt discount		0.3
Increase in interest expense for the amortization of the deferred financing costs		1.1
	$	34.9
Related income tax benefit calculated based on a combined U.S. and State statutory tax rate (adjusted for those state tax jurisdictions where the interest expense is not expected to be deductible)	$	(12.9	)

ASC Acquisition

      Note that the notes presented below relate to the pro forma adjustments for the unaudited pro forma condensed combined income statement of UCI Holdco for the twelve months ended September 30, 2006. As discussed previously, the pro forma condensed combined income statement for the twelve months ended September 30, 2006 reflects ASC’s results only for the nine months ended September 30, 2006; accordingly, the pro forma adjustments relating to the acquisition of ASC and the related financing for the 2006 period appear below under the caption “Nine Months Ended September 30, 2006.”

      (c) Represents the elimination of the write-off in UCI’s historical 2006 income statement of the unamortized deferred financing costs related to the extinguishment of debt as if it had occurred in 2005.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Elimination of the 2006 write-off of UCI’s unamortized deferred financing costs related to the extinguishment of debt as if it had occurred on January 1, 2005	$	(2,625	)

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Twelve Months Ended September 30, 2006 — (Continued)

      (d) Represents the elimination of the increase in cost of sales in UCI’s historical 2006 income statement due to the sale of acquired inventory that was written up to fair value as if such sales had occurred in 2005. This non-cash charge will occur only one time within one year after the ASC Acquisition Date.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Elimination of the 2006 increase in cost of sales resulting from the sale of inventory written up to fair value to reflect such costs as if they had occurred in 2005	$	(8,097	)
Related effect on minority interest	$	803

      (e) Represents adjustment to depreciation expense to reflect the acquired fixed assets write-up to fair value offset by the related change in estimated useful lives, and the related effect on minority interest. The estimated depreciation expense is computed on a straight-line basis over the estimated useful lives of the fixed assets, which range from 16 to 34 years for buildings and from 2 to 15 years for machinery and equipment.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Elimination of ASC’s historical depreciation expense	$	(1,673	)
Estimated depreciation expense resulting from fair value adjustment and related change in estimated useful lives		1,187
	$	(486	)
Related effect on minority interest	$	57

      (f) Represents adjustment to amortization expense to reflect the amortization of the acquired intangible assets. Acquired intangible assets are primarily customer relations and trademarks. The estimated amortization expense is computed on an accelerated basis commensurate with the expected benefits received from such intangibles. The useful lives of these intangibles are estimated to range from 3 to 16 years.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Elimination of ASC’s historical amortization expense	$	(1,272	)
Estimated amortization expense resulting from acquired intangible assets		795
	$	(477	)

      (g) Represents adjustment to interest expense to reflect (i) the $113.0 million of additional debt outstanding, and (ii) the lower interest rate (0.25%) related to the amended and restated credit agreement of UCI, (iii) the net change in UCI’s interest expense resulting from the net change in unamortized deferred financing fees and the change in maturity date of the debt, (iv) the elimination of the one-time cost related to the

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Twelve Months Ended September 30, 2006 — (Continued)

amendment of UCI’s revolving credit facility in 2006, and (v) the repayment of certain ASC debt at the ASC Acquisition Date, including the related amortization of deferred financing costs and debt issue costs.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Additional interest expense to reflect the additional debt outstanding	$	4,045
Reduction of interest expense due to the lower interest rate		(271	)
Net change in interest expense resulting from the net change in deferred financing costs and maturity date of the debt		(402	)
Elimination of the one-time cost related to the amendment of UCI’s revolving credit facility		(217	)
Elimination of ASC’s interest expense reflected in historical amounts related to debt paid at the ASC Acquisition Date, including the related amortization of deferred financing costs and debt issue costs		(2,252	)
	$	903

      (h) Represents adjustment to other costs in ASC’s historical amounts that were affected by the ASC Acquisition.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Elimination of ASC’s management fees. Such fees will not be paid subsequent to the ASC Acquisition Date	$	(140	)
Elimination of ASC’s deal costs which are reflected in ASC’s historical amounts		(600	)

      (i) In the nine months ended September 30, 2006, UCI Holdco recorded $5.4 million of expenses for the cost of, and the related impairment from, integrating the ASC water pump operations with the water pump operations of UCI that existed before the ASC Acquisition. Pro forma adjustment “(i)” represents the elimination of the 2006 integration costs and the related impairment of assets to record these expenses as if they had occurred in 2005.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Elimination of the 2006 integration costs and the related impairment of assets and reflection of such costs as if they had occurred in 2005	$	(5,429	)

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Twelve Months Ended September 30, 2006 — (Continued)

      (j) Represents adjustment to income tax expense to reflect the aggregate pro forma income tax effect on the pro forma adjustments. Income tax expense is calculated based on a combined U.S. and State statutory tax rate. Goodwill is not expected to be deductible for income tax purposes.

	Pro Forma
	Adjustments
	Nine Months
	Ended
	September 30, 2006
	(In thousands)
Adjustment to income tax expense to reflect the income tax effect on the pro forma adjustments	$	6,276

UCI Holdco, Inc.

Unaudited Pro Forma Condensed Combined Income Statement

For the Year Ended December 31, 2005

(In thousands)

										Pro Forma Adjustments
				UCI															UCI
				Holdco			ASC						Flexible Lamps			Issuance of the			Holdco
				Historical			Historical			ASC Acquisition			Sale			Notes			Pro Forma
Net sales				$	873,426		$	98,258		$	—		$	(60,723	)(a)	$	—		$	910,961
Cost of sales					708,360			80,338			9,766	(e)		(50,706	)(a)		—			747,118
											(640	)(f)					—
		Gross profit			165,066			17,920			(9,126	)		(10,017	)		—			163,843
Operating expenses
Selling and warehousing					60,813			3,113			—			(3,547	)(a)		—			60,379
	General and administrative				41,761			4,712			(26	)(j)		(3,805	)(a)		—			42,642
	Amortization of acquired intangible assets				5,888			3,053			(1,192	)(g)		—			—			7,749
	Costs of integration of water pump operations and resulting asset impairment losses				—			—			5,429	(k)		—			—			5,429
	Asset impairments and other costs				21,530			—			—			—			—			21,530
		Operating income			35,074			7,042			(13,337	)		(2,665	)		—			26,114
Other income (expense)
Interest expense, net					(36,003	)		(6,689	)		(1,613	)(h)		(87	)(a)		(31,955	)(c)		(76,347	)
	Loss on extinguishment of debt				—			—			(2,625	)(d)		—			—			(2,625	)
	Accretion of put option obligation				—			(8,875	)		8,875	(i)		—			—			—
	Management fee expense				(2,000	)		(421	)		421	(j)		—			—			(2,000	)
	Miscellaneous, net				(1,139	)		(512	)		966	(e)		15	(a)		—			(554	)
											(134	)(f)
											250	(j)
(Loss) income before income taxes					(4,068	)		(9,455	)		(7,197	)		(2,737	)		(31,955	)		(55,412	)
Income tax expense (benefit)					1,678			(807	)		(5,714	)(l)		(1,167	)(a)		(11,852	)(c)		(17,862	)
			(Loss) income from continuing operations	$	(5,746	)	$	(8,648	)	$	(1,483	)	$	(1,570	)	$	(20,103	)	$	(37,550	)
Discontinued Operations
	Gain on sale of discontinued operations, net of tax												$	2,798	(b)				$	2,798

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Income Statement

for the Year Ended December 31, 2005.

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Year Ended December 31, 2005

      The pro forma adjustments are presented below and are grouped by transaction.

Flexible Lamps Sale

      (a) Reflects the elimination of the results of operations of Flexible Lamps.

      (b) Reflects the recognition of the $2.8 million after tax gain on the sale.

Issuance of the Notes

      (c) Reflects (i) the additional interest expense related to $235.0 million of new debt, (ii) the amortization of an assumed $2.3 million (1%) of debt discount over the life of the notes, and (iii) the amortization of the $7.9 million of deferred financing costs over the life of the notes.

      The additional interest expense related to the $235.0 million of debt is calculated at an assumed rate of three-month LIBOR of 5.39% plus an assumed spread of 7.0%. A 0.25% change in the rate would change interest expense by $0.6 million.

	(In millions)
Additional interest expense to reflect the additional debt outstanding	$	30.6
Increase in interest expense for the amortization of the debt discount		0.3
Increase in interest expense for the amortization of the deferred financing costs		1.1
	$	32.0
Related income tax benefit calculated based on a combined U.S. and State statutory tax rate (adjusted for those state tax jurisdictions where the interest expense is not expected to be deductible)	$	(11.9	)

ASC Acquisition

      (d) Represents adjustment for the 2006 write-off of unamortized deferred financing costs as if it had occurred in 2005.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Recognition of the 2006 write-off of UCI’s unamortized deferred financing costs related to the extinguishment of debt as if they had occurred on January 1, 2005	$	2,625

      (e) Represents adjustment for the recognition of the adverse effect of the higher costs due to the 2006 sale of acquired inventory that was written-up to fair value and the related effect on minority interest as if

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Year Ended December 31, 2005 — (Continued)

such sales of inventory had occurred in 2005. This non-cash charge will occur only one time within one year after the ASC Acquisition Date.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Recognition of the adverse effect of the 2006 sale of acquired inventory written up to fair value and reflection of such sale as if it had occurred in 2005	$	9,766
Related effect on minority interest	$	(966	)

      (f) Represents adjustment to depreciation expense to reflect the acquired fixed assets write-up to fair value offset by the related change in estimated useful lives, and the related effect on minority interest. The estimated depreciation expense is computed on a straight-line basis over the estimated useful lives of the fixed assets, which range from 16 to 34 years for buildings and from 2 to 15 years for machinery and equipment.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Elimination of ASC’s historical depreciation expense	$	$(3,488	)
Estimated depreciation expense resulting from fair value adjustment and related change in estimated useful lives		2,848
	$	(640	)
Related effect on minority interest	$	134

      (g) Represents adjustment to amortization expense to reflect the amortization of the acquired intangible assets. Acquired intangible assets are primarily customer relations and trademarks. The estimated amortization expense is computed on an accelerated basis commensurate with the expected benefits received from such intangibles. The useful lives of these intangibles are estimated to range from 3 to 16 years.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Elimination of ASC’s historical amortization expense	$	(3,053	)
Estimated amortization expense resulting from acquired intangible assets		1,861
	$	(1,192	)

      (h) Represents adjustment to interest expense to reflect (i) the $113.0 million of additional debt outstanding, and (ii) the lower interest rate (0.25%) related to the senior credit agreement, (iii) the net change in UCI’s interest expense resulting from the net change in unamortized deferred financing fees and the change in maturity date of the debt, (iv) the recognition of the one-time cost in 2006 related to the amendment of UCI’s revolving credit facility as if it had occurred in 2005 and (v) the repayment of certain

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Year Ended December 31, 2005 — (Continued)

ASC debt at the ASC Acquisition Date, including the related amortization of deferred financing costs and debt issue costs.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Additional interest expense to reflect the additional debt outstanding	$	7,876
Reduction of interest expense due to the lower interest rate		(543	)
Net change in interest expense resulting from the net change in deferred financing costs and maturity date of the debt		(186	)
One-time cost related to the amendment of UCI’s revolving credit facility		217
Elimination of ASC’s interest expense reflected in historical amounts related to debt paid at the ASC Acquisition Date, including the related amortization of deferred financing costs and debt issue costs		(5,751	)
	$	1,613

      (i) Represents adjustment to ASC’s historical amounts to eliminate the accretion of the put option obligation, which was paid at the ASC Acquisition Date.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Elimination of ASC’s accretion of the put option obligation reflected in historical amounts and paid at the ASC Acquisition Date	$	(8,875	)

      (j) Represents adjustment to other costs in ASC’s historical amounts that were affected by the ASC Acquisition.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Elimination of ASC’s stock compensation expense. All outstanding stock options became fully vested and were paid at the ASC Acquisition Date	$	(26	)
Elimination of ASC’s management fees. Such fees will not be paid subsequent to the ASC Acquisition Date		(421	)
Elimination of ASC’s deal costs which are reflected in ASC’s historical amounts		(250	)

      (k) In the nine months ended September 30, 2006, UCI Holdco recorded $5.4 million of expenses for the cost of, and the related impairment from, integrating the ASC water pump operations with the water

UCI Holdco, Inc.

Notes to the Unaudited Pro Forma Condensed Combined Income Statement

For the Year Ended December 31, 2005 — (Continued)

pump operations of UCI that existed before the ASC Acquisition. Pro forma adjustment “(k)” represents an adjustment to record these expenses as if they had occurred in 2005.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Recognition of the 2006 integration costs and the related impairment of assets and reflection of such costs as if they had occurred in 2005	$	5,429

      (l) Represents adjustment to income tax expense to reflect the aggregate pro forma income tax effect on the pro forma adjustments, (i) excluding the pro forma adjustment related to the accretion of the put option which is not deductible for income tax purposes, and (ii) including the income tax benefit related to ASC’s outstanding stock options, which became fully vested and were paid at the ASC Acquisition Date. Income tax expense is calculated based on a combined U.S. and State statutory tax rate. Goodwill is not expected to be deductible for income tax purposes.

	Pro Forma
	Adjustments
	Year Ended
	December 31, 2005
	(In thousands)
Adjustment to income tax expense to reflect the income tax effect on the pro forma adjustments	$	(5,714	)

EX-99.2

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The statements in the following discussion and analysis regarding industry outlook, our expectations regarding the performance of our business and the forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to risks and uncertainties Exhibits 99.1 and 99.3 of this Form 8-k. All references to years, unless otherwise noted, refer to our fiscal years, which end on December 31.

Overview

      We are a leading supplier to the vehicle replacement parts market, or the aftermarket, with top three market positions in each of our product lines. We supply a broad range of filtration, fuel, cooling and engine management products to the automotive, trucking, industrial, construction, agricultural, marine and mining vehicle markets. Over 80% of our pro forma LTM net sales were made to a diverse aftermarket customer base that includes some of the largest and fastest growing companies servicing the aftermarket.

      Sales. We have one of the most comprehensive product lines in the aftermarket, offering over 43,000 part numbers. We believe the breadth of our product offerings in each of our business lines, combined with our extensive global manufacturing, sourcing and distribution capabilities, product innovations, diverse customer base and reputation for quality and service, make us a leader in our industry.

      We design, develop, manufacture and distribute an extensive range of vehicle replacement parts across our four product lines:

• Filtration Products (Champion): oil, air, fuel, hydraulic, transmission, cabin air and industrial filters and PCV valves.

• Fuel Products (Airtex): fuel pump assemblies, electric fuel pumps, mechanical fuel pumps and fuel pump strainers.

• Cooling Products (ASC): water pumps and water outlets.

• Engine Management Products (Wells): caps and rotors, emission controls, sensors, ignition controls and coils.

We believe our product lines are well positioned in the aftermarket. Our filtration products have relatively short and predictable replacement cycles and our fuel, cooling and engine management products are non-discretionary replacement items, the need for which increases as cars reach the prime age (six years or more) for aftermarket maintenance.

      We believe that the majority of our sales tend to track the overall growth of the aftermarket. Sales in the automotive aftermarket (excluding tires) have grown at an average annual rate of approximately 4.5% from 2000 through 2005, with the lowest year of growth in 2004 of approximately 3.1%. In addition, AAIA reported that annual miles driven in the United States by all types of wheeled vehicles increased every year between 1985 and 2004, though annual miles driven decreased slightly in 2005 due to increased gas prices. We believe that the aftermarket will continue to grow as a result of increases in the average age of vehicles, average number of miles driven per year by passenger cars, number of vehicles registered in the United States and number of licensed drivers. Because we primarily supply the aftermarket, our sales do not correlate strongly with annual vehicle production.

      During 2005 and 2004, 20% and 22%, respectively, of our net total sales were derived from our business with AutoZone. This percentage is expected to increase by approximately two percentage points as a result of

the ASC Acquisition. Our failure to maintain this relationship with AutoZone stores would result in a significant decrease in our net sales. Even if we maintain our relationship, this sales concentration with one customer increases the potential impact to our business that could result from any changes in the economic terms of this relationship.

      Cost of Sales. Cost of sales includes all costs of manufacturing required to bring a product to a saleable condition. Such costs include direct and indirect materials (net of vendor consideration), direct and indirect labor costs (including pension, postretirement and other fringe benefits), supplies, utilities, freight, depreciation, insurance, information technology costs and other costs. Cost of sales also includes all costs to procure, package and ship products that we purchase and resell. The two largest components of our cost of sales are labor and steel.

      Since early 2004, global demand for steel has been high and has resulted in supplier-imposed price increases and/or surcharges for this raw material. While we have been, and expect to continue to be, able to obtain sufficient quantities to satisfy our needs, we have been required to pay significantly higher prices for the material. In 2005 and the beginning of 2006, the prices we paid for steel stabilized. However, the cost of certain types of steel we used increased again in the third quarter of 2006. It is uncertain whether this price increase trend will continue. We have implemented price increases on certain products with high steel content and are considering the implementation of additional price increases on these products. Existing price increases, as well as any future increases, have not been and may not be sufficient to offset all of the steel cost increases we have been forced to incur. The higher cost of steel, net of our product price increases, decreased pre-tax income of continuing operations by approximately $4.5 million in 2005 compared to 2004. The impact of higher steel costs, net of our product price increases, was approximately $0.5 million higher in the first three quarters of 2006 compared to the similar period of 2005. Due to the recent steel cost increases, for the full year 2006, the impact of steel costs, net of our product price increases, is forecasted to be comparable to 2005.

      Selling and Warehousing Expenses. Selling and warehousing expenses primarily include sales and marketing, warehousing and distribution costs. Our major cost elements include salaries and wages, pension and fringe benefits, depreciation, advertising and information technology costs.

      We intend to leverage the fixed portion of selling and warehousing as sales increase. Consequently, we think that selling and warehousing expense as a percentage of sales is a key measure.

      General and Administrative Expenses. General and administrative expenses primarily include executive, accounting and administrative personnel salaries and fringe benefits, professional fees, pension benefits, insurance, provision for doubtful accounts, rent and information technology costs.

Recent Events

Acquisition of ASC Industries, Inc.

      On May 25, 2006, we acquired ASC Industries, Inc. and its subsidiaries. The preliminary purchase price was $125.5 million. In addition, we assumed $12.0 million of ASC indebtedness and certain other obligations.

      We have agreed to pay to the former stockholders of ASC up to an aggregate amount of $4.0 million of additional purchase price, based upon the integration of certain operations within ASC and UCI. In the third quarter of 2006, we paid $2.0 million of the $4.0 million. This $2.0 million has been included in the $125.5 million purchase price. The remaining $2.0 million will be added to the final purchase price, if and when the remainder of the integration is completed.

      ASC is a manufacturer and distributor of water pumps, with 2005 revenue of $98.3 million.

      In connection with the ASC Acquisition, on May 25, 2006, UCI entered into a senior credit agreement. This senior credit agreement replaced UCI’s previously existing credit facility and provided for additional borrowing capacity of up to $113.0 million. UCI replaced the $217.0 million of outstanding debt under its previously existing credit facility with the new credit facility borrowings. In addition, $113.0 million was borrowed to finance a portion of the ASC Acquisition purchase price.

UCI Holdco Reorganization

      In connection with the ASC Acquisition, we were formed as a holding company for UCI Acquisition Holdings, Inc. and UCI. All of the shares of common stock of UCI Acquisition were exchanged for an equal number of shares of our common stock. As a result, we became the direct parent company of UCI Acquisition and the ultimate parent company of UCI and its subsidiaries.

Dispositions

Sale of Driveline Components and Specialty Distribution Operations.

      On June 30, 2006, we sold our driveline components operation and our specialty distribution operation. The driveline components operation manufactured and distributed products including universal joints, drive shafts, CV joints and boot kits, and small vehicle CV half shafts. The specialty distribution operation sold hard-to-find products in categories such as engine and transmission parts, power train components, engine mounts and shop supplies.

      These operations were sold to two separate buyers for a combined $37.6 million of cash, approximately $1.3 million of which is expected to be paid by the end of the first quarter of 2007. In June 2006, we recorded a combined after-tax loss of $18.3 million on these sales.

Sale of Lighting Systems Operation.

      On November 30, 2006, we sold our Flexible Lamps subsidiary. Flexible Lamps manufactures and distributes lighting systems for commercial vehicles. Its customers are primarily in the European market. Net sales in the nine months ended September 30, 2006 were $45.6 million and were $60.7 million in the year ended December 31, 2005.

      Flexible Lamps was sold for $36.5 million in cash, net of fees and expenses. The gain on the sale was approximately $2.8 million, net of $6.8 million of tax expense. Only $2.1 million of the tax will be paid in cash. The remaining $4.7 million is a non-cash charge from the reversal of book/tax temporary differences.

      The final sales price is subject to certain post-closing adjustments, including an increase or decrease dependent on finalization of net working capital. In addition, the sales price could increase by up to $2.3 million, depending on the amount of proceeds from the possible post-closing sale of a Flexible Lamps building. Also, if Flexible Lamps makes structural changes to its pension plan within 15 months from the date of closing, and if such changes result in a reduction in the actuarially determined deficit, the final sales price could increase by up to an additional $2.2 million. Any adjustment in the sales price will result in a commensurate adjustment to the pre-tax gain on the sale of Flexible Lamps.

Critical Accounting Policies and Estimates

      The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate, and different assumptions or estimates about the future could change our reported results.

      We believe the following accounting policies are the most critical in that they significantly affect our financial statements, and they require our most significant estimates and complex judgments.

      Inventory. We record inventory at the lower of cost or market. Cost is principally determined using standard cost, which approximates the first-in, first-out (FIFO) method. Estimated market value is based on assumptions for future demand and related pricing. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.

      Revenue recognition. We record sales when title transfers to the customer. Where we have sales rebate programs with some of our customers, we estimate amounts due under these sales rebate programs when the sales are recorded. Net sales relating to any particular shipment are based upon the amounts invoiced for the shipped goods less estimated future rebate payments. These estimates are based upon our historical experience. Revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

      Additionally, we enter into agreements with our customers that provide for sales discounts, marketing allowances, return allowances and performance incentives. Any discount, allowance or incentive is treated as a reduction to sales, based on estimates of the criteria that give rise to the discount, allowance or incentive, such as sales volume and marketing spending. We routinely review these criteria and our estimating process and make adjustments as facts and circumstances change. Historically, we have not found material differences between our estimates and actual results.

      In order to obtain exclusive contracts with certain customers, we may incur upfront cost or assume liabilities. These are capitalized and amortized over the life of the contract. The amortized amounts are recorded as a reduction of sales.

      Product returns. Credits for parts returned under warranty and parts returned because of customer excess quantities are estimated and recorded at the time of the related sales. These estimates are based on historical experience, current trends and other factors. Revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Our customers have the right, in varying degrees, to return excess quantities of product. Any significant increase in the amount of product returns above historical levels could have a material adverse effect on our financial results.

      In 2005, we recorded a change in our estimate of outstanding potential warranty returns. For a description of this estimate change, see “— Results of Operations — Year Ended December 31, 2005 Compared with Year Ended December 31, 2004.”

      Impairment of intangible assets and tangible fixed assets. Our goodwill and other intangible assets with indefinite lives are held at historical cost. Our other intangible assets with finite lives and tangible fixed assets are held at historical cost, net of amortization and depreciation. We periodically evaluate the realizability of our intangible assets. We also perform a review of these intangible assets and tangible fixed assets if an indicator of impairment, such as an operating loss or a significant adverse change in the business or market place exists. If we determine that the historical carrying value of any of these assets has been impaired, we record the amount of the impairment as a charge against income.

      Tests for impairment involve management’s estimates of future cash flows. Such estimates require numerous assumptions including, but not limited to, assumptions regarding future economic and market conditions, competition, customer relations, pricing, raw material costs, production costs, selling, general and administrative costs, and income and other taxes. These estimates require judgment and are, by their nature, subjective.

      Retirement benefits. Pension obligations are actuarially determined and are affected by assumptions including discount rate, life expectancy, annual compensation increases and the expected rate of return on plan assets. Changes in the discount rate, and differences between actual results and assumptions, will affect the amount of pension expense we recognize in future periods.

      Postretirement health obligations are actuarially determined and are based on assumptions including discount rate, life expectancy and health care cost trends. Changes in the discount rate, and differences between actual results and assumptions, will affect the amount of expense we recognize in future periods. A one percent increase or decrease in the assumed health care cost trends would result in a $45,000 annual increase and a $39,000 annual decrease in postretirement health costs, respectively.

      Insurance reserves. Our insurance for workers’ compensation, automobile, product and general liability include high deductibles for which we are responsible. Deductibles for which we are responsible are recorded in accrued expenses. Estimates of such losses involve substantial uncertainties including litigation trends, the

severity of reported claims, and incurred but not yet reported claims. External actuaries are used to assist us in estimating these losses.

      Environmental expenditures. Our expenditures for environmental matters fall into two categories. The first category is routine compliance with applicable laws and regulations related to the protection of the environment. The costs of such compliance are based on actual charges and do not require significant estimates.

      The second category of expenditures is for matters related to investigation and remediation of contaminated sites. The impact of this type of expenditure requires significant estimates by management. The estimated cost of the ultimate outcome of these matters is included as a liability in our balance sheet at September 30, 2006. This estimate is based on all currently available information, including input from outside legal and environmental professionals, and numerous assumptions. Management believes that the ultimate outcome of these matters will not exceed the $2.1 million accrued at September 30, 2006 by a material amount, if at all. However, because all investigation and site analysis has not yet been completed and because of the inherent uncertainty in such environmental matters, there can be no assurance that the ultimate outcome of these matters will not be significantly different than our estimates.

      Acquisition of ASC Industries, Inc. On May 25, 2006, we acquired ASC. The results of ASC have been included in our results since that date. The information included herein has been prepared based on a preliminary allocation of the preliminary ASC Acquisition purchase price. This allocation was based on preliminary estimates of the fair value of the assets acquired and liabilities assumed. The purchase price allocation is subject to change until all pertinent information regarding the ASC Acquisition and the assets and liabilities of ASC is obtained and fully evaluated. Finalization of the allocation of the ASC Acquisition purchase price could result in material changes to the amounts presented herein. The allocation of the ASC Acquisition purchase price will be finalized within one year after the ASC Acquisition Date.

Results of Operations

      The following table was derived from our unaudited condensed consolidated income statements for the nine months ended September 30, 2005 and 2006 and our audited consolidated income statements for the years ended December 31, 2004 and 2005. The amounts are presented in thousands.

			Year Ended						Nine Months Ended
			December 31,						September 30,
			2004			2005			2005			2006
Net sales			$	892,765		$	873,426		$	667,607		$	729,012
Cost of sales				703,035			708,360			531,617			584,216
		Gross profit		189,730			165,066			135,990			144,796
Operating expenses
	Selling and warehousing			60,335			60,813			46,086			47,826
	General and administrative			38,395			41,761			31,115			34,721
	Amortization of acquired intangible assets			6,834			5,888			4,772			4,773
	Costs of integration of water pump operations and resulting asset impairment losses			—			—			—			5,429
	Costs of closing facilities and consolidating operations			—			—			—			6,275
	Asset impairments and other costs, including loss on abandonment of an operation			—			21,530			2,759			—
		Operating income		84,166			35,074			51,258			45,772
Other income (expense)
	Interest expense, net			(35,699	)		(36,003	)		(26,514	)		(31,935	)
	Write-off of deferred financing costs			—			—			—			(2,625	)
	Management fee expense			(2,000	)		(2,000	)		(1,500	)		(1,500	)
	Miscellaneous, net			867			(1,139	)		(351	)		92
Income (loss) before income taxes				47,334			(4,068	)		22,893			9,804
Income tax expense				19,295			1,678			10,340			5,347
Net income (loss) from continuing operations				28,039			(5,746	)		12,553			4,457
Discontinued operations
	Net income from discontinued operations, net of tax			2,790			1,218			546			1,509
	Loss on sale of discontinued operations, net of tax			—			—			—			(18,272	)
				2,790			1,218			546			(16,763	)
		Net (loss) income	$	30,829		$	(4,528	)	$	13,099		$	(12,306	)

Acquisition and Sales of Operations

      As discussed above, on May 25, 2006, we acquired ASC. The amounts presented in the table above and discussed below include the results of ASC from the ASC Acquisition Date.

      On June 30, 2006, we sold our driveline components operation and our specialty distribution operation. The results of the driveline components and specialty distribution operations are reported as discontinued operations in the table above. Except where specifically referred to as discontinued operations, the amounts and comparisons discussed below address only continuing operations and, therefore, exclude the results of the operations that were sold.

Nine Months Ended September 30, 2006 compared with the Nine Months Ended September 30, 2005

      Net sales. Net sales increased $61.4 million, or 9.2%, to $729.0 million in the first three quarters of 2006 compared to $667.6 million in the first three quarters of 2005. $35.6 million of the increase was due to the inclusion of ASC’s sales after the ASC Acquisition Date. The remaining increase was volume driven, with higher sales in the retail, OEM, and heavy duty channels, partially offset by lower sales in the traditional and OES channels. The sales increase includes an approximate 0.6% increase attributable to initial rollouts related to our initiative to expand into additional product lines with existing customers. There is no assurance that this trend will occur in future quarters.

      Gross profit. Results for the first three quarters of 2006 included $0.3 million of severance costs and $8.1 million of non-cash ASC Acquisition-related charges. Results for the first three quarters of 2005 included $2.0 million of special facilities consolidation and severance costs.

      The $8.1 million non-cash ASC Acquisition-related charges in the 2006 period consisted of the sales, after the ASC Acquisition Date, of ASC inventory that was written up from cost to market value as part of the preliminary allocation of the ASC Acquisition purchase price. The total preliminary inventory write-up, which was required by GAAP for an acquisition, was $9.8 million. Sales of the written-up inventory will continue to adversely affect our results until all of the inventory on hand at the ASC Acquisition Date is sold. The remaining portion of that inventory on hand at September 30, 2006 is expected to be sold in the fourth quarter of 2006. Consequently, the remaining $1.7 million of inventory write-up is expected to be included in cost of sales in the fourth quarter of 2006 and, thereby, adversely affect results for that period.

      Gross profit, as reported, was $144.8 million in the first three quarters of 2006 and $136.0 million in the first three quarters of 2005. Excluding the special and ASC Acquisition-related charges identified in the second preceding paragraph, gross profit increased to $153.2 million in the 2006 period from $138.0 million in the 2005 period. The related gross margin percentage increased to 21.0% in the 2006 period compared to 20.7% in the 2005 period.

      Higher sales volume in the first three quarters of 2006 was a major factor in our gross profit increase. The 2006 period gross profit was favorably impacted by benefits from our manufacturing cost reduction initiatives, a favorable sales mix, and by the lower per-unit cost of manufacturing at higher production volumes. These benefits were offset by higher warranty expense and the cost of inflation-driven wage and other cost increases, including increases in raw material, freight and utility costs due to the high cost of energy.

      Selling and warehousing expenses. Selling and warehousing expenses were $47.8 million for the first three quarters of 2006, $1.7 million higher than the first three quarters of 2005. $0.8 million of the increase was due to the inclusion of ASC since the ASC Acquisition Date. The 2006 period increase also included the effects of higher volume, higher employee bonuses, and the effects of inflation on employee-related and other operating costs. These increases were partially offset by lower trade advertising. Selling and warehousing expenses were 6.6% of sales in the 2006 period and 6.9% of sales in the 2005 period.

      General and administrative expenses. General and administrative expenses were $34.7 million in the first three quarters of 2006, $3.6 million higher than the first three quarters of 2005. $1.4 million of the increase was due to the inclusion of ASC since the ASC Acquisition Date. The 2006 period increase also included higher employee bonuses, inflation-driven cost increases, and the cost of employee stock option based compensation. These increases in the first three quarters of 2006 expense were partially offset by a $0.5 million gain from the sale of our airplane and lower bad debt expense.

      The employee stock option based compensation expense of $1.2 million in the first three quarters of 2006 was the result of implementing SFAS No. 123R, “Stock-Based Payments,” in 2006. In 2005, prior to adoption of SFAS No. 123R, we did not record an expense for stock option based compensation.

      Costs of integration of water pump operations and resulting asset impairment losses. Before the ASC Acquisition, our “pre-acquisition water pump operations” manufactured and distributed water pumps to all market channels. We have made plans to integrate our pre-acquisition water pump operations with the water

pump operations of ASC. This integration includes plans to consolidate the operations of several facilities. In connection with this consolidation, we incurred the following expenses and losses in the first three quarters of 2006 (in millions):

Land, building, & equipment impairment losses	$	4.3
Severance		0.3
Raw materials write-off		0.3
Other integration costs		0.5
	$	5.4

      Costs of closing facilities and consolidating operations. The following table summarizes the costs of closing certain facilities, which we recorded in the first three quarters of 2006 (in millions):

	Asset
	Write-
	downs		Severance		Other		Total
Closure of Canadian facility (a)	$	0.4	$	0.4	$	0.1	$	0.9
Closure of Mexican facility (b)		1.0		2.0		2.4		5.4
Total	$	1.4	$	2.4	$	2.5	$	6.3

(a)

In March 2006, we decided to close our Canadian facility, which manufactured and distributed mechanical fuel pumps. This production and distribution was transferred to our fuel pump operations in Fairfield, Illinois. Closure activities began in the second quarter of 2006 and were completed in the third quarter of 2006.

(b)

On April 24, 2006, we announced our plan to close our Mexican filter manufacturing plant and transfer production to our Albion, Illinois filter manufacturing facility. The shutdown and transfer of production began in the second quarter and was, for the most part, completed by the end of third quarter of 2006. In the first three quarters of 2006, we incurred $5.4 million of losses related to closing the Mexican plant and consolidating operations in Illinois. These losses included $2.0 million for severance costs, $1.0 million of non-cash equipment and inventory write-offs, $0.6 million of professional fees, and $1.8 million of other cash costs, which were primarily for equipment dismantling and transporting costs.

      Asset impairments and other costs, including loss on abandonment of an operation. Airtex Products Ltd. (“Airtex UK”) was an indirect wholly owned subsidiary of UCI with operations in the United Kingdom. In the second quarter of 2005, the largest customer of Airtex UK became insolvent and ceased operations, resulting in a loss of more than 50% of the revenue of Airtex UK. As a result of that situation, in the second quarter of 2005, we decided to cease additional funding of the operations of Airtex UK and we subsequently sold Airtex UK in the third quarter of 2005. In the first three quarters of 2005, we recorded a non-cash charge of $2.2 million for the impairment of certain assets of Airtex UK and $0.6 million for losses incurred as a result of the abandonment and sale of Airtex UK.

      Interest expense, net. Net interest expense was $5.4 million higher in the first three quarters of 2006 compared to the first three quarters of 2005. $3.2 million of this increase was related to the effects of the ASC Acquisition, which resulted in the assumption of $10 million of ASC debt and $113 million of new borrowings to pay for a portion of the ASC Acquisition cost. This increase was partially offset by the $0.6 million favorable effect of the $36.3 million of net cash proceeds from the sale of the driveline components and specialty distribution operations. Excluding the effects of the aforementioned acquisition and dispositions, the remaining $2.8 million increase was attributable to higher interest rates, partially offset by lower debt levels.

      Write-off of deferred financing costs. In the first three quarters of 2006, we recorded a $2.6 million loss to write off the unamortized deferred financing costs related to previously outstanding debt, which was replaced by the borrowings under UCI’s senior secured credit agreement.

      Income tax expense. Income tax expense in the first three quarters of 2006 was $5.0 million lower than expense in the first three quarters of 2005, due to lower pre-tax income. For an explanation of high effective tax rates in both periods, see Note H to our historical condensed consolidated financial statements as of September 2006 and for the nine months ended September 30, 2006 and 2005 included in this offering memorandum.

      Net income (loss) from continuing operations. Due to the factors described above, net income from continuing operations was $4.5 million for the first three quarters of 2006 and $12.6 million in the first three quarters of 2005.

      Discontinued operations. Net income of discontinued operations was $1.5 million in the first three quarters of 2006 compared to $0.5 million in the first three quarters of 2005. The after-tax loss on the sale of the discontinued operations was $18.3 million in 2006.

      Net (loss) income. Due to the factors described above, we reported a net loss of $12.3 million in 2006 compared to net income of $13.1 million in the first three quarters of 2005.

Year Ended December 31, 2005 Compared with Year Ended December 31, 2004

      Net sales. Net sales decreased $19.3 million, or 2.2%, from $892.8 million in 2004 to $873.4 million in 2005.

      $14.0 million of the sales reduction was attributable to a change in our estimate of outstanding potential warranty claims. Based on new information, we have revised our estimate of the average periods of time it takes for warranty claims to be received after our sale to our customer. (This time period includes the time our product is in our customer’s possession and the amount of time, after our customer sells to the ultimate consumer, that it takes for the warranty claim to be made.) We currently estimate that there is a significantly longer period of time than previously estimated between the date of sale and the date the related warranty claims are received. This significantly longer period of time translates into a significantly higher estimate of potential warranty claims outstanding.

      Excluding this $14.0 million, the decrease in sales from 2004 to 2005 was $5.3 million. This decrease was volume driven with lower sales to the traditional and OEM channels. Sales to the original equipment service and heavy-duty channels increased. Sales to the retail channel were essentially unchanged.

      Gross profit. Gross profit, as reported, was $165.1 million for 2005 and $189.7 million for 2004. Both years include several special entries. The following table presents the special entries and a gross profit comparison, after excluding these special entries. The amounts are presented in millions.

		2005		2004
Gross profit, as reported		$	165.1	$	189.7
Add back special entries:
	Product line relocations, facilities upgrades and consolidations, and severance		2.4		1.3
	Change in estimated warranty reserves		14.0		—
	Change in estimated slow moving/obsolete inventory reserves		—		2.8
	Sale of inventory that was written up to market from historical cost per U.S. GAAP acquisition rules		—		0.5
		$	181.5	$	194.3

      The $14.0 million change in warranty reserves is discussed above. The $2.8 million increase in the reserve for slow moving inventory recorded in 2004 was the result of unsuccessful efforts to sell the slow moving inventory in the fourth quarter of 2004 and the resulting determination that the slow moving inventory was worth less than the recovery amount estimated in 2003.

      Excluding the special entries, gross profit declined to $181.5 million from $194.3 million in 2004, and the gross margin percentage declined to 20.5% in 2005 from 21.8% in 2004. For purposes of calculating the

'

2005 gross margin percent, 2005 sales were increased by the $14.0 million change in estimated warranty reserves.

      Lower sales volume in 2005 contributed to the gross profit decline. The remaining decline in gross profit and reduction in gross margin percentage were primarily due to the higher per-unit cost of manufacturing at lower production volumes, a shift in sales mix and an increase in steel costs, net of pass-through selling price increases. These higher costs were partially offset by lower insurance costs and manufacturing cost reductions. Savings due to improved procurement practices offset inflation-driven wage increases and higher freight, non-steel raw material, and fuel costs caused by higher oil prices and general inflation.

      Selling and warehousing expenses. Selling and warehousing expenses were $60.8 million for 2005, $0.5 million higher than 2004. The cost of the addition of strategic sales personnel and inflation-driven salary increases was offset by cost savings from warehouse consolidations. Selling and warehousing expenses were 7.0% and 6.8% of sales in 2005 and 2004, respectively.

      General and administrative expenses. General and administrative expenses were $41.8 million in 2005, $3.4 million higher than in 2004. The increase was primarily due to our continuing investment in processes and management talent necessary to drive improvements in future operations and to inflation-driven salary increases. These increases were partially offset by lower bonus expense and lower employee-related insurance. General and administrative expenses were 4.8% and 4.3% of sales in 2005 and 2004, respectively.

      Asset impairments and other costs, including loss on abandonment of an operation. The following table summarizes the Company’s 2005 asset impairments and other costs, including loss on abandonment of an operation (in millions):

Impairment of trademark	$	8.1
Impairment of software asset		3.8
Loss on contractual commitment		1.3
Impairment of property and equipment		5.5
Abandonment of an operation		2.8
	$	21.5

      For additional information, see Note C to our historical consolidated financial statements as of December 31, 2005 and for the years ended December 31, 2005 and 2004 included in this offering memorandum.

      Interest expense, net. Net interest expense increased $0.3 million from $35.7 million in 2004 to $36.0 million in 2005. The 2005 and 2004 amounts included $0.2 million and $1.0 million, respectively, of accelerated amortization of deferred financing costs associated with the voluntary prepayments of $15.0 million of debt in 2005 and $65.0 million of debt in 2004. The 2004 amount included $0.6 million of interest capitalization related to a large 2004 capital project. Excluding the accelerated amortization and interest capitalization, there was a $0.5 million increase of interest expense, which was attributable to higher interest rates in 2005, partially offset by lower debt levels.

      Income tax expense. Because of pre-tax loss in 2005 versus pre-tax income in 2004, income tax expense is significantly lower in 2005. Despite a consolidated pre-tax loss, we have a 2005 tax expense. The primary reasons for this are (i) not recognizing tax benefit on foreign tax credit carryforwards, (ii) not recognizing tax benefit on foreign operating losses that resulted in tax loss carryforwards, and (iii) not recognizing tax benefit on the $2.8 million loss on abandonment and sale of Airtex UK. Tax benefit was not recognized on these three items because realization is not probable.

      Net income (loss) from continuing operations. Due to the factors described above, we reported a net loss from continuing operations of $5.7 million in 2005 compared to a net income from continuing operations of $28.0 million in 2004.

      Discontinued operations. Net income of discontinued operations was $1.2 million in 2005 compared to $2.8 million in 2004.

      Net (loss) income. Due to the factors described above, we reported a net loss of $4.5 million in 2005, compared to net income of $30.8 million in 2004.

Liquidity and Capital Resources

      At September 30, 2006 and December 31, 2005, the Company had $41.4 million and $26.2 million of cash, respectively. Outstanding debt at September 30, 2006 and December 31, 2005, was $532.7 million and $442.5 million, respectively, as follows (in millions):

	September 30,			December 31,
	2006			2005
Short-term borrowings	$	10.5		$	0.3
Capital lease obligations		1.0			—
Term loan		295.4			217.0
Senior subordinated notes		230.0			230.0
Unamortized debt issuance costs		(4.2	)		(4.8	)
	$	532.7		$	442.5

      On October 27, 2006, we used cash on hand to voluntarily repay $30.4 million of the term loan. Also, on July 6, 2006, we used cash on hand to repay $34.6 million of the term loan, of which $8.0 million was required to be paid. In June 2005, we made a voluntary prepayment of $15 million of the term loan. Because of these and previous voluntary prepayments of $65.0 million in 2004, we do not have any required repayments of the senior credit facility term loans until September 2011. UCI’s $230.0 million senior subordinated notes are due in 2013.

      Short-term borrowings are routine borrowings by our foreign operations.

      As adjusted to give effect to the issuance of the notes and the October 2006 voluntary repayment of the $30.4 million discussed above, our outstanding debt as of September 30, 2006 would have been $735.0 million.

      Below is a schedule of future cash debt payments as adjusted to give effect to the issuance of the notes and the October 2006 voluntary repayment of the $30.4 million discussed above. The amounts are presented in millions.

2006	$	4.2
2007		7.1
2008		0.3
2009		—
2010		—
Thereafter		927.6
	$	939.2

      Our significant debt service obligation is an important factor when assessing our liquidity and capital resources. At the September 30, 2006 debt level and interest rates, annual interest expense, including amortization of deferred financing costs and debt issuance costs, was approximately $48.0 million. An increase of 0.25% on our variable interest rate debt would increase the annual interest cost by $0.6 million.

      At the September 30, 2006 pro forma debt level and assumed interest rate for the twelve months ended September 30, 2006, annual interest expense, including amortization of deferred financing costs and debt issuance costs, was approximately $79.5 million. Because interest on the notes will initially be paid by capitalizing accrued interest to principal, our cash interest expense will not initially increase as a result of the issuance. However, on                     , 2012, we will be required to make a catch up payment on the notes to cover all interest on the notes through that date that have been capitalized to principal, and thereafter, interest on the notes will be payable in cash.

'

      Our significant debt service obligation could, under certain circumstances, have a material adverse effect on results of operations and cash flow.

UCI Holdco Debt Obligations.

      We are a holding company with no business operations or assets other than the capital stock of UCI Acquisition, which itself is a holding company with no operations or assets of its own other than the capital stock of UCI. Our operations are conducted through UCI and its subsidiaries. Consequently, we are dependent on loans, dividends and other payments from UCI Acquisition, and, indirectly, UCI and its subsidiaries, to make payments of principal and interest in cash on the notes.

      If we are unable to obtain funds from our direct and indirect subsidiaries as a result of restrictions under their debt or other agreements, applicable laws and regulations or otherwise, we may not be able to pay cash interest or principal on the notes when due. The terms of its senior credit facilities significantly restrict UCI from paying dividends and otherwise transferring assets to us, except for administrative, legal and accounting services. The terms of the indenture governing the senior subordinated notes issued by UCI also significantly restrict UCI and its subsidiaries from paying dividends and otherwise transferring assets to us.

      We currently anticipate that, in order to pay the principal amount of the notes or to repurchase the notes upon a change of control as defined in the indenture governing the notes, we will be required to adopt one or more alternatives, such as refinancing all or a portion of our and our subsidiaries’ indebtedness, selling our equity securities or the equity securities or assets of UCI or seeking capital contributions or loans from our affiliates. If refinancing is necessary, there can be no assurance that we will be able to secure such financing on acceptable terms, or at all.

UCI Debt Obligations and Operations.

      UCI’s primary source of liquidity is cash flow from operations and borrowings under its $75.0 million revolving credit facility. Borrowings under the revolving credit facility are available to fund working capital requirements, capital expenditures and other general corporate purposes. At September 30, 2006 and as of the date hereof, $9.4 million of revolving credit borrowing capacity had been used to support outstanding letters of credit. This resulted in $65.6 million of unused borrowing capacity at September 30, 2006.

      UCI’s ability to make scheduled payments of principal or interest on, or to refinance, its indebtedness or to fund planned capital expenditures will depend on its ability to generate cash in the future. Such cash generation is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

      Based on the current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under UCI’s revolving credit facility, will be adequate to service UCI and its subsidiaries’ debt, meet liquidity needs and fund planned capital expenditures for the next two years. For later years, we can give no assurance that UCI’s business will generate sufficient cash flow from operations, or that future borrowings will be available under its revolving credit facility in an amount sufficient to enable it to service its indebtedness or to fund other liquidity needs.

      The Company’s senior credit agreement for its senior credit facility permits sales of and liens on receivables, which are being sold pursuant to factoring arrangements, subject to certain limitations. We intend to factor our receivables when it is economically beneficial to do so. We have established factoring relationships with three customers, which have resulted in the sales of approximately $31.4 million of receivables during the first three quarters of 2006. If receivables had not been factored, there would have been $21.7 million more receivables outstanding at September 30, 2006, including $0.7 million sold by ASC prior to the ASC Acquisition Date. At December 31, 2005, if receivables had not been factored, there would have been $6.0 million more receivables outstanding. As the opportunities arise, we will evaluate other factoring arrangements, which if implemented, would increase the amount of receivables sold in the future.

Senior Credit Agreement.

      In connection with the ASC Acquisition, on May 25, 2006, UCI entered into a senior credit agreement. The senior credit agreement replaced UCI’s previously existing credit facility and provided for additional borrowing capacity of up to $113.0 million.

      UCI replaced the $217.0 million term loan that was outstanding under its previously existing senior credit facility with a term loan borrowing under the new credit facility. In addition, $113.0 million was borrowed to finance a portion of the ASC Acquisition purchase price.

      On June 16, 2005, UCI entered into an amendment to its senior credit facility, which permits it to repurchase from time to time up to $75.0 million in aggregate principal amount of senior subordinated notes. As of the date hereof, UCI had not repurchased any of the senior subordinated notes, although it may, under appropriate market conditions, do so in the future.

Net Cash Provided by Operating Activities.

      Net cash provided by operating activities of continuing operations for the first three quarters of 2006 was $34.6 million. Profits, before deducting (i) depreciation, (ii) amortization, and (iii) $8.7 million of non-cash charges for the write-off of deferred financing costs and the write-down of assets, generated $42.9 million of cash. An increase in trade receivables resulted in a $7.9 million use of cash. (Higher sales in the 2006 third quarter compared to the 2005 fourth quarter caused this receivables increase.) Significant reductions in both inventory and accounts payable resulted in a net $2.2 million use of cash. Changes to all other assets and liabilities netted to a $1.8 million positive effect on cash.

      Net cash provided by operating activities of continuing operations for the year ended December 31, 2005 was $62.4 million. Profits, before deducting depreciation and amortization and before deducting non-cash impairments and asset write-downs of an abandoned operation, generated $53.2 million of cash. Increased trade receivables resulted in a $21.2 million use of cash. Higher sales in the fourth quarter of 2005 compared to the fourth quarter of 2004 was the primary reason for the increase. Normal timing of collections and selective extensions of customer payment terms also contributed to the increase. At times payment terms are extended for special promotional sales and at times as part of comprehensive long-term sales agreements. The trade receivables use of cash was offset by cash generated from $5.2 million of inventory reductions and an $18.7 million increase in accounts payable. The increase in payables was due to extending payment timeframes with our suppliers, as well as the timing of disbursements. We continually work to extend vendor payment terms as a means of reducing our cash requirements for working capital. Changes in all other assets and liabilities netted to a $6.5 million positive effect on cash.

Net Cash Used in Investing Activities.

      Historically, net cash used in investing activities has been for capital expenditures, offset by proceeds from the disposition of property, plant and equipment. Capital expenditures in the nine months ended September 30, 2006 and 2005 were $18.3 million and $25.1 million, respectively. Approximately $2.2 million and $9.8 million, respectively, of the 2006 and 2005 amounts were related to the implementation of a new fully integrated information system that has been implemented at certain domestic operations. For the full year 2006, we expect capital expenditures of our continuing operations to be between $25.0 million and $30.0 million. Capital expenditures for the year ended December 31, 2005 and 2004 were $30.6 million and $42.5 million, respectively. Approximately $2.2 million and $12.5 million, respectively, of the 2005 and 2004 capital expenditures were related to the long-term capital investment plan to increase capacity and reduce cost at our filtration facilities. The 2005 and 2004 amounts also included $11.6 million and $7.6 million, respectively, for the implementation of the new, fully integrated information technology.

      In the first nine months of 2006, we had net cash proceeds of $36.3 million from the sale of discontinued operations and cash expenditures of $125.5 million for the acquisition of ASC. As part of the ASC Acquisition, we acquired $3.8 million of cash.

Contractual Obligations

      The following table is a summary of contractual cash obligations (excluding interest) for continuing operations at December 31, 2005 (in millions) on a pro forma basis:

	Payments Due by Period
	Less Than						More Than
	1 Year		1-3 Years		3-5 Years		5 Years		Total
Short-term borrowings	$	0.3	$	—	$	—	$	—	$	0.3
Long-term debt		—		2.8		214.2		230.0		447.0
Estimated pension funding(1)		9.7		26.0		23.0		—		58.7
Other postretirement benefit payments(2)		0.4		0.8		1.0		—		2.2
Operating leases		3.1		4.7		3.5		6.9		18.2
Purchase obligations(3)		64.7		0.2		—		—		64.9
Management fee(4)		2.0		4.0		4.0		—		10.0
Employment agreements		0.8		—		—		—		0.8
Total contractual cash obligations	$	81.0	$	38.5	$	245.7	$	236.9	$	602.1

(1)	Estimated pension funding is based on the current composition of pension plans and current actuarial assumptions. Pension funding will continue beyond year 5. Nevertheless, estimated pension funding is excluded from the table after year 5. See Note M to our historical consolidated financial statements as of December 31, 2005 and for the years ended December 31, 2005 and 2004 included in this offering memorandum for the funding status of the Company’s pension plans at December 31, 2005.
(2)	Estimated benefit payments are based on current actuarial assumptions. Benefit payments will continue beyond year 5. Nevertheless, estimated payments are excluded from the table after year 5. See Note M to our historical consolidated financial statements as of December 31, 2005 and for the years ended December 31, 2005 and 2004 included in this offering memorandum for the funding status of our other postretirement benefit plans at December 31, 2005.
(3)	Included in the purchase obligations is $4.1 million related to property, plant and equipment. The remainder is for materials, supplies and services routinely used in our normal operations.
(4)	The management fee is excluded from the table after year 5. The management fee is expected to continue as long as the ownership of us does not change.

Recent Accounting Pronouncements

      In December 2004, SFAS No. 123R, “Share-Based Payment” was issued. SFAS No. 123R requires the measurement of share-based payments to employees using a fair-value-based method and the recording of such expense in the income statement. The accounting provisions of SFAS No. 123R, as related to us, are effective for reporting periods beginning after December 15, 2005 and are to be applied prospectively. Also, in March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 107 (“SAB 107”). SAB 107 provides clarification on the implementation of SFAS No. 123R and the relationship of SFAS No. 123R to certain SEC rules and regulations. The pro forma disclosures previously permitted under SFAS No. 123 will no longer be an alternative to financial statement recognition. See the “Stock Options” section of Note A to our consolidated financial statements as of December 31, 2005 and for the years ended December 31, 2005 and 2004 included in this offering memorandum for the pro forma net income as if we had used a fair-value-based method, similar to the methods required under SFAS No. 123R, to measure compensation expense. Had SFAS No. 123R been applied in the periods disclosed, the impact would have been similar to those pro forma amounts. The future impact is dependent upon if and when additional options are granted or expire, as well as the vesting period of such options.

      In December 2004, the FASB issued SFAS No. 151, “Inventory Costs.” SFAS No. 151 primarily clarifies the accounting for inventory when there are abnormal amounts of idle facility expense, freight,

handling costs and wasted materials. Under existing guidelines, items such as idle facility expense, excessive spoilage and re-handling costs may be ’so abnormal’ as to require treatment as current period charges rather than recorded adjustments to the value of inventory. SFAS No. 151 requires that abnormal levels of such items be recognized as current period charges regardless of whether they meet the ’so abnormal’ criteria. The accounting provisions of SFAS No. 151 are to be applied prospectively and are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. SFAS No. 151 did not have a material effect on our financial statements.

      In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140.” This statement, which is effective for fiscal years beginning after September 15, 2006, was issued to simplify the accounting for servicing rights and to reduce the volatility that results from using different measurement attributes. The implementation of SFAS No. 156 is not expected to have a material effect on our financial statements.

      In June 2006, the FASB issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. FIN 48 is effective beginning January 1, 2007. Any cumulative impact resulting from the adoption of FIN 48 would be recorded as an adjustment to beginning retained earnings. We are currently evaluating this interpretation to determine if it will have a material impact on our financial statements.

      In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for fiscal years beginning after November 15, 2007. We have not evaluated the impact of this statement on our financial statements.

      In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R).” This statement requires a company to fully recognize the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability in its financial statements and to recognize changes in the funded status through comprehensive income in the year in which the changes occur. This provision of SFAS No. 158 is effective for reporting periods beginning after July 1, 2007. We are currently assessing the impact of this provision of SFAS No. 158 on our financial statements. SFAS No. 158 also requires that we measure our plans assets and benefit obligations as of our year-end financial statement date. This provision of SFAS No. 158 is effective for fiscal years ending after December 15, 2008. This provision of SFAS No. 158 will not impact our financial statements because we currently do our measurements at our year-end financial statement date.

      In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 addresses diversity in practice in quantifying financial statement misstatements for the purpose of assessing materiality. SAB 108 requires that a company quantify misstatements based on the impact on each of their financial statements and related disclosures. SAB 108 is effective as of the end of 2006, allowing a one-time transitional cumulative effect adjustment to retained earnings as of January 1, 2006 for misstatements that were not previously deemed material, but are material under the guidance in SAB 108. We are currently evaluating SAB 108 to determine if it will have an impact on our financial statements.

Quantitative and Qualitative Disclosures About Market Risk

      Our exposure to market risk consists of foreign currency exchange rate fluctuations and changes in interest rates.

Foreign Currency Exposure

      Currency translation. As a result of international operating activities, we are exposed to risks associated with changes in foreign exchange rates, principally exchange rates between the U.S. dollar and the Mexican peso, British pound and the Chinese Yuan. The results of operations of our foreign subsidiaries are translated into U.S. dollars at the average exchange rates for each relevant period. This translation has no impact on our cash flow. However, as foreign exchange rates change, there are changes to the U.S. dollar equivalent of sales and expenses denominated in foreign currencies. During 2005, approximately 12% of our business was transacted in local currencies of foreign countries. While our international results of operations, as measured in U.S. dollars, are subject to foreign exchange rate fluctuations, we do not consider the related risk to be material to our financial condition or results of operations. If the exchange rate between the foreign currencies and the U.S. dollar had decreased by 10%, our net income would have been lower by $0.2 million in 2005 due to the reduction in reported results from our foreign operations.

      The balance sheets of foreign subsidiaries are translated into U.S. dollars at the closing exchange rates as of the relevant balance sheet date. Any adjustments resulting from the translation are recorded as other comprehensive income on our statement of shareholders’ equity. We manage this exposure primarily by balancing monetary assets and liabilities and maintaining cash positions only at levels necessary for operating purposes in those countries.

      Currency transactions. Currency transaction exposure arises where actual sales and purchases are made by a business or company in a currency other than its own functional currency. The majority of our businesses source raw materials and sell their products within their local markets’ currencies and, therefore, have limited transaction exposure.

      As a result of the ASC Acquisition, we now source a greater amount of our raw materials and produce a greater amount of our products in China. We are currently evaluating the effects of changes in currency translation on this business.

      In the future, we expect to continue to monitor our transaction exposure to currency rate changes and enter into currency forward and option contracts to limit the exposure, as appropriate. Gains and losses on contracts are deferred until the transaction being hedged is finalized. As of September 30, 2006, we had no foreign currency contracts outstanding. We do not engage in any speculative activities.

Interest Rate Risk

      In connection with UCI’s senior credit facilities, UCI had interest rate swap agreements, which expired in August 2005. These agreements effectively converted $118 million of variable rate debt to fixed rate debt for the two years ended August 2005. On August 10, 2005, UCI entered into new interest rate swap agreements. These new agreements effectively convert $80 million of variable rate debt to fixed rate debt for the two years ending August 2007, and $40 million for the 12-month period ending August 2008. The variable component of the interest rate on borrowings under the senior credit facilities is based on LIBOR. Under the swap agreements, we will pay 4.4%, and will receive the then current LIBOR on $80 million through August 2007 and $40 million for the 12-month period ending August 2008.

      Both the senior credit facility and these notes are variable interest rate debt based on LIBOR. We utilize, and we will continue to utilize, sensitivity analyses to assess the potential effect of our variable rate debt. Adjusted to give effect to the issuance of the notes, if variable interest rates were to increase by 0.25% per annum, the net impact would be a decrease of approximately $0.7 million of our net income and approximately $0.3 million of our cash flow.

Treasury Policy

      Our treasury policy seeks to ensure that adequate financial resources are available for the development of our businesses while managing our currency and interest rate risks. Our policy is to not engage in speculative transactions. Our policies with respect to the major areas of our treasury activity are set forth above.

EX-99.3

Exhibit 99.3

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of UCI Holdco, Inc.:

      We have audited the accompanying consolidated balance sheet of UCI Holdco, Inc. and subsidiary (the “Company”) (a Delaware corporation) as of December 31, 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UCI Holdco, Inc. and subsidiary as of December 31, 2005, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

Cincinnati, Ohio
December 8, 2006

UCI Holdco, Inc. (“Holdco”)

Balance Sheet

December 31, 2005

(In thousands)

ASSETS
Current assets
	Cash and cash equivalents		$	26,182
	Accounts receivable, net			233,007
	Inventories, net			150,190
	Deferred tax assets			22,529
	Other current assets			21,634
	Assets of discontinued operations			63,863
		Total current assets		517,405
Property, plant and equipment, net				180,647
Goodwill				166,559
Other intangible assets, net				87,197
Deferred financing costs, net				6,177
Pension and other assets				12,904
Assets of discontinued operations				13,953
		Total assets	$	984,842
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
	Accounts payable		$	94,613
	Short-term borrowings			261
	Current maturities of long-term debt			12
	Accrued expenses and other current liabilities			93,585
	Liabilities of discontinued operations			17,778
		Total current liabilities		206,249
Long-term debt, less current maturities				442,274
Pension and other postretirement liabilities				49,623
Deferred tax liabilities				3,554
Other long-term liabilities				1,936
Liabilities of discontinued operations				860
Contingencies — Note N				—
		Total liabilities		704,496
Shareholders’ equity
	Common stock			26
	Additional paid in capital			263,610
	Retained earnings			17,546
	Accumulated other comprehensive income (loss)			(836	)
		Total shareholders’ equity		280,346
		Total liabilities and shareholders’ equity	$	984,842

The accompanying notes are an integral part of these statements.

UCI Holdco, Inc.

Income Statements

(In thousands)

			Year Ended December 31,
			2005			2004
Net sales			$	873,426		$	892,765
Cost of sales				708,360			703,035
		Gross profit		165,066			189,730
Operating expenses
	Selling and warehousing			60,813			60,335
	General and administrative			41,761			38,395
	Amortization of acquired intangible assets			5,888			6,834
	Asset impairments and other costs (Note C)			21,530			—
		Operating income		35,074			84,166
Other income (expense)
	Interest expense, net			(36,003	)		(35,699	)
	Management fee expense			(2,000	)		(2,000	)
	Miscellaneous, net			(1,139	)		867
(Loss) income before income taxes				(4,068	)		47,334
Income tax expense				1,678			19,295
Net (loss) income from continuing operations				(5,746	)		28,039
Discontinued operations (Note B)
	Net income from discontinued operations, net of tax			1,218			2,790
		Net (loss) income	$	(4,528	)	$	30,829

The accompanying notes are an integral part of these statements.

UCI Holdco, Inc.

Statements of Cash Flows

				Year Ended
				December 31,
				2005			2004
				(In thousands)
Cash flows from operating activities of continuing operations
	Net (loss) income			$	(4,528	)	$	30,829
	Less:
		Net income from discontinued operations, net of tax			1,218			2,790
	Net (loss) income from continuing operations				(5,746	)		28,039
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization of other intangible assets			37,140			40,397
		Amortization of deferred financing costs and debt issuance costs			2,141			3,093
		Deferred income taxes			(6,807	)		2,046
		Asset impairments and write-downs of assets of an abandoned operation			19,600			—
		Other non-cash, net			(1,690	)		1,092
		Changes in operating assets and liabilities
			Accounts receivable		(21,225	)		(7,724	)
			Inventories		5,241			(15,225	)
			Other current assets		(10,594	)		(1,123	)
			Accounts payable		18,685			11,315
			Accrued expenses and other current liabilities		29,231			6,385
			Other assets		(55	)		(1,232	)
			Other long-term liabilities		(3,554	)		4,300
			Net cash provided by operating activities of continuing operations		62,367			71,363
Cash flows from investing activities of continuing operations
	Acquisition and related fees				—			(8,000	)
	Capital expenditures				(30,636	)		(42,456	)
	Proceeds from sale of property, plant and equipment				355			1,989
			Net cash used in investing activities of continuing operations		(30,281	)		(48,467	)
Cash flows from financing activities of continuing operations
	Issuances of debt				—			967
	Debt repayments				(16,254	)		(65,688	)
	Shareholders’ equity contribution				516			1,735
			Net cash used in financing activities of continuing operations		(15,738	)		(62,986	)
Discontinued operations
	Net cash provided by operating activities of discontinued operations				452			7,002
	Net cash used in investing activities of discontinued operations				(1,536	)		(2,337	)
Effect of exchange rate changes on cash					(373	)		586
Net increase (decrease) in cash and cash equivalents					14,891			(34,839	)
Cash and cash equivalents at beginning of year					11,291			46,130
Cash and cash equivalents at end of year				$	26,182		$	11,291

The accompanying notes are an integral part of these statements.

UCI Holdco, Inc.

Statements of Changes in Shareholders’ Equity

											Accumulated
						Additional					Other			Total
				Common		Paid In		Retained			Comprehensive			Shareholders’			Comprehensive
				Stock		Capital		Earnings			Income (Loss)			Equity			Income (Loss)
				(In thousands)
Balance at January 1, 2004				$	26	$	261,359	$	(8,755	)	$	1,460		$	254,090
Additions to paid in capital							1,735								1,735
Comprehensive income
	Net income								30,829						30,829		$	30,829
	Other comprehensive income (loss)
			Interest rate swaps									504			504			504
			Foreign currency adjustment									1,308			1,308			1,308
			Minimum pension liability adjustment									(546	)		(546	)		(546	)
		Total comprehensive income															$	32,095
Balance at December 31, 2004				$	26	$	263,094	$	22,074		$	2,726		$	287,920
Balance at January 1, 2005				$	26	$	263,094	$	22,074		$	2,726		$	287,920
Additions to paid in capital							516								516
Comprehensive income (loss)
	Net (loss) income								(4,528	)					(4,528	)	$	(4,528	)
	Other comprehensive income (loss)
			Interest rate swaps									(64	)		(64	)		(64	)
			Foreign currency adjustment									(2,544	)		(2,544	)		(2,544	)
			Minimum pension liability adjustment									(954	)		(954	)		(954	)
		Total comprehensive income (loss)															$	(8,090	)
Balance at December 31, 2005				$	26	$	263,610	$	17,546		$	(836	)	$	280,346

The accompanying notes are an integral part of these statements.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS

NOTE A — GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

      UCI Holdco, Inc. (“Holdco”) was incorporated on March 8, 2006 as a holding company for UCI Acquisition, Inc. (“UCI Acquisition”) and United Components, Inc. (“UCI”). Holdco owns all of the common stock of UCI through its wholly-owned subsidiary, UCI Acquisition. Holdco, UCI Acquisition and UCI are corporations formed at the direction of The Carlyle Group (“Carlyle”).

      The financial statements presented herein are for Holdco and its subsidiaries and, prior to Holdco’s formation, UCI Acquisition and its subsidiaries (collectively sometimes referred to as the “Company”).

      At December 31, 2005, affiliates of Carlyle owned 98.6% of UCI Acquisition’s common stock and the remainder was owned by certain members of UCI’s senior management and board of directors.

      On May 25, 2006, UCI completed its acquisition of all of the capital stock of ASC Industries, Inc. (“ASC”). ASC is a manufacturer and distributor of water pumps, with 2005 revenue of $98 million. See Note X.

      On June 30, 2006, UCI sold its driveline components operation and its specialty distribution operation. See Note B.

      On November 30, 2006, UCI sold its lighting systems operation. See Note X.

      All operations of Holdco are conducted by UCI and its subsidiaries. UCI operates in one business segment through its subsidiaries. UCI manufactures and distributes vehicle parts, primarily servicing the vehicle replacement parts market in North America and Europe.

      A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows:

Principles of Consolidation and Combination

      The consolidated financial statements include the accounts of Holdco and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The term “Holdco” refers to UCI Holdco, Inc., as well as UCI Acquisition Holdings, Inc. prior to the formation of UCI Holdco, Inc.

Revenue Recognition

      The Company records sales when title has transferred to the customer, the sales price is fixed and determinable, and the collection of the related accounts receivable is reasonably assured. In the case of sales to the aftermarket, the Company recognizes revenue when the above conditions are met for its direct customers, which are the aftermarket distributors. Provisions for estimated sales returns, allowances and warranty costs are recorded when the sales are recorded. Sales returns, allowances and warranty costs are estimated based upon historical experience, current trends, and the Company’s expectations regarding future experience. Adjustments to such returns, allowances, and warranty costs are made as new information becomes available.

Cash Equivalents

      Certificates of deposit, commercial paper, and other highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

Allowance for Doubtful Accounts

      The Company generally does not require collateral for its trade accounts receivable. Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future. These

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

allowances are established based on a combination of write-off history, aging analysis and specific account evaluations. When a receivable balance is known to be uncollectible, it is written off against the allowance for doubtful accounts.

Inventories

      Inventories are stated at the lower of cost or market. Cost is principally determined using standard cost, which approximates the first-in, first-out method. Inventories are reduced by an allowance for excess and obsolete inventories, based on the Company’s review of on-hand inventories. The expense of inventory write-downs is included in cost of sales.

Depreciation and Amortization

      Depreciation of property, plant and equipment is provided on a straight-line basis, over the estimated service lives of the assets. Leasehold improvements are amortized over the shorter of their service life or the remaining term of the lease.

      Major renewals and improvements of property, plant and equipment are capitalized, and repairs and maintenance costs are expensed as incurred. Repairs and maintenance expenses for the years ended December 31, 2005 and 2004 were $5.7 million and $6.1 million, respectively.

      Trademarks have indefinite lives and are not amortized; instead they are subject to impairment evaluations. Other intangibles are amortized over their useful lives on an accelerated or straight-line basis commensurate with the expected benefits received from such intangible assets.

Goodwill and Trademarks with Indefinite Lives

      Goodwill and trademarks with indefinite lives are tested for impairment on an annual basis in the fourth quarter, unless conditions arise that would require a more frequent evaluation. In assessing their recoverability, projections regarding estimated discounted future cash flows and other factors are made to determine if an impairment has occurred. If the Company concludes that there has been an impairment, the Company will write down the carrying value of the asset to its fair value. In 2005, the Company recorded an $8.1 million trademark impairment loss (see Note H).

      The Company evaluates trademarks with indefinite lives annually to determine whether events and circumstances continue to support the indefinite useful lives. Other than the trademark that was written down for the aforementioned $8.1 million impairment loss, no trademarks were determined to have finite useful lives in any of the periods presented.

Impairment of Long-Lived Assets other than Goodwill and Trademarks with Indefinite Lives and Long-Lived Assets to be Disposed of

      The Company evaluates all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of such long-lived assets is measured by a comparison of the carrying amount of the asset to the future undiscounted net cash flows that are expected to be generated by the asset. If the carrying amount exceeds the expected undiscounted future cash flows, the asset is considered to be impaired. If an asset is considered to be impaired, it is written down to fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. In 2005, the company recorded a $5.5 million impairment loss on certain property and equipment and a $3.8 million impairment loss on a software asset (see Note C).

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

Income Taxes

      Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets are also recognized for operating losses and tax credit carryforwards. The Company establishes valuation allowances against operating losses and tax credit carryforwards when the ability to fully utilize these benefits is determined to be uncertain. Deferred tax assets and liabilities are measured using enacted tax rates applicable in the years in which they are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in income in the period that includes the enactment date.

Foreign Currency Translation and Transactions

      Income statements of foreign subsidiaries are translated into U.S. dollars using the average exchange rates during the applicable period.

      Assets and liabilities of foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect at the applicable balance sheet date. Resulting cumulative translation adjustments are recorded as a component of shareholders’ equity in accumulated other comprehensive income (loss).

      Transaction foreign exchange gains and losses are included in the income statement and are not material.

Reporting of Comprehensive Income (Loss)

      Comprehensive income (loss) includes (i) net income (loss), (ii) the cumulative effect of translating balance sheets of foreign subsidiaries to U.S. dollars, (iii) the effect of adjusting interest rate swaps to market, and (iv) the recognition of minimum pension liabilities. The last three are not included in the income statement and are reflected as adjustments to shareholder’s equity.

Financial Statement Presentation

      The following provides a description of certain items that appear in the income statement:

      Net sales includes gross sales less deductions for incentive rebate programs, sales returns, allowances and discounts. Shipping and handling fees that are billed to customers are classified as revenues.

      Cost of sales includes all costs required to bring a product to a ready-for-sale condition. Such costs include direct and indirect materials (net of vendor consideration), direct and indirect labor costs (including pension, postretirement and other fringe benefits), supplies, utilities, depreciation, insurance, information technology costs, shipping and other costs. Cost of sales also includes the procurement, packaging, and shipping of products purchased for resale.

      Selling and warehousing expenses includes costs of selling and marketing, warehousing, technical services and distribution. The major cost elements for this line item include salaries and wages (including pension, postretirement and other fringe benefits), freight, depreciation, advertising and information technology costs.

      Advertising is expensed as incurred and for the years ended December 31, 2005 and 2004 was $4.9 million and $6.4 million, respectively.

      General and administrative expenses includes the costs of executive, accounting and administrative personnel (including pension, postretirement and other fringe benefits), professional fees, insurance, provisions for doubtful accounts, rent and information technology costs.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

Stock Options

      Holdco has a stock option plan that permits the granting of options to purchase shares of common stock of Holdco. The Company’s employees, directors and consultants are eligible to receive stock option grants.

      The Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” which permits the Company to account for stock option grants in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees.”

      Under APB Opinion No. 25, the intrinsic-value-based method of accounting for stock option plans is used. Under this method, compensation cost is the excess, if any, of the market price at the grant date over the amount an employee must pay to acquire the stock. The Company grants stock options with an exercise price of not less than the market value of the common stock on the date of the grant; therefore, no compensation expense has been recorded in any period presented in connection with the stock options.

      The Black-Scholes option pricing model was used to estimate fair values as of the date of the grants using the following assumptions:

	Year Ended
	December 31,
	2005			2004
Dividend yield		0.00	%		0.00	%
Risk-free interest rate		4.34	%		3.99	%
Volatility		41.00	%		43.00	%
Expected option term in years		8			8

      The per share weighted average fair value of options granted was $53.51 and $54.30 in 2005 and 2004, respectively.

      Had the compensation cost of the stock option plan been applied using the fair-value-based method at the grant date, rather than the intrinsic-value-method of accounting, the pro forma amounts would be as follows (in millions):

	Year Ended
	December 31,
	2005			2004
Net (loss) income from continuing operations, as reported	$	(5.7	)	$	28.0
Pro forma stock-based compensation expense, net of tax		1.7			2.0
Pro forma net (loss) income from continuing operations	$	(7.4	)	$	26.0

      Pro forma disclosures for stock option accounting may not be representative of the effects on reported net income in future years.

Environmental Liabilities

      The Company accrues for environmental investigation, remediation and penalty costs when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The liability is determined on an undiscounted cash flow basis and is not reduced for potential claims for recovery. Claims for recovery are recognized as agreements are reached with third parties. Environmental expenditures are capitalized if they mitigate or prevent future contamination or if they improve the environmental safety or efficiency of the existing assets. All other environmental costs are expensed as incurred. Environmental cost estimates may include expenses for remediation of identified sites, long term monitoring, payments for claims, administrative expenses and expenses for ongoing evaluations and litigation. The liability is adjusted

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available.

Insurance Reserves

      The Company’s insurance for workers’ compensation, automobile, product and general liability includes high deductibles for which the Company is responsible. Deductibles, for which the Company is responsible, are estimated and recorded as expenses in the period incurred.

Use of Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. The estimates and assumptions include estimates of collectibility of accounts receivable and the realizability of inventory, goodwill and other intangible assets. They also include estimates of cost accruals, environmental liabilities, warranty and product returns, insurance reserves, income taxes, pensions and other postretirement benefits and other factors. Management has exercised reasonableness in deriving these estimates; however, actual results could differ from these estimates.

      In the fourth quarter of 2005, the Company recorded a change in its estimate of outstanding potential warranty returns (see Note J).

New Accounting Pronouncements

      In December 2004, SFAS No. 123R, “Share-Based Payment” was issued. SFAS No. 123R requires the measurement of share-based payments to employees using a fair-value-based method and the recording of such expense in the income statement. The accounting provisions of SFAS No. 123R, as related to the Company, are effective for reporting periods beginning after December 15, 2005 and are to be applied prospectively. Also, in March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 107 (“SAB 107”). SAB 107 provides clarification on the implementation of SFAS No. 123R and the relationship of SFAS No. 123R to certain SEC rules and regulations. The pro forma disclosures previously permitted under SFAS No. 123 will no longer be an alternative to financial statement recognition. See the “Stock Options” section of this Note A for the pro forma net income as if the Company had used a fair-value-based method, similar to the methods required under SFAS No. 123R, to measure compensation expense. Had SFAS No. 123R been applied in the periods disclosed, the impact would have been similar to those pro forma amounts. The future impact is dependent upon if and when additional options are granted or expire, as well as the vesting period of such options.

      In December 2004, the FASB issued SFAS No. 151, “Inventory Costs.” SFAS No. 151 primarily clarifies the accounting for inventory when there are abnormal amounts of idle facility expense, freight, handling costs and wasted materials. Under existing guidelines, items such as idle facility expense, excessive spoilage and re-handling costs may be ’so abnormal’ as to require treatment as current period charges rather than recorded adjustments to the value of inventory. SFAS No. 151 requires that abnormal levels of such items be recognized as current period charges regardless of whether they meet the ’so abnormal’ criteria. The accounting provisions of SFAS No. 151 are to be applied prospectively and are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not expect SFAS No. 151 to have a material effect on its financial statements.

      In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140.” This statement, which is effective for fiscal years beginning after September 15, 2006, was issued to simplify the accounting for servicing rights and to reduce the volatility

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

that results from using different measurement attributes. The implementation of SFAS No. 156 is not expected to have a material effect on the Company’s financial statements.

      In June 2006, the FASB issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. FIN 48 is effective beginning January 1, 2007. Any cumulative impact resulting from the adoption of FIN 48 would be recorded as an adjustment to beginning retained earnings. The Company is currently evaluating this interpretation to determine if it will have a material impact on the Company’s financial statements.

      In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement is effective for fiscal years beginning after November 15, 2007. The Company has not evaluated the impact of this Statement on its financial statements.

      In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R).” This statement requires a company to fully recognize the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability in its financial statements and to recognize changes in the funded status through comprehensive income in the year in which the changes occur. This provision of SFAS No. 158 is effective for reporting periods beginning after July 1, 2007. The Company is currently assessing the impact of this provision of SFAS No. 158 on the Company’s financial statements. SFAS No. 158 also requires that the Company measure its plans assets and benefit obligations as of the Company’s year-end financial statement date. This provision of SFAS No. 158 is effective for fiscal years ending after December 15, 2008. This provision of SFAS No. 158 will not impact the Company’s financial statements because the Company currently does its measurements at year-end.

      In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 addresses diversity in practice in quantifying financial statement misstatements for the purpose of assessing materiality. SAB 108 requires that a company quantify misstatements based on the impact on each of their financial statements and related disclosures. SAB 108 is effective as of the end of 2006, allowing a one-time transitional cumulative effect adjustment to retained earnings as of January 1, 2006 for misstatements that were not previously deemed material, but are material under the guidance in SAB 108. The Company is currently evaluating SAB 108 to determine if it will have an impact on its financial statements.

Segment Reporting

      In accordance with the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the Company reports as one segment. The Company is in one business, which is the manufacturing and distribution of vehicle parts. The products and services, customer base, distribution channel, manufacturing process, procurement and economic characteristic are similar throughout all of the Company’s operations.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

Derivative Financial Instruments

      The Company recognizes derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. Changes in the fair value of those instruments will be reported in income or other comprehensive income (loss) depending on the use of the derivative and whether it qualifies for hedge accounting. The accounting for gains and losses associated with changes in the fair value of the derivative, and the effect on the financial statements, will depend on its hedge designation and whether the hedge is highly effective in offsetting changes in the fair value of cash flows of the asset or liability hedged.

NOTE B — DISCONTINUED OPERATIONS

      On June 30, 2006, the Company sold its driveline components operation and its specialty distribution operation. The driveline components operation manufactured and distributed products including universal joints, drive shafts, CV joints and boot kits and small vehicle CV half shafts. The specialty distribution operation sold hard-to-find products in categories such as engine and transmission parts, power train components, engine mounts, and shop supplies.

      These operations were sold to two separate buyers for a combined $37.6 million of cash, approximately $1.3 million of which is expected to be received by the end of the first quarter of 2007. In the second quarter of 2006, the Company recorded a combined after-tax loss of $18.3 million on these sales.

      The operating results and the assets and liabilities of these operations are presented as discontinued operations in the Company’s financial statements for all periods presented.

      Net sales and income before income taxes for these discontinued operations is presented below (in millions):

	Year Ended
	December 31,
	2005		2004
Net sales	$	139.9	$	133.9
Income before income taxes		2.0		4.6

      The pre-tax income presented in the above table includes deductions for allocated interest expense of $0.5 million and $0.3 million for the year ended December 31, 2005 and 2004, respectively. Interest expense is allocated to discontinued operations in accordance with EITF Issue No. 87-24, which requires allocation of interest expense to discontinued operations to the extent the Company is required to repay debt as a result of a disposition transaction.

NOTE C — ASSET IMPAIRMENTS AND OTHER COSTS

      The following table summarizes the Company’s asset impairments and other costs recorded in 2005 (in millions):

	Asset Write-
	Downs		Other		Total
Impairment of trademark	$	8.1	$	—	$	8.1
Impairment of software asset		3.8		—		3.8
Loss on contractual commitment		—		1.3		1.3
Impairment of property and equipment		5.5		—		5.5
Abandonment of an operation		2.2		0.6		2.8
	$	19.6	$	1.9	$	21.5

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

Impairment of trademark and software asset

      See Note H for a description.

Loss on contractual commitment

      In connection with the installation of a new integrated software system (see Note H), the Company entered into an agreement to outsource certain computer processing functions. The agreement expires in June 2007. As explained in Note H, the Company decided not to install the new software system at as many operating locations as initially planned. As a result, the Company will not use all of the outsourced computer processing capacity for which it is obligated to pay. In the fourth quarter of 2005, the Company recorded a $1.3 million loss for that portion of this contractual commitment that will not be used and, therefore, will not provide future economic benefit. This $1.3 million will be paid in 2006 and 2007, or upon settlement.

Impairment of property and equipment

      The Company has concluded that the estimated future cash flows of its air filter operations in the United Kingdom do not support the carrying value of that operation’s property and equipment. Consequently, the Company has recorded a $5.5 million impairment loss to write down those assets to their fair value. Fair value was estimated based on valuations from an independent appraiser.

Abandonment of an operation

      Airtex Products Ltd. (“Airtex UK”) was an indirect wholly-owned subsidiary of the Company with operations in the United Kingdom. During 2005, the largest customer of Airtex UK became insolvent and ceased operations, resulting in the loss of more than 50% of the revenue of Airtex UK. As a result of this situation, the Company decided to cease additional funding of the operations of Airtex UK, and subsequently sold Airtex UK to a newly incorporated English company owned by the local management of Airtex UK. The selling price was £1.

      In 2005, the Company recorded a pre-tax non-cash charge of $2.2 million for the impairment of certain assets of Airtex UK and an additional pre-tax charge of $0.6 million for losses incurred as a result of the abandonment and sale of Airtex UK.

      Sales of Airtex UK included in the Company’s consolidated results for the years ended December 31, 2005 and 2004 were $3.7 million, and $7.5 million, respectively. Pre-tax income (losses) of Airtex UK included in the Company’s consolidated results for the same years were $(0.9) million and $(0.2) million, respectively.

NOTE D — ALLOWANCE FOR DOUBTFUL ACCOUNTS

      Changes in the Company’s allowance for doubtful accounts are as follows (in thousands):

	Year Ended
	December 31,
	2005			2004
Beginning of year	$	2,723		$	3,573
Provision for doubtful accounts		158			47
Accounts written off		(203	)		(1,117	)
Recoveries		8			220
	$	2,686		$	2,723

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

NOTE E — SALES OF RECEIVABLES

      UCI enters into agreements to sell undivided interests in certain of its receivables to a factoring company, which in turn has the right to sell an undivided interest to a financial institution or other third party. UCI enters these agreements at its discretion when it determines that the cost of factoring is less than the cost of servicing its receivables with existing debt. Pursuant to these agreements, UCI sold $22 million of receivables during 2005, of which $6 million would otherwise have been outstanding at December 31, 2005. UCI retained no rights or interest, and has no obligations, with respect to the sold receivables. UCI does not service the receivables after the sales.

      The sales of receivables were accounted for as a sale in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The sold receivables were removed from the balance sheet at the time of sales. The costs of the sales were a 0.25% agent’s fee and a discount deducted by the factoring company, which is calculated based on LIBOR plus 1.5%. These costs were $0.3 million and $0.1 million in 2005 and 2004, respectively, and are recorded in miscellaneous, net.

NOTE F — INVENTORIES

      The components of inventories at December 31, 2005 are as follows (in thousands):

Raw materials	$	41,502
Work in process		24,517
Finished products		101,567
Valuation reserves		(17,396	)
	$	150,190

NOTE G — PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment at December 31, 2005 consists of the following (in thousands):

	Depreciable Life
Land and improvements	5-10 years	$	17,492
	(for improvements)
Buildings and improvements	5-40 years		59,757
Equipment	3-15 years		171,962
			249,211
Less accumulated depreciation			(68,564	)
		$	180,647

      Included in equipment shown above are purchases totaling approximately $0.4 million at December 31, 2005 under capital lease obligations. Accumulated amortization was approximately $0.1 million at December 31, 2005.

      Depreciation expense for the years ended December 31, 2005 and 2004 was $31.3 million and $33.6 million, respectively.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

NOTE H — OTHER INTANGIBLE ASSETS

      The components of other intangible assets at December 31, 2005 are as follows (in thousands):

		Amortizable				Accumulated
		Life		Gross		Amortization			Net
Acquired intangible assets
	Customer relationships		15 years	$	49,400	$	(12,519	)	$	36,881
	Technologies		10 years		7,100		(3,379	)		3,721
	Trademarks		Indefinite		32,000		—			32,000
Integrated software system			7 years		15,421		(826	)		14,595
				$	103,921	$	(16,724	)	$	87,197

      In 2005, as a result of its annual fourth quarter evaluation of trademarks with indefinite lives, the Company identified and recorded an $8.1 million impairment loss on one of its trademarks. This loss was due to a customer’s decision to market a significant portion of the Company-supplied products under its own private label brand, instead of the Company’s brand. The impairment loss is also due to lower than expected sales on the products that are still marketed under the Company’s brand.

      In the third quarter of 2005, the Company installed a new integrated software system at three of its North American operating facilities. The implementation process began in the second quarter of 2004. The Company’s intent was to install the new system at all of its other North American facilities, after the first three were operating efficiently. As a result, incremental costs were incurred to enable the software to accommodate the needs of the other facilities. These incremental costs were recorded as part of the integrated software system asset. Because of cost/ benefit and cash flow considerations, in December 2005 the Company decided to abandon its plans to install this system at the remaining North American operations. Consequently, in the fourth quarter of 2005, an impairment loss of $3.8 million was recorded to write-off the costs incurred to accommodate the needs of the other facilities.

      The estimated amortization expense related to acquired intangible assets and the integrated software system for each of the succeeding five years is (in thousands):

	Acquired		Integrated
	Intangible		Software
	Assets		System
2006	$	5,318	$	2,203
2007		4,814		2,203
2008		4,366		2,203
2009		3,968		2,203
2010		3,619		2,203

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

NOTE I — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

      Accrued expenses and other current liabilities at December 31, 2005 consists of the following (in thousands):

Salaries and wages	$	2,903
Bonuses		3,919
Vacation pay		4,827
Pension and other postretirement liabilities		8,705
Product returns		26,215
Rebates, credits and discounts due customers		11,045
Insurance		9,693
Taxes payable		7,543
Interest		3,043
Other		15,692
	$	93,585

NOTE J — PRODUCT RETURNS LIABILITY

      The liability for product returns is included in accrued expenses and other current liabilities. This liability includes accruals for parts returned under warranty and for parts returned because of customer excess quantities. The Company provides warranties for its products’ performance. Warranty periods vary by part, but generally are either one year or indefinite. In addition to returns under warranty, the Company allows its customers to return quantities of parts that the customer determines to be in excess of its current needs. Customer rights to return excess quantities vary by customer and by product category. Generally, they are contractually limited to 3% to 5% of the customer’s purchases in the preceding year. In some cases, the Company does not have a contractual obligation to accept excess quantities. However, common practice for the Company and the industry is to accept periodic returns of excess quantities from on-going customers. If a customer elects to cease purchasing from the Company and change to another vendor, it is industry practice for the new vendor, and not the Company, to accept any inventory returns resulting from the vendor change.

      The changes in the Company’s product returns are listed in the table below. The 2005 reductions to sales include $14.0 million resulting from a change in estimate with respect to warranty returns. Based on new information, the Company has increased its estimate of the average periods of time from (a) the date that certain products are sold to (b) the various dates when warranty claims on those products are received. In prior periods, the Company assumed that most warranty claims surfaced soon after the ultimate consumer purchased and installed the product. Based on unexpectedly high loss experience in the fourth quarter of 2005 and research conducted in 2005, the Company now estimates that, in many cases, warranty claims surface over a much longer period of time. Because warranty claims on certain products may be received for a longer period of time than previously estimated, the Company has increased the estimate of potential claims outstanding.

      The 2005 changes listed below also include a $2.2 million reduction in product returns liabilities. This favorable effect is the result of the Company reducing the warranty period for one of it product lines. The warranty period was reduced from indefinite to one year after it is purchased by the ultimate consumer.

      The 2004 reductions to sales amount includes $2.1 million for a single, unusually large quality matter. There were no similar issues in 2005.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Amounts in the following table are in thousands of dollars.

	Year Ended
	December 31,
	2005			2004
Beginning of year	$	14,794		$	13,497
Cost of unsalvageable returned parts		(39,863	)		(37,853	)
Additional reductions to sales		51,284			39,150
End of year	$	26,215		$	14,794

NOTE K — DEBT

      Debt at December 31, 2005 is summarized as follows (in thousands):

Short-term borrowings		$	261
Capitalized leases			12
Term loan			217,000
Senior subordinated notes			230,000
Debt issuance costs			(4,726	)
			442,547
Less:
	Short-term borrowings		261
	Current maturities		12
Long-term debt		$	442,274

      Senior credit facilities — The senior credit facilities are comprised of a revolving credit facility and a term loan.

      The $75 million revolving credit facility is available until 2010. The interest rates per annum applicable to the revolving credit facility, as well as the term loans, are, at UCI’s option, the Base Rate or Eurodollar Rate plus, in each case, an applicable margin. The applicable margin is subject to adjustment based on a consolidated leverage ratio, as defined. The Base Rate is a fluctuating interest rate equal to the higher of (a) the prime lending rate as set forth on the British Banking Association Telerate page 5 or another comparable page and (b) the Federal funds effective rate plus 0.50%. In addition to interest on outstanding borrowings, UCI is required to pay a commitment fee on any unused revolving credit facility commitments at a per annum rate of 0.50%, subject to adjustment based on a consolidated leverage ratio, as defined. At December 31, 2005, the interest rate was 6.81%. At December 31, 2005, there were no borrowings outstanding under the revolving credit facility. Also, at December 31, 2005, $8.0 million of the borrowing capacity had been used to support outstanding letters of credit. Accordingly, at December 31, 2005, $67.0 million was available for borrowing under the revolving credit facility.

      The $217 million term loan facility is due in 2010. Interest is payable quarterly or more frequently depending on the Eurodollar interest periods elected under the facility. The interest rate is variable and is determined as described above. At December 31, 2005, the interest rate was 6.81%. The loan is secured by all tangible and intangible assets of UCI. The Tranche C term loan amortizes in scheduled quarterly payments of $0.6 million per quarter, beginning December 31, 2007 through June 30, 2009, and $53.3 million per quarter from September 30, 2009 through June 30, 2010.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Borrowings under the Amended and Restated Credit Agreement are guaranteed on a full and unconditional and joint and several basis by UCI’s domestic subsidiaries.

      In 2005 and 2004, UCI voluntarily prepaid $15 million and $65 million, respectively, of the senior credit facility term loan.

      In 2005, UCI entered into an amendment to the senior credit facility which permits UCI to repurchase from time to time up to $75 million in aggregate principal amount of senior subordinated notes.

      In May 2006, UCI entered into an Amended and Restated Credit Agreement. See Note X.

      The senior credit facilities require UCI to maintain certain financial covenants and require mandatory prepayments under certain events as defined in the agreement. Also, the facilities include certain negative covenants restricting or limiting UCI’s ability to, among other things: declare dividends or redeem stock; prepay certain debt; make loans or investments; guarantee or incur additional debt; make capital expenditures; engage in acquisitions or other business combinations; sell assets, and alter UCI’s business. UCI is in compliance with all of these covenants at December 31, 2005.

      Senior subordinated notes — The Senior Subordinated Notes (the “Notes”) bear interest at 9³/8%. Interest is payable semi-annually, in arrears on June 15 and December 15 of each year, beginning December 15, 2003. The Notes are unsecured and rank equally in right of payment with any of UCI’s future senior subordinated indebtedness. They are subordinated to indebtedness and other liabilities of UCI’s subsidiaries that are not guarantors of the Notes. They are guaranteed on a full and unconditional and joint and several basis by the Company’s domestic subsidiaries. The Notes mature on June 15, 2013.

      The Notes indenture contains covenants that limit UCI’s ability to: incur or guarantee additional debt, pay dividends or redeem stock, make certain investments, and sell assets. UCI is in compliance with all of these covenants at December 31, 2005.

      Short-term borrowings — Short-term borrowings include notes payable of a foreign subsidiary to foreign credit institutions at December 31, 2005. The foreign notes bear interest at EURIBOR, plus 0.50%, which totaled 3.34% at December 31, 2005. The notes payable are collateralized by certain accounts receivable related to the amounts financed.

      Future Payments — The following is a schedule of future payments of debt at December 31, 2005 (in thousands):

2006	$	273
2007		566
2008		2,260
2009		107,652
2010		106,522
Thereafter		230,000
	$	447,273

      Interest Expense — Interest expense in 2005 was $36.0 million, including $0.2 million of accelerated write-off of deferred financing costs due to the voluntary prepayment of $15 million of the senior credit facility and $0.3 million of fees incurred in connection with the amendment to the senior credit facility. Interest expense in 2004 was $35.7 million, including $1.0 million of accelerated write-off of deferred financing costs due to the voluntary prepayment of $65 million of the senior credit facility term loan.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

NOTE L — INCOME TAXES

      The components of (loss) income before income taxes are as follows (in thousands):

		Year Ended
		December 31,
		2005			2004
(Loss) income before income taxes
	United States	$	2,141		$	44,945
	Non-United States		(6,209	)		2,389
		$	(4,068	)	$	47,334

      Components of income tax expense are as follows (in thousands):

		Year Ended
		December 31,
		2005			2004
Current
	Federal	$	6,562		$	13,252
	State		1,142			1,850
	Foreign		780			2,147
			8,484			17,249
Deferred
	Federal		(4,748	)		3,007
	State		(230	)		90
	Foreign		(1,828	)		(1,051	)
			(6,806	)		2,046
		$	1,678		$	19,295

      A reconciliation of income taxes computed at the United States Federal statutory tax rate to income tax expense follows (in thousands):

	Year Ended
	December 31,
	2005			2004
Income tax expense (benefit) at U.S. Federal statutory income tax rate	$	(1,424	)	$	16,567
R&D tax credit		(1,040	)		—
Foreign income taxed both locally and in the U.S. and foreign tax credits not benefitted		1,017			913
Foreign income tax losses not benefited and rate differential		1,102			260
State income taxes, net of Federal income tax benefit		592			1,261
Abandonment of an operation		950			—
Other, net		481			294
Income tax expense	$	1,678		$	19,295

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Deferred taxes at December 31, 2005 are attributable to the following (in thousands):

Deferred tax assets
	Pension and postretirement benefits		$	12,214
	Product returns and warranty accruals			10,451
	Inventory valuation			7,665
	Acquired intangible asset impairment			2,827
	Foreign net operating loss carryforwards			1,363
	Vacation accrual			1,854
	Insurance accruals			1,993
	Allowance for doubtful accounts			1,030
	Foreign tax credit carryforwards			932
	Minimum pension liability adjustment included in other comprehensive income (loss)			935
	Contractual commitment accrual			510
	Environmental accruals			230
	Other			912
				42,916
	Less: valuation allowance for foreign tax credit carryforwards and foreign net operating loss carryforwards			(2,295	)
		Total deferred tax assets		40,621
Deferred tax liabilities
	Depreciation and amortization			(13,526	)
	Goodwill amortization for tax, but not book			(6,483	)
	Cumulative foreign exchange adjustment included in other comprehensive income (loss)			(142	)
	Prepaid expenses			(1,292	)
	Other			(203	)
		Total deferred tax liabilities		(21,646	)
		Net deferred tax assets	$	18,975

      The net deferred tax assets are included in the balance sheet as follows (in thousands):

Deferred tax assets		$	22,529
Deferred tax liabilities			(3,554	)
	Net deferred tax assets	$	18,975

      At December 31, 2005, the Company had $4.5 million of foreign net operating loss carryforwards with no expiration date and $932 of foreign tax credit carryforwards of which $0.4 million and $0.5 million expire in 2015 and 2014, respectively. In assessing the realization of the deferred tax assets related to these carryforwards, the Company has determined that it is more likely than not that the deferred tax assets will not be realized. Therefore, a valuation allowance has been recorded for these carryforwards.

      Realization of the remaining net deferred tax assets is dependent on the Company generating sufficient taxable income in future years to utilize the benefits of the reversals of temporary differences. The Company has performed an assessment regarding the realization of the remaining net deferred tax assets, which

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

includes projecting future taxable income, and has determined it is more likely than not that the remaining net deferred tax assets will be realized.

      The Company’s tax returns are subject to examinations by taxing authorities. The Company believes its tax returns, as filed, are in accordance with applicable tax statutes. Because of the judgmental nature of certain tax positions, the Company’s tax provisions take into consideration possible differences between the taxing authority determinations and the “as filed” positions of the Company.

      The Company does not provide for U.S. income taxes on undistributed earnings of its foreign subsidiaries that are intended to be permanently reinvested. At December 31, 2005, these earnings amounted to approximately $3 million. Determination of the net amount of unrecognized U.S. income taxes with respect to these earnings is not practicable.

NOTE M — EMPLOYEE BENEFIT PLANS

Pension Plans

      The Company maintains defined benefit retirement plans covering certain U.S. and non-U.S. employees. The defined benefit retirement plans are generally based on years of service and employee compensation.

      The measurement date used to determine pension obligations is December 31, 2005. The following table sets forth the plans’ status at December 31, 2005 (in thousands):

			U.S.			Foreign
Change in benefit obligations
	Benefit obligations at beginning of year		$	184,474		$	53,002
	Service cost			6,844			2,028
	Interest cost			10,488			2,713
	Actuarial loss			11,771			4,086
	Foreign currency change			—			(5,873	)
	Plan curtailments			—			28
	Participant contributions			—			945
	Benefits paid			(6,577	)		(4,279	)
		Benefit obligations at end of year	$	207,000		$	52,650
Change in plan assets
	Fair value of plan assets at beginning of year		$	152,885		$	36,282
	Actual return on plan assets			8,975			6,223
	Employer contributions			5,115			2,490
	Foreign currency change			—			(4,105	)
	Participant contributions			—			945
	Benefits paid			(6,577	)		(4,279	)
		Plan assets at end of year	$	160,398		$	37,556
Funded status			$	(46,602	)	$	(15,094	)
	Unrecognized net actuarial loss			24,004			480
	Unrecognized prior service cost			1,393			—
		Net liability on balance sheet	$	(21,205	)	$	(14,614	)

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The net liability is classified in the balance sheet at December 31, 2005 as follows (in thousands):

	U.S.			Foreign
Plans in net asset position included in pension and other assets	$	10,778		$	—
Intangible pension assets included in pension and other assets		1,393			—
Amounts included in accumulated other comprehensive income (pre-tax amount)		2,435			—
Accrued pension cost included in accrued expenses and other current liabilities		(8,303	)		—
Accrued pension cost included in pension and other postretirement liabilities		(27,508	)		(14,614	)
	$	(21,205	)	$	(14,614	)

      The components of net periodic pension expense are as follows (in thousands):

	Year Ended December 31,
	2005						2004
	U.S.			Foreign			U.S.			Foreign
Service cost	$	5,870		$	2,028		$	4,996		$	2,272
Interest cost		8,966			2,713			8,125			2,455
Expected return on plan assets		(10,374	)		(2,393	)		(9,879	)		(2,179	)
Amortization of prior service cost		89			—			30			—
Amortization of unrecognized (gain) loss		30			(2	)		(18	)		—
Curtailment loss recognized		—			28			—			70
	$	4,581		$	2,374		$	3,254		$	2,618

      The Company determines its actuarial assumptions on an annual basis. In determining the present values of the Company’s benefit obligations and net periodic pension expense for all plans as of and for the years ended December 31, 2005 and 2004, the Company used the following assumptions:

	2005		2004
Weighted average discount rate to determine benefit obligations		5.4%		5.7%
Weighted average discount rate to determine net cost		5.7%		6.1%
Rate of future compensation increases		3.9% - 5.0%		4.0% - 5.0%
Rate of return on plan assets		7.1% - 8.0%		7.1% - 8.0%

      The assumed rate of return on plan assets was determined based on expected asset allocation and long-term returns for each category of investment.

      The weighted-average pension plan asset allocations for all plans are as follows at December 31, 2005:

Equity securities		59	%
Debt securities		41	%
	Total	100	%

      The Company’s investment strategy is to maintain the mix of equity and debt securities in the approximate percentages shown above.

      During 2006, the Company expects to contribute approximately $12.1 million to its plans. Pension benefit payments expected to be paid are as follows: 2006, $8.2 million; 2007, $8.7 million; 2008,

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

$9.1 million; 2009, $9.9 million; 2010, $10.5 million, and 2011 through 2015, $62.9 million. Expected benefit payments are based on the same assumptions used to measure the Company’s benefit obligations at December 31, 2005 and include estimated future employee service.

Profit Sharing and Defined Contribution Pension Plans

      Certain subsidiaries of the Company sponsor defined contribution plans under section 401(k) of the Internal Revenue Code. Eligible participants may elect to defer from 5% to 50% of eligible compensation. Such subsidiaries are required to match employees’ contributions based on formulas, which vary by plan. The Company had expenses for profit sharing and defined contribution pension plans of approximately $2.7 million and $2.7 million for the years ended December 31, 2005 and 2004, respectively.

Other Postretirement Benefits

      Certain subsidiaries of the Company provide health care and life insurance benefits to eligible retired employees. The plans are partially funded by participant contributions and contain cost-sharing features such as deductibles and coinsurance.

      The measurement date used to determine postretirement obligations is December 31, 2005. The following table presents information for the postretirement plans at December 31, 2005 (in thousands):

Change in benefit obligations
	Benefit obligations at beginning of year		$	7,838
	Service cost			283
	Interest cost			410
	Actuarial (gain) loss			(273	)
	Benefits paid			(403	)
		Benefit obligations at end of year		7,855
Unrecognized net actuarial (gain) loss				(48	)
Accrued obligations			$	7,903

      The accrued obligation is included in the balance sheet at December 31, 2005 as follows (in thousands):

Accrued obligation included in accrued expenses and other current liabilities	$	(402	)
Accrued obligation included in pension and other postretirement liabilities		(7,501	)
	$	(7,903	)

      The following are the components of net periodic postretirement benefit cost (in thousands):

	Year Ended
	December 31,
	2005			2004
Service cost	$	283		$	263
Interest cost		410			433
Amortization of net actuarial gain		(6	)		—
	$	687		$	696

      The Company determines its actuarial assumptions on an annual basis. In determining the present values of the Company’s benefit obligations and net periodic benefit cost, the Company used a discount rate of 5.50% and 5.75% for the years ended December 31, 2005 and 2004, respectively. The annual health care cost trend

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

rate is assumed to trend downward from 9% in 2005 to 5% in 2009. Increasing the assumed healthcare cost trend rates by one percentage point would result in additional annual costs of approximately $45,000. Decreasing the assumed health care cost trend rates by one percentage point would result in a decrease of approximately $39,000 in annual costs. The effect on postretirement benefit obligations at December 31, 2005 of a one-percentage point increase is $0.3 million. The effect of a one-percentage point decrease is $0.3 million.

      The Company continues to fund medical and life insurance benefit costs principally on a pay-as-you-go basis. The pay-as-you-go expenditures for postretirement benefits have not been material. During 2006, the Company expects to contribute approximately $0.4 million to its postretirement benefit plans. The benefits expected to be paid in each year from 2007 through 2010 are $0.4 million, $0.4 million, $0.5 million, and $0.5 million, respectively. The aggregate benefits expected to be paid in the five years 2011 through 2015 are $2.8 million.

NOTE N — COMMITMENTS AND CONTINGENCIES

Leases

      The following is a schedule of the future minimum payments and sublease rentals under operating leases that have non-cancelable lease terms (in thousands):

	Minimum		Sublease
	Payments		Rentals
2006	$	3,072	$	(599	)
2007		2,535		(599	)
2008		2,180		(599	)
2009		2,002		(599	)
2010		1,549		(599	)
2011 and thereafter		6,928		(2,397	)
	$	18,266	$	(5,392	)

      These leases also provide for payment of taxes and other expenses. Rent expense was $4.7 million and $4.3 million for the years ended December 31, 2005 and 2004, respectively.

Insurance Reserves

      The Company purchases insurance policies for workers’ compensation, automobile, product and general liability. These policies include high deductibles for which the Company is responsible. Deductibles, for which the Company is responsible, are estimated and recorded as expenses in the period incurred. Estimates of experts are updated and adjustments are recorded each quarter. These estimates are subject to substantial uncertainty because of several difficult to predict factors, including actual claims experience, regulatory changes, litigation trends and changes in inflation. Estimated losses for which the Company is responsible are included in accrued expenses and other current liabilities in the balance sheet.

Environmental

      The Company is subject to a variety of Federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes and the cleanup of contaminated sites. The Company has been identified as a potentially responsible party for contamination at two sites. One of these sites is a former facility in Edison, New Jersey, where a state agency has ordered the Company to continue with the monitoring and investigation of chlorinated solvent contamination. The Company has informed the agency

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

that this contamination was caused by another party at a neighboring facility and has initiated a lawsuit against that party for damages and to compel it to take responsibility for any further investigation or remediation. The second site is a previously owned site in Solano County, California, where the Company, at the request of the regional water board, is investigating and analyzing the nature and extent of the contamination and is conducting some remediation. Based on currently available information, management believes that the cost of the ultimate outcome of these environmental matters will not exceed the $2.6 million accrued at December 31, 2005 by a material amount, if at all. However, because all investigation and analysis has not yet been completed and because of the inherent uncertainty in such environmental matters, it is reasonably possible that the ultimate outcome of these matters could have a material adverse effect on results for a single quarter. Expenditures for these environmental matters total $0.7 million and $0.7 million in 2005 and 2004, respectively.

Litigation

      The Company is subject to various other contingencies, including routine legal proceedings and claims arising out of the normal course of business. These proceedings primarily involve commercial claims, product liability claims, personal injury claims and workers’ compensation claims. The outcome of these lawsuits, legal proceedings and claims cannot be predicted with certainty. Nevertheless, the Company believes that the outcome of any currently existing proceedings, even if determined adversely, would not have a material adverse effect on financial condition or results of operations.

Product Recall

      The Company is in the early stages of recalling one of the products it distributes. The estimated cost of this recall ranges from $1 million to $2 million. Because the Company is in the early stages of resolving this matter, the estimates are subject to change, which could be significant.

      The product being recalled was purchased as a completed product from a third-party manufacturer. The Company believes that this third-party manufacturer is contractually responsible for all costs associated with the recall. The third-party manufacturer has informally accepted responsibility.

      In 2005, the Company recorded a $1.0 million accrued liability for this matter and has recorded a corresponding $1.0 million receivable, which is included in other current assets.

International Asset Transfers

      The Company is evaluating the adequacy of its documentation of certain international asset transfers. It is uncertain if such documentation will be deemed complete. Therefore, the Company could be subject to fines estimated to range from $250,000 and $1 million. In 2005, the Company recorded a $250,000 accrued liability for these fines.

NOTE O — RELATED PARTY TRANSACTIONS

      The Company has employment agreements with certain of its executive officers providing for annual compensation amounting to approximately $0.8 million per annum plus bonuses (as defined in the agreements) and severance pay under certain circumstances (as defined in the agreements).

      In 2003, the Company entered into a management agreement with TC Group, L.L.C., an affiliate of Carlyle, for management and financial advisory services and oversight to be provided to the Company and its subsidiaries. Pursuant to this agreement, the Company pays an annual management fee of $2.0 million and out-of-pocket expenses, and the Company may pay Carlyle additional fees associated with financial advisory and other future transactions. The management agreement provides for indemnification of Carlyle against liabilities and expenses arising out of Carlyle’s performance of services under the agreement. The agreement

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

terminates either when Carlyle or its affiliates own less than 10% of the Company’s equity interest or when the Company and Carlyle mutually agree to terminate the agreement.

NOTE P — GEOGRAPHIC INFORMATION

      The Company had the following net sales by country (in thousands):

	Year Ended
	December 31,
	2005		2004
United States	$	695,463	$	721,160
Canada		30,041		28,022
United Kingdom		37,132		38,591
Mexico		29,917		25,225
Germany		13,319		13,223
France		10,220		8,231
Belgium		6,934		6,919
Sweden		5,744		6,086
Spain		3,954		3,681
Other		40,702		41,627
	$	873,426	$	892,765

      Net long-lived assets by country at December 31, 2005 are as follows (in thousands):

United States	$	253,349
United Kingdom		30,263
Mexico		13,129
Spain		3,269
Canada		868
Goodwill		166,559
	$	467,437

NOTE Q — STOCK OPTIONS

      Holdco adopted a stock option plan in 2003, which was amended in May 2006 (the “Plan”). The Plan permits the granting of options to purchase shares of common stock of Holdco. The Company’s employees, directors and consultants are eligible to receive a stock option grant. Options granted pursuant to the Plan must be authorized by the Compensation Committee of the Board of Directors of Holdco (the “Compensation Committee”). The aggregate number of shares which may be issued under the Plan shall not exceed 338,778 shares of common stock (amended to 450,000 shares in May 2006). The terms of the options may vary with each grant and are determined by the Compensation Committee within the guidelines of the Plan. No option life can be greater than ten years. The exercise price of the options cannot be less than 100% of fair market value of the related shares at the date of grant. Options currently outstanding vest over an 8 year period, and vesting of a portion of the options could accelerate if UCI achieves certain financial targets, or in the event of certain changes in ownership. In 2005 and 2004, the exercise price of all options granted was at the estimated $100 market value of Holdco’s common stock on the date of the grant. The average remaining life of options outstanding at December 31, 2005 is 8 years.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Information related to the number of shares under options follows:

		Year Ended
		December 31,
		2005			2004
Number of shares under option:
	Outstanding, beginning of year		304,578			278,678
	Granted		39,500			73,900
	Exercised		—			—
	Canceled		(40,038	)		(48,000	)
	Outstanding, end of year		304,040			304,578
	Exercisable, end of year		92,657			74,381

NOTE R — FAIR VALUE OF FINANCIAL INSTRUMENTS

      Cash and cash equivalents — The carrying amount of cash equivalents approximates fair value because the original maturity is less than 90 days.

      Trade accounts receivable — The carrying amount of trade receivables approximates fair value because of their short outstanding terms.

      Trade accounts payable — The carrying amount of trade payables approximates fair value because of their short outstanding terms.

      Short-term borrowings — The carrying value of these borrowings equals fair market value because their interest rates reflect current market rates.

      Long-term debt — The fair market value of the $230 million senior subordinated notes, at December 31, 2005, is $228.0 million. The carrying value of borrowings under the senior credit facility equals fair market value because their variable interest rates reflect market rates.

      Interest rate swaps — Interest rate swaps are marked to market at the end of each reporting period.

NOTE S — INTEREST RATE SWAPS

      In connection with UCI’s senior credit facilities, UCI had interest rate swap agreements which expired in August 2005. These agreements effectively converted $118 million of variable rate debt to fixed rate debt for the two years ended August 2005. On August 10, 2005, UCI entered into new interest rate swap agreements. These agreements effectively convert $80 million of variable rate debt to fixed rate debt for the two years ending August 2007 and $40 million for the 12-month period ending August 2008. The variable component of the interest rate on borrowings under the senior credit facilities is based on LIBOR. Under the swap agreements, UCI will pay 4.4%, and will receive the then current LIBOR, on $80 million through August 2007 and $40 million for the 12-month period ending August 2008.

      The Company does not use derivatives for trading or speculative purposes nor is it a party to leveraged derivatives. Further, the Company has a policy of only entering into contracts with carefully selected major financial institutions based upon their credit ratings and other factors.

      The Company recorded an asset of $529,000 at December 31, 2005 to recognize the fair value of interest derivatives. The Company has also recorded a tax liability of $203,000 at December 31, 2005 associated therewith. The net offset is recorded in accumulated other comprehensive income (loss).

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

NOTE T — OTHER COMPREHENSIVE INCOME (LOSS)

      The components of other comprehensive income (loss) for the year ended December 31, 2005 are as follows (in thousands):

	Before					Net of
	Tax			Tax		Tax
	Amount			Benefit		Amount
Interest rate swaps	$	(112	)	$	48	$	(64	)
Foreign currency adjustment		(4,485	)		1,941		(2,544	)
Minimum pension liability adjustment		(1,540	)		586		(954	)
	$	(6,137	)	$	2,575	$	(3,562	)

      Accumulated other comprehensive income (loss) is as follows (in thousands):

							Minimum			Accumulated
				Foreign			Pension			Other
	Interest Rate			Currency			Liability			Comprehensive
	Swaps			Adjustment			Adjustment			Income (Loss)
Balance at January 1, 2005	$	390		$	2,882		$	(546	)	$	2,726
2005 change		(64	)		(2,544	)		(954	)		(3,562	)
Balance at December 31, 2005	$	326		$	338		$	(1,500	)	$	(836	)

NOTE U — OTHER INFORMATION

      Cash payments for interest and income taxes (net of refunds) and non-cash transactions follow (in thousands):

		Year Ended
		December 31,
		2005		2004
Cash flow information:
	Interest	$	35,278	$	32,908
	Income taxes (net of refunds)		12,783		17,397

      On June 20, 2003, UCI purchased from UIS, Inc. and UIS Industries, Inc., the vehicle parts businesses. The $8 million accrued liability related to this purchase was paid in January 2004.

      In 2004, the Company recorded $874,000 pre-tax expense for losses associated with the closure of certain distribution facilities in the third and fourth quarters. The pre-tax expense includes $57,000 of employee severance costs and $817,000 for lease commitments, net of estimated sublease income. Such lease commitments are for distribution facilities that will not be used by the Company for the remaining term.

      At December 31, 2005, 5,000,000 shares of voting common stock were authorized, and 2,636,320 shares of voting common stock were issued and outstanding. The par value of each share of common stock is $0.01 per share.

NOTE V — CONCENTRATION OF RISK

      The Company places its cash investments with a relatively small number of high quality financial institutions. Substantially all of the cash and cash equivalents, including foreign cash balances at December 31, 2005, were uninsured. Foreign cash balances at December 31, 2005 were $4.8 million.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The Company sells vehicle parts to a wide base of customers for use by original equipment manufacturers and aftermarket consumers. The Company has outstanding receivables owed by these customers and to date has experienced no significant collection problems. Sales to a single customer, AutoZone, approximated 20% and 22% of total net sales for the years ended December 31, 2005 and 2004, respectively. No other customer accounted for more than 10% of total net sales for the years ended December 31, 2005 and 2004. Although the Company is directly affected by developments in the vehicle parts industry, management does not believe significant credit risk exists.

NOTE W — QUARTERLY FINANCIAL INFORMATION (unaudited)

      The following is a summary of the unaudited quarterly results of operations for the year ended December 31, 2005. The Company believes that all adjustments considered necessary for a fair presentation in accordance with generally accepted accounting principles have been included (in thousands).

	Three Months Ended
	March 31		June 30		September 30		December 31
Net sales	$	211,701	$	232,018	$	223,888	$	205,819
Gross margin		41,478		47,877		46,635		29,076
Net (loss) income from continuing operations		2,648		3,954		5,951		(18,299	)

NOTE X — SUBSEQUENT EVENTS (unaudited)

Closure of Canadian Facility

      In March 2006, the Company decided to close a Canadian facility, which manufactures and distributes mechanical fuel pumps. Production and distribution will be transferred to the Company’s fuel pump operations in Illinois. This Canadian facility had sales of $6.2 million and $8.2 million in 2005 and 2004, respectively.

      In 2006, the Company recorded a loss of $0.9 million related to this closing. This loss includes approximately $0.4 million of severance payments, $0.4 million of equipment write-offs, and $0.1 million of other related costs.

Acquisition of ASC Industries, Inc.

      On May 25, 2006 (the “ASC Acquisition Date”), UCI completed the acquisition of all of the outstanding capital stock of ASC. This transaction is referred to as the “ASC Acquisition”.

      ASC is a manufacturer and distributor of water pumps, with 2005 revenues of $98 million.

      The preliminary ASC Acquisition purchase price, including $3.6 million of fees and expenses directly related to the ASC Acquisition, was $123.5 million. In addition, UCI assumed $12.0 million of ASC debt and certain other ASC obligations related to the acquisition.

      In addition to the above, UCI agreed to pay to the former stockholders of ASC up to an aggregate amount of $4 million of additional purchase price, based upon the integration of certain operations within ASC and UCI. In the third quarter of 2006, UCI paid $2 million of the $4 million and has added that amount to the purchase price of ASC. The remaining $2 million will be added to the final purchase price, if and when the remainder of the integration is completed.

UCI Holdco, Inc.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Financing for the ASC Acquisition was comprised of the following:

	(in millions)
Proceeds from additional UCI debt	$	113.0
UCI’s cash on hand		4.2
Rollover equity		8.3
	$	125.5

      Certain ASC stockholders exchanged $8.3 million of ASC stock for the stock of UCI’s parent company, and UCI’s parent company contributed the ASC stock to UCI. This stock is referred to as “rollover equity” in the above table.

      In connection with the ASC Acquisition and the related financing, the Company paid $2.5 million to the Carlyle Group.

Amended and Restated Credit Agreement

      In connection with the ASC Acquisition, on May 25, 2006, UCI entered into an Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement replaced UCI’s previously existing credit facility, and provided for additional borrowing capacity of up to $113 million.

      UCI replaced the $217 million term loan that was outstanding under its previously existing senior credit facility with a term loan borrowing under the new credit facility. In addition, $113 million was borrowed to finance a portion of the ASC Acquisition purchase price.

      On October 27, 2006, UCI voluntarily repaid $30.4 million of the term loan. Also, on July 6, 2006, UCI repaid $34.6 million of the term loan, of which $8.0 million was required to be paid. Of the remaining $265 million balance, $47.5 million is due in September 2010, and $72.5 million is due in each of December 2011, March 2012 and June 2012. The terms and conditions of the new Amended and Restated Credit Agreement are similar to those of UCI’s previous senior credit facility.

Sale of Lighting Systems Operation

      On November 30, 2006, UCI sold its Flexible Lamps subsidiary (“Flexible”). Flexible manufactures and distributes lighting systems for commercial vehicles. Its customers are primarily in the European market. Net sales in the nine months ended September 30, 2006 were $45.6 million and were $60.7 million in the year ended December 31, 2005.

      Flexible was sold for $36.5 million in cash, net of fees and expenses. The gain on the sale was approximately $2.8 million, net of $6.8 million of tax expense. Only $2.1 million of the tax will be paid in cash. The remaining $4.7 million is a non-cash charge from the reversal of book/tax temporary differences.

      The final sales price is subject to certain post-closing adjustments, including an increase or decrease, dependent on finalization of net working capital. In addition, the sales price could increase by up to $2.3 million, depending on the amount of proceeds from the possible post-closing sale of a Flexible building. Also, if Flexible makes structural changes to its pension plan within 15 months, and if such changes result in a reduction in the actuarially determined deficit, the final sales price could increase by up to an additional $2.2 million. Any adjustment in the sales price will result in a commensurate adjustment to the pre-tax gain on the sale of Flexible.

  EX-99.4 5 w27712exv99w4.htm EX-99.4: OTHER DATA

Exhibit 99.4

Other data

(Unaudited)

(in thousands)

Other Financial Data:
	Capital expenditures	$	42,456	$	30,636	$	25,114	$	18,299	$	32,324	$	24,293

12

EBITDA
	EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with generally accepted accounting procedures in the United States (GAAP). This measure is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to operating income, cash flows or any other measures of performance or liquidity prepared in accordance with GAAP or as an alternative to cash flow from operating, investing or financing activities as a measure of liquidity.
	We present EBITDA because certain covenants in the indenture relating to the notes we intend to issue on December 19, 2006 (the “notes”) are tied to a ratio based on this measure. “EBITDA” represents net income before interest expense, income tax provision and depreciation and amortization. Set forth below in the reconciliation are certain other adjustments to EBITDA contemplated by the indenture for the notes. You are encouraged to evaluate each adjustment and whether you consider each to be appropriate. In addition, in evaluating EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments in the presentation of EBITDA. Our presentation of EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our calculation of EBITDA may not be comparable to a similarly entitled measure reported by other companies. Based on our industry and debt financing experience, we believe that EBITDA is customarily used by securities analysts, investors and other interested parties to provide useful information regarding a company’s ability to service and/or incur indebtedness. The indenture requires that our Fixed Charge Coverage Ratio equal or exceed 2.0x in order for us to be able to incur additional debt, subject to certain exceptions. EBITDA is used in the calculation of Fixed Charge Coverage Ratio.
	EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or to reduce our indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA only supplementally.

The following is a reconciliation of net income to EBITDA:

											Pro Forma
														Twelve
		Year Ended					Nine Months Ended				Year Ended			Months Ended
		December 31,					September 30				December 31,			September 30,
		2004		2005			2005		2006		2005			2006(a)
							(Unaudited)				(Unaudited)
		(In thousands)
Net income (loss) from continuing operations		$	28,039	$	(5,746	)	$	12,553	$	4,457	$	(37,550	)	$	(25,157	)
	Income tax expense (benefit)		19,295		1,678			10,340		5,347		(17,862	)		(12,160	)
	Interest expense, net		35,699		36,003			26,514		31,935		76,347			79,548
	Depreciation and amortization of intangible assets		40,397		37,140			27,781		28,003		37,922			37,541
EBITDA			123,430		69,075			77,188		69,742		58,857			79,772
	Sale of inventory written-up to market per GAAP(b)		—		—			—		7,296		8,800			—
	Asset impairments and cost of facility consolidation and integration(c)		1,390		23,917			4,769		12,004		29,346			25,723
	Write-off of deferred financing costs from refinancing(d)		—		—			—		2,625		2,625			—
	Cost of new business(e)		—		—			—		3,928		—			3,928
	Warranty reserves(f)		—		14,000			—		—		14,000			14,000
	Non-cash charges(g)		4,038		1,203			648		1,172		1,203			1,726
	Management fee(h)		2,000		2,000			1,500		1,500		2,000			2,000
	Completed initiatives(i)		—		—			—		—		—			6,000

(a)	Our pro forma financial information for the twelve months ended in September 30, 2006 does not include the fourth quarter 2005 results of ASC. We estimate that ASC’s net sales for the three months ended December 31, 2005 were between $25.0 and $27.0 million and that ASC’s Adjusted EBITDA for the three months ended December 31, 2005 was between $3.0 and $4.0 million.
(b)	In accordance with GAAP, ASC’s inventory on hand at the ASC Acquisition Date was written up from ASC’s historical cost to fair market value. When this inventory is sold, the difference in value is charged to cost of sales, reducing reported gross profit. After the written-up inventory has all been sold, cost of sales will reflect ASC’s historical costs. The adjustments reflect the difference in value related to the inventory sold during the relevant period, net of minority interest.
(c)	The following table represents asset impairment, facility consolidation and integration charges as set forth below:

		Pro Forma
				Twelve Months
		Year Ended		Ended
		December 31,		September 30,
		2005		2006
		(unaudited)
		(in millions)
Impairment — trademark (i)		$	8.1	$	8.1
Impairment — software (ii)			3.8		3.8
Loss on contractual commitment (iii)			1.3		1.3
Impairment — property, plant and equipment (iv)			5.5		5.5
Closure of UK facility (v)			2.8
Closure of Canadian facility (vi)					0.9
Closure of Mexican facility (vii)					5.4
Water pump integration (viii)			5.4
Facilities closing and severence (ix)			2.4		0.7
	Total		29.3		25.7

	(i) In the fourth quarter of 2005, we wrote down one of our trademarks. The write-down was due to a customer’s decision to market a significant portion of our products under its own private label, instead of under our brand. This resulted in significantly lower sales under our brand and, consequently, an impairment loss.
	(ii) In 2004 and 2005, we incurred costs to install a new integrated software system at all of our North American operations. In the third quarter of 2005, we implemented the software at three of our facilities. Because of cost/benefit and cash flow considerations, we decided to abandon the plan to implement the system at the other facilities. Consequently, we wrote off the costs incurred related to the other facilities.
	(iii) As a result of the decision not to implement the new software system at all North American operations, we recorded a loss related to a contractual commitment for computer services that would not be used at all operations as initially planned.
	(iv) In the fourth quarter of 2005, we incurred an impairment charge to write down certain fixed assets to fair market value.
	(v) In the second and third quarters of 2005, we incurred charges in connection with the abandonment of our UK water pump manufacturing operation.
	(vi) In March 2006, we decided to close our Canadian fuel pump facility and transfer its operations to Fairfeld, Illinois, resulting in asset write-offs and severance and other closure related costs.
	(vii) In April 2006, we decided to close our Mexican filter facility and transfer its operations to Albion, Illinois, resulting in asset write-offs and severance and other closure related costs.
	(viii) In 2006, as a result of our integration of ASC and our existing water pump operations, we incurred asset impairment write-downs and other costs.
	(ix) We incurred additional one-time charges for several facilities consolidation and severance costs.
(d)	In connection with the ASC Acquisition, UCI entered into a senior credit agreement, which replaced UCI’s previously existing senior credit facility and provided for additional borrowing capacity of up to $113.0 million. As a result of this refinancing, we recorded a $2.6 million loss in May 2006 to write off the unamortized deferred financing costs related to the previously outstanding debt.
(e)	In connection with certain new business wins, we incurred an aggregate of $3.9 million of one-time costs relating to repurchase of the previous suppliers’ inventory and certain other start-up costs.
(f)	In 2005, we reduced our net sales by $14.0 million based on a change in estimate with respect to our warranty reserves. This adjustment was based on new information relating to the average periods of time it takes for warranty claims to be received after the initial sale.
(g)	Primarily consists of non-cash pension and stock option charges. Also, in 2004, we recorded a non-recurring adjustment to increase our slow-moving and obsolete inventory reserve.
(h)	Represents management fees paid to Carlyle.
(i)	Represents the pro forma effect of certain completed initiatives on prior periods.
	(i) $4.0 million — Represents the pro forma effect on prior periods of plant closures in the third quarter of 2006.
	(ii) $2.0 million — Represents the pro forma effect on prior periods of headcount reductions in the first three quarters of 2006.

EX-99.4

EX-99.4