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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS

Commission file number: 333-107219

United Components, Inc.

Registrant’s telephone number, including area code: (812) 867-4156

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes o          No þ

Documents Incorporated by Reference: None

TABLE OF CONTENTS

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PART I

Overview

      We were incorporated on April 16, 2003, and on June 20, 2003, we purchased all of our operating units from UIS, Inc., and UIS Industries, Inc. (together “UIS”). For more information regarding the purchase of our operations, see “The Acquisition and Ownership” section, which immediately follows this overview.

      Prior to June 20, 2003, our operations comprised the vehicle parts business of UIS. Beginning with the purchase of Airtex in 1958, UIS continued acquisitions in the automotive industry over the following four decades resulting in the acquisitions of Wells Manufacturing, Champion Laboratories, Neapco, Flexible Lamps and Pioneer. Over the years, UIS achieved growth in these businesses through increased parts offerings and domestic and international expansion.

      We are among North America’s largest and most diversified companies servicing the vehicle replacement parts market, or the aftermarket. We supply a broad range of filtration products, fuel and cooling systems, engine management systems, driveline components and lighting systems to the automotive, trucking, marine, mining, construction, agricultural and industrial vehicle markets. We estimate about 80% of our net sales in 2003 were made in the aftermarket, to a customer base that includes some of the largest and fastest growing companies servicing the aftermarket. We believe we have leading market positions in our primary business lines, including fuel and cooling systems, filtration products and engine management systems. We continue to expand our product and service offerings to meet the needs of our customers, and we believe that we offer one of the most comprehensive lines of products in the vehicle replacement parts market consisting of approximately 60,000 part numbers. We believe our breadth of product offering is a key competitive advantage. This product breadth along with our extensive manufacturing and distribution capabilities, product innovation and reputation for quality and service makes us a leader in our industry. We have established a network of manufacturing facilities, distribution centers and offices located in the United States, Europe, Mexico and China, with a global work force of more than 6,500 employees as of December 31, 2003. In 2003, our net sales were $959.3 million.

      Unlike many companies that are exclusively or primarily original equipment suppliers, our sales do not necessarily correlate to annual vehicle production. Rather, we believe that the majority of our sales tend to track more closely with the overall growth of the aftermarket. According to the 2003 AAIA Report, the automotive aftermarket (excluding tires) has grown at an annual rate of approximately 4.1% from 1997 through estimated 2003, or 27% during this six-year period, with the lowest year of growth in 1998 of approximately 2.9%. We believe that the aftermarket will continue to grow as a result of increases in the median age of vehicles, average number of miles driven per year by passenger cars, number of vehicles registered in the United States, number of licensed drivers and number of light trucks and sport utility vehicles, which generally require higher priced replacement parts.

      We believe our primary product lines are well positioned in the aftermarket, as our filtration products have relatively short and predictable replacement cycles and our fuel and cooling systems and engine management systems are non-discretionary replacement items. The need for our products increases as cars reach the prime age (six years or more) for aftermarket maintenance. We believe our diversity across products and sales channels is also among the most attractive in the industry, and this diversity allows us to benefit from positive trends impacting different products and sales channels. We have also developed longstanding relationships with our customers through our breadth of product offering, emphasis on customer service, product quality and competitive pricing, as evidenced by the numerous customer awards we have earned over the years. Our customer base includes leading aftermarket companies such as Advance Stores Company, Inc. (Advance Auto Parts), Valvoline Company, a division of Ashland Inc. (Valvoline), AutoZone, Inc. (AutoZone), Carquest Corporation (CARQUEST), MDSA, Inc. (Mighty) and National Automotive Parts Association, a wholly-owned subsidiary of Genuine Parts Company (NAPA), as well as a diverse group of original equipment manufacturers, or OEMs, such as DaimlerChrysler Corporation (DaimlerChrysler), CNH Global N.V. (Case New Holland), Ford Motor Company, Inc. (Ford), General Motors Corporation (GM),

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The Acquisition and Ownership

      On June 20, 2003, we purchased, from UIS, its vehicle parts businesses, consisting of all of the issued and outstanding common stock or other equity interests of Champion Laboratories, Inc., Wells Manufacturing Corporation, Neapco Inc., Pioneer, Inc., Wells Manufacturing Canada Limited, UIS Industries Ltd. (which is the owner of 100% of the capital stock of Flexible Lamps, Ltd. and Airtex Products Ltd.), Mid-South Mfg., Inc., Airtex Products S.A., Airtex Products, Inc., (currently Airtex Mfg., Inc.), Talleres Mecanicos Montserrat S.A. de C.V., Brummer Seal de Mexico, S.A. de C.V., Brummer Mexicana en Puebla, S. A. de C.V., Automotive Accessory Co. Ltd and Airtex Products, LLC, a limited liability company that owns the assets of the Airtex Products business of UIS, Inc. We refer to this transaction as the “Acquisition”.

      The purchase price paid was $808 million, plus transaction fees. The Acquisition was financed through a combination of debt and $260 million in cash contributed to us as equity by our parent, UCI Acquisition Holdings, Inc. through contributions from Carlyle Partners III, L.P. and CP III Coinvestment, L.P. We are a wholly owned subsidiary of UCI Acquisition Holdings, Inc. We and UCI Acquisition Holdings are corporations formed at the directions of The Carlyle Group.

Our Products

      We design, develop, manufacture and distribute a broad range of vehicle replacement parts, including filtration products, fuel and cooling systems, engine management systems, driveline products and commercial vehicle lighting systems. Our products are described below:

      See “Our Product Categories” at the end of this “Item 1. Business” overview section for more information.

Our Industry

      The North American vehicle parts industry contains numerous participants, many with less diverse product lines than ours. We believe industry participants are increasingly focused on limiting their supplier base, and therefore place a premium on suppliers with a diverse offering of quality products, customized service and consistent and timely availability and delivery of products. Our industry is also characterized by relatively high barriers to entry, which include the need for significant start-up capital expenditures, initial product depth within a product line, distribution infrastructure and long-standing customer relationships.

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      The vehicle parts industry is comprised of four main sales channels: the retail sales channel, the traditional sales channel, the original equipment service, or OES, sales channel and the OEM sales channel. The retail, traditional and original equipment service sales channels together comprise the aftermarket. The characteristics of the aftermarket vary considerably from that of the OEM sales channel. While product sales for use by OEMs are one-time sales events, product sales in the aftermarket are of replacement products that are repeatedly purchased.

      Historically, the largest portion of our net sales have been to the aftermarket portion of the vehicle parts industry. According to the AAIA Report, the U.S. automotive aftermarket (excluding tires) is large and fragmented with an estimated $166 billion of aggregate retail sales in 2003, and is organized around two groups of end-users: the do-it-yourself group, or DIY group, and the do-it-for-me group, or DIFM group. The DIY group, which is supplied primarily through the retail channel (e.g., Advance Auto Parts, AutoZone, Pep Boys and Wal-Mart), represents an estimated 21% of industry-wide aftermarket sales in 2003, and consists of consumers who prefer to do various repairs on their vehicles themselves. The DIFM group is supplied primarily through the traditional channel (e.g., CARQUEST and NAPA), which represents an estimated 79% of industry-wide aftermarket sales in 2003, and consists of car dealers, repair shops, service stations and independent installers who perform the work for the consumer. In addition, the OES sales channel includes service bays at vehicle dealerships.

      There are many factors, as supported by the AAIA Report unless otherwise indicated, that contribute to the strong growth of aftermarket sales, including:

      Consumers are retaining their cars longer. According to R.L. Polk and Co., the median age for passenger cars has increased 76% from 4.9 years in 1970 to a median of 8.6 years in 2003. Because of the significant increase in new car sales in the late 1990s, a surge of vehicles entering the prime age for aftermarket maintenance is expected to begin in 2004.

      Increasing miles driven. The demand for the majority of our products is tied to the regular replacement cycle or the natural wearing cycle of a vehicle part based on actual miles driven. According to the 2003 Automotive Industry Status Report prepared by Motors & Engine Mechanics Association, or MEMA, annual miles driven in the United States by all types of wheeled vehicles increased every year between 1970 and 2001 with the exception of the three years coinciding with the oil crises of 1974, 1979 and 1980. From 1992 to 2001, the average miles driven for passenger cars increased over 11% over the nine-year period, according to the AAIA Report, and we believe this trend is likely to continue

      Increasing number of registrations. Since 1993, the number of registered passenger cars and light trucks, or light vehicles, has increased by 20% and the number of licensed drivers has grown by 13%. In 2000, the U.S. light vehicle market achieved the highest total sales on record with 17.4 million cars and light trucks sold. We believe the buildup in vehicle sales volumes between 1999 and 2002 will also drive the growth in the installed base of older vehicles over the next several years.

      Shifting vehicle mix. The number of light vehicles in use has increased over the past ten years, driven primarily by growing consumer interest in pickup trucks and sports utility vehicles, or SUVs. From 1993 to 2002, the number of light trucks in use grew annually by 4.5%, as compared to the 0.8% annual increase in passenger cars in use during the same period. In 2002, light trucks accounted for more than half of all light vehicle sales (up from 39% in 1993). This trend is significant as light truck parts are generally more expensive than the parts for passenger cars.

Our Competitive Strengths

      Leading Market Positions. We are among North America’s largest companies serving the aftermarket, supplying a broad range of vehicle replacement products. We have served customers with our products for over 20 years and, as a result, we have developed a strong portfolio of quality products that we believe have achieved market leadership positions. As a result of our performance record, we have won a number of awards from our customers. We believe we have leading market positions in several of our key business lines, including fuel and cooling systems, filtration products and engine management systems.

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      Breadth of Product Offering and Service. We believe our product portfolio is one of the broadest in the North American vehicle parts industry. We currently offer approximately 60,000 part numbers, which provide our business with a competitive advantage by enabling us to offer our customers a wide array of quality products. In addition, we believe we have an excellent reputation with our customers for providing top quality components, as well as timely delivery, high unit fill rates and customer service.

      Diversified Businesses. We believe the diversity across our products and sales channels is among the most attractive in the industry. Our diversification enables us to capitalize on the growth of the traditional channel, align ourselves with rapidly growing retailers, enhance our recognition in the aftermarket through original equipment sales and increase our ability to pursue sales in other growth areas, including the heavy-duty filtration market. We also believe our diversification, combined with the non-discretionary replacement nature of our products, lessens the impact of an economic downturn on our business. The following table describes our approximate 2003 net sales by percentage of product and percentage of sales channel:

2003 Net Sales

(1)	Other Filters includes cabin air filters, hydraulic filters, transmission filters, PVC valves and industrial filters.
(2)	Engine, Driveline and Lighting Systems primarily includes ignition products, signal lighting equipment, specialty distribution, engine management systems, universal joints, electronic controls and heavy-duty components.

      Experienced Management Team. Our operations are led by an experienced management team with an average of almost 20 years of industry experience. In addition, David Squier, the former Chief Executive Officer of Howmet Corporation, is our Chairman of the Board and Bruce Zorich, the former Chief Executive Officer of Magnatrax Corporation and former President of Huck International, Inc., is our Chief Executive Officer. Both of these individuals have experience with implementing lean manufacturing methodologies to realize cost savings and improve cash flow.

Our Strategy

      Our strategic objective is to maximize our return on invested capital by using our strong market position, our breadth of product offering and our strong customer relationships to take advantage of the increasing demand for vehicle replacement parts.

      Focus on Operating Efficiency. We have pursued and will continue to pursue opportunities to optimize our resources and reduce manufacturing costs by, among other things, executing strategic initiatives aimed at improving our operating performance and lowering our manufacturing costs. In 2003, we continued our implementation of a capital investment plan at our filtration production operations, which is designed to expand capacity and reduce manufacturing costs by focusing on lean manufacturing techniques and

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      Capitalize on Favorable Aftermarket Trends. Several trends are likely to affect growth and profitability positively in the aftermarket, including increases in the median age of vehicles, average number of miles driven per year by passenger cars, number of vehicles registered in the United States, number of licensed drivers and number of light trucks and sport utility vehicles, which generally require higher priced replacement parts. Because of our breadth and depth of product offerings, diversity of sales channels served and leading market positions, we believe we are well-positioned to benefit from this growth in the aftermarket. As such, we are focused on expanding our product lines and solidifying our position as a sole-source provider of aftermarket filtration products, pumps, engine management systems and driveline components for many of our customers.

      Expand our Products and Markets Served. We also plan to expand in several fast growing product lines that we believe offer substantial growth opportunities, such as filtration products for the heavy-duty channel and fuel pump assemblies for the aftermarket. We are also pursuing the growth of our business in the Mexican aftermarket. According to the AAIA Report, Mexico has an increasingly large number of vehicles that are older on average than those in the United States, which we believe will result in an increased demand for replacement products. We currently have three manufacturing facilities in Mexico, and we intend to use the Mexican market as an entry point into Central and South America, where countries including Brazil, Chile, and Venezuela may become targets for selective expansion.

      Capitalize on Integration Opportunities. Prior to the Acquisition, separate back office functions were maintained for each of our businesses. We are beginning the process of integrating some of these functions, and we believe that successful integration of these back office functions, combined with continued low-cost sourcing and selective plant and distribution facility consolidation, could generate meaningful savings for us. However, while we believe there are significant savings to be gained through integration, our primary focus will be to share our best practices and to continue to implement lean manufacturing techniques.

Our Sales Channels and Customers

      As of December 31, 2003, we distributed our products to more than 8,000 customers across several sales channels, including the retail, traditional, installer, and OES aftermarket channels and original equipment manufacturers of automotive, trucking, agricultural, marine, mining and construction equipment. We have maintained longstanding relationships with our customers and have been servicing many for well over a decade. Some of our most significant customers include AutoZone, GM, CARQUEST, Ford, Valvoline and Advance Auto Parts. Sales to AutoZone were approximately 23% of our total net sales in both 2003 and 2002. Over the last few years, we believe several customers transitioned to us as a result of their need for improved product quality and service.

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      The following table provides a description of the various sales channels to which we supply our products.

      Our sales are diversified between the retail, traditional, installer, OES, heavy-duty and OEM channels, which enables us to capture demand throughout the life cycle of the vehicle. In the early part of a vehicle’s life, the OES channel services a significant percentage of aftermarket vehicle maintenance and repair volume. However, as vehicles age and their warranties expire, consumers increasingly rely on the retail or traditional channels for vehicle maintenance.

      We estimate that about 80% of our net sales in 2003 were to the aftermarket, which is subdivided into four primary channels: the retail channel, the traditional channel, the installer channel and the OES channel.

      The retail channel represented approximately 30% of our net sales in 2003, and includes national retailers such as AutoZone and Advance Auto Parts. The retail channel is our largest channel, and has historically provided us with a steadily increasing revenue stream. As retailers become increasingly focused on consolidating their supplier base, we believe that our broad product offering, product quality and customer service make us increasingly valuable to these customers. One of our longest standing customers is AutoZone, which we have been supplying since the opening of their first store in 1979. We believe that we are one of the few suppliers in the industry that can provide AutoZone with the levels of quality, customer service and product breadth that AutoZone requires, which is substantiated by our receipt of AutoZone’s Vendor of the Year Award in 1997, 1999 and 2000. Awards from other customers include Automotive Parts Associates Preferred Vendor of the Year 2003, Advance Auto Parts Vendor of the Year 2002, and National Pronto Supplier of the Year 1998.

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      The traditional distribution channel is composed of established warehouses and represented approximately 20% of our net sales in 2003. The traditional channel is important to us because it is the primary source of products for professional mechanics, or DIFM market. We have many longstanding relationships with leading customers in the traditional channel such as CARQUEST and NAPA, for whom we have manufactured products for over 20 years. We believe that our strong position in this channel allows us to capitalize on the fast growth of the traditional channel within the aftermarket. We believe that professional mechanics place a premium on the quality of a product, and unlike the retailer and installer channels, end users in this channel require manufacturers to provide a high level of individual customer service, including field support and product breadth and depth. We have recently been awarded several new contracts in this channel and continue to pursue others.

      The OES channel is comprised of a diverse mix of dealership service bays in the automotive, truck, motorcycle and watercraft vehicle markets, and represented approximately 9% of our net sales in 2003. In 2003, we estimate that a substantial majority of our OES net sales were derived from sales of filtration products. Our position in this channel allows us to capitalize on vehicle maintenance in the early years of a vehicle’s life, when the vehicle is under warranty and the consumer typically returns to the dealer for routine maintenance. Our most significant OES channel customers include automotive dealerships associated with companies such as GM, Ford and DaimlerChrysler and other dealerships such as Bombardier.

      The installer channel represented approximately 9% of our net sales in 2003 and includes quick lubes, tire dealers and full service gas stations. Almost all of our sales into this channel consist of filtration products, which are supplied to the national and regional service chains through distributors such as Valvoline and Mighty. We believe the installer channel is a growth area for our filtration products because consumers increasingly prefer to have professionals maintain their vehicles as vehicles become increasingly complex. This channel requires just-in-time availability, ability to meet competitive price points, and product breadth and depth.

      Although the OEM channel comprised less than 15% of our net sales in 2003, it is an important sales channel to us because OEM affiliations have a direct impact on our aftermarket credibility. We believe aftermarket customers show a preference for products that were utilized in original equipment. We sell products to a diverse mix of OEMs, enabling us to capitalize on a number of different opportunities and market shifts. Our OEM products are sold to end users within each of the following categories:

	•	Automotive — GM, Ford, DaimlerChrysler, Volkswagen and Mazda
	•	Recreational Equipment — Polaris and Onan.
	•	Heavy-duty Truck — Freightliner, Caterpillar and GM.
	•	Agriculture — John Deere and Kubota.
	•	Marine — OMC, Mercury Marine, and Sierra Supply.
	•	Lawn and Garden — Briggs and Stratton, Kohler and John Deere.
	•	Motorcycle — Harley-Davidson and Kawasaki.

      We have earned a number of awards and certifications for customer service and product quality, including General Motors’ Supplier of the Year award in 1995 and 1996, Ford’s Preferred Quality Award from 1984 through 2003, Caterpillar’s Certified Supplier Award from 1996 to 2002 and John Deere’s Quality Certification Award from 1996 through 2003.

      We believe the large and highly fragmented heavy-duty channel, which accounted for approximately 9% of our net sales in 2003, provides us with one of our best opportunities for growth. We believe heavy-duty truck owners tend to be less price sensitive and more diligent about maintenance of their vehicles than vehicle

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Sales, Marketing and Distribution

      We market our products predominantly throughout North America and Europe. The sales force is organized and aligned by distribution channel, serving both the traditional and retail channels of the aftermarket, the heavy-duty channel and the original equipment manufacturers channel to effectively address the requirements of our customers and end users. Our sales people are primarily organized by product category and secondarily by sales channel.

      We use both direct sales representatives and independent manufacturers’ representatives to market and sell our products. The number of sales personnel varies within each sales group, ranging from under 10 people in our French sales team for lighting systems to over 100 in our aftermarket sales group for fuel and cooling system products. Each sales group is uniquely qualified to sell their particular products and to focus on the requirements of their particular market. We believe that the market positions we hold with respect to certain of our products are in part related to the specialization of our sales groups.

      We distribute our products primarily into the aftermarket. The aftermarket is further divided into four primary channels: the retail, traditional, installer and OES channels. The OEM market consists of original equipment manufacturers in the automotive, marine, agriculture and heavy-equipment industries.

      Within the traditional channel, a manufacturer of automotive parts sells to traditional and specialty warehouses. Most warehouses in the traditional market belong to buying groups referred to as Program Distribution Groups (e.g., Alliance, Federated and National Pronto). These warehouses sell to wholesale jobbers who redistribute to DIFM outlets. This is an important channel to us because it is the primary source of supply for professional mechanics. Several large oil companies, such as Valvoline and Pennzoil Quaker State purchase directly from manufacturers and distribute filters and other products with their branded motor oil. Within the retail channel, most sales are direct transactions between the manufacturer and retailer, such as Advance, AutoZone, CSK and Pep Boys.

Operations

      Our operational strategy is to pursue operational excellence at all of our locations. This initiative encompasses a lean enterprise strategy, the goals of which include improvement of inventory management, customer delivery, plant utilization and cost structure. The foundation for this is lean manufacturing, which targets the elimination of waste from every business process. This involves transforming our manufacturing processes from typical batch systems to single piece flow systems, which will enable us to better match production to customer demand. To achieve this transformation, employees are being trained to implement value stream mapping and implement Kanban to improve production, lead times and reduce inventory. Kanban is a system that allows a company to manufacture a product or order supplies as needed. The system reduces production lead times, amount of inventory required, and subsequently, the costs in high volume production lines.

      Several of our plants have made good progress in the implementation of lean manufacturing and have received related benefits. We plan to expand and accelerate the use of lean manufacturing across all of our operations. This expansion is being accomplished by applying additional resources, outside consultant support, the sharing of best practices, and the establishment of appropriate metrics and incentives. An industry expert has been hired as Vice President of Lean Manufacturing to drive our lean manufacturing initiatives.

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      In addition, we will examine each of our logistics and distribution systems with an objective of developing an integrated system that fully meets customer requirements, eliminates redundancies, lowers costs and minimizes inventories and cycle times. Going forward, we expect to continue to enhance our lean strategy by utilizing our senior management team’s experience with similar programs at Howmet Corporation and Huck International.

Suppliers and Raw Materials

      We purchase various components and raw materials for use in our manufacturing processes. In 2003, we sourced the raw materials used in our manufacturing processes from approximately 1,800 suppliers. The primary raw materials that we use include steel, brass, iron, rubber, resins, plastic, paper and packaging material, each of which is available in sufficient quantities from numerous sources. We have not historically experienced any shortages of these items.

      Currently, each of our product groups has its own purchasing staff, which makes its purchasing decisions. We intend to have a centralized purchasing group which will facilitate the spread of best practices and will enable us to leverage the buying power of all of UCI. That central group will continue to be supported by a smaller number of product group level purchasing personnel making many of the day-to-day purchasing decisions. We believe that centralized procurement and increased global sourcing represent attractive opportunities to lower the cost of our purchased materials. A Vice President of Procurement has been recently added to our central staff, and the centralization process has begun. Significant benefits are already being realized.

Trademark and Patents

      We rely on a combination of patents, trademarks, copyright and trade secret protection, employee and third-party non-disclosure agreements, license arrangements and domain name registrations to protect our intellectual property. We sell many of our products under a number of registered trademarks, which we believe are widely recognized in the sales channels we serve. No single patent, trademark or trade name is material to our business as a whole.

      Any issued patents that cover our proprietary technology and any of our other intellectual property rights may not provide us with adequate protection or be commercially beneficial to us. The issuance of a patent is not conclusive as to its validity or its enforceability. Our competitors may also be able to design around our patents. If we are unable to protect our patented technologies, our competitors could potentially commercialize our technologies.

      With respect to proprietary know-how, we rely on trade secret protection and confidentiality agreements. Monitoring the unauthorized use of our technology is difficult, and the steps we have taken may not prevent unauthorized use of our technology. The disclosure or misappropriation of our intellectual property could harm our ability to protect our rights and our competitive position.

Employees

      As of December 31, 2003, we had more than 6,500 employees and several different union affiliations and collective bargaining agreements across our businesses, mostly concentrated in Mexico, representing approximately 21% of our workforce. Management considers our labor relations to be good and our labor rates competitive. Other than a short-term stoppage in April 1997 at one of our smaller plants in Pottstown, Pennsylvania, we have not had a labor stoppage since 1984.

Our Product Categories

      We have an extensive product offering made up of approximately 60,000 part numbers. Our products can be categorized into three primary categories: filtration products, which primarily includes oil, air and fuel filters; fuel and cooling systems, which mainly consists of fuel pumps, fuel pump assemblies and water pumps;

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          Filtration Products

      We are a leading designer and manufacturer of a broad range of filtration products for the automotive, trucking, construction, mining, agriculture and marine industries as well as other industrial markets. We distribute into both the original equipment manufacturer and the aftermarket channels. We are one of the leading global manufacturers of private label filter products for companies such as AutoZone, GM and Valvoline. Our filtration product offering consists of approximately 4,100 part numbers and includes oil filters, air filters, fuel filters, transmission filters, cabin air filters, PCV valves, hydraulic filters, fuel dispensing filters and fuel/water separators. Filtration products comprised approximately 37% of our net sales in 2003. The table below summarizes our product offerings.

      In an effort to improve our cost structure, in 2001 we completed construction of a new manufacturing facility in Saltillo, Mexico. We have also recently completed an $18.6 million major expansion and efficiency improvement project at our Albion, Illinois manufacturing site. This effort was the first phase, or Phase I, in a two-phase capital investment plan designed to improve operating efficiency and lower costs. We completed Phase I early in the third quarter of 2003.

      We recently initiated Phase II of the capital investment plan. Among other things, the project will add two new high-speed oil assembly lines in Albion and relocate most of the West Salem, Illinois operations to Albion. We expect Phase II will generate additional manufacturing capacity and lower our overall manufacturing costs, which we believe will position us to pursue new business opportunities and market share.

      We are also focused on increasing our penetration into the heavy-duty channel. The heavy-duty channel represents our most significant opportunity for growth with respect to filtration, and we believe that our heavy-duty sales could experience meaningful growth for our Luber-finer branded filters. We are investing capital to improve capacity utilization, employee productivity and distribution in this channel, which will enable us to manufacture a greater proportion of our heavy-duty product line. Prior to the Phase I capital investment plan, we were operating at 100% capacity in heavy-duty filters, and therefore, were unable to grow this business.

      According to the April 2001 North America Automotive Filter Aftermarket Report No. 7886-18 prepared by Frost & Sullivan, which we refer to as the Frost & Sullivan Filter Report, in 2000, the total North American automotive filter market generated an estimated $1.3 billion in manufacturer-level revenues and is expected to grow at approximately 3.0% annually during 2000 to 2007, reaching $1.5 billion by 2007. The two primary factors driving this growth are the number of cars on the road and the number of miles being driven. As vehicle owners are driving their vehicles for longer periods of time and for more miles, the total demand for filters is increasing. The rate of replacement of automotive filters exceeds that of all other auto parts.

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	•	Oil filters. According to the Frost & Sullivan Filter Report, in 2000, the North American oil filter aftermarket generated an estimated $848 million in manufacturer-level revenues, or 67% of the total North American automotive filter aftermarket.
	•	Air filters. According to the Frost & Sullivan Filter Report, in 2000, the North American air filter aftermarket generated an estimated $280 million in manufacturer-level revenues, or 22% of the total North American automotive filter aftermarket.
	•	Fuel filters. According to the Frost & Sullivan Filter Report, in 2000, the North American fuel filter aftermarket generated an estimated $124 million in manufacturer-level revenues, or 10% of the total North American automotive filter aftermarket.

      According to the Frost & Sullivan Filter Report, the North American automotive filter aftermarket is comprised of several large manufacturers and we, Honeywell Consumer Product Group (FRAM), ArvinMeritor (Purolator), and Wix Filtration of Dana Corporation control approximately 90% of the market with shares split between the four companies. In the heavy-duty channel, we believe our market share ranks behind Cummins, Donaldson and Clarcor.

          Fuel and Cooling Systems

      We design and manufacture a broad range of fuel pump and cooling systems. Our fuel and cooling systems are distributed to both the OEM and the aftermarket under the Airtex and Master Parts brand names and some private labels. The table below sets forth a summary of our product offerings.

      We are currently in the final stages of a facility expansion in Puebla, Mexico, where upon completion, we will double our foundry capacity for water pumps. We also have a strategic arrangement with a Chinese manufacturer for the supply of various water pump components. We believe these initiatives have positioned us to take advantage of lower-cost labor rates, thereby reducing manufacturing costs on high labor content products.

      To strengthen our OEM market share in fuel systems, we have recently developed two new programs: demand delivery returnless fuel systems and a fuel-conditioning module for diesel applications. Our demand delivery returnless fuel system utilizes a patented electronic system, engineered to control the responses of a comprehensive fuel pump process for light vehicles. To compliment the demand delivery program for the diesel market, we have co-developed a fuel-conditioning module with Parker Hannifin Corp. This system has expanded our relationships with Parker Hannifin, Caterpillar and other OEM customers.

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      The fuel pump aftermarket and OEM markets are concentrated in the hands of several large manufacturers. According to the 2003 United States Automotive Fuel Pump Aftermarket Report No. A542-18 prepared by Frost & Sullivan, in 2003, we and our top competitor together controlled 59% of the U.S. electric fuel pump aftermarket. We believe we are a leader in the aftermarket for water pumps. Our primary competitors are ASC Industries, Inc. and GMB North America Inc.

     Engine, Driveline and Lighting Systems

      Four of our wholly owned subsidiaries, Wells Manufacturing, Neapco, Flexible Lamps and Pioneer, produce products that we describe as our engine, driveline and lighting systems. Our engine, driveline and lighting systems businesses consist of four broad product lines, which include engine management systems, driveline products, lighting systems and specialty distribution. U.S. sales account for approximately 83% of our engine, driveline and lighting systems revenues, while international sales constitute the remaining 17%. More than two-thirds of the 2003 sales outside of the U.S. were made in Europe, while the balance of the remaining sales were predominantly made in Canada and Mexico.

      We believe that we have one of the industry’s most comprehensive lines of highly engineered engine management system components, commercial lighting systems and driveline components for use in a broad range of vehicle platforms. Additionally, our engine, driveline and lighting systems offerings allow us to distribute specialty or “hard-to-find” products to the aftermarket and OEM channels. The following table provides a description of the principal products comprising our engine, driveline and lighting systems businesses.

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      The competitors for our engine, driveline and lighting systems businesses are involved in manufacturing and distributing engine management systems, driveline components and lighting systems to the aftermarket, as well as aftermarket specialty distribution. Within the North American engine management systems aftermarket, Standard Motor Products and Bosch are our two largest competitors. The market for driveline components is comprised of small private manufacturers and divisions of large, multi-national manufacturers. The European signal lighting equipment market competition is concentrated among a select number of large, multi-product automotive suppliers and several smaller manufacturers that focus primarily on lighting products. Our direct competition in the North American specialty distribution market comes primarily from small, family-owned operations. Many of these companies are niche industry participants with narrow product line offerings.

      We are 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. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. We are also subject to the U.S. Occupational Health and Safety Act and similar state and foreign laws. We believe that we are in substantial compliance with all applicable material laws and regulations in the United States. Historically, our costs of achieving and maintaining compliance with environmental and health and safety requirements have not been material to our operations.

      Some environmental laws, such as the U.S. Federal Superfund law and similar state statutes, can impose liability for the entire cost of cleanup of contaminated sites upon any of the current or former site owners or operators, or upon parties who sent waste to these sites, regardless of whether the owner or operator owned the site at the time of the release of hazardous substances or the lawfulness of the original disposal activity. We have been identified as a potentially responsible party for contamination at several contaminated sites and currently are addressing historic contamination at other facilities. These activities include remediation of a former Champion/ Interlee facility in Edison, New Jersey, where the New Jersey Department of Environmental Protection has ordered Champion to continue with an ongoing groundwater remediation of chlorinated solvent contamination. Champion is currently seeking a declaratory judgment that this contamination was caused by another party at a neighboring facility. The California Regional Water Quality Control Board has also requested that Champion investigate and remediate solvent and petroleum contamination at a previously owned site in Solano County, California. An investigation is underway. Our costs in connection with some of these sites are difficult to predict; however, we do not expect them to exceed amounts accrued in the December 31, 2003 balance sheet by a material amount, if at all.

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      We currently maintain 26 manufacturing facilities, 19 of which are located in North America, six in Europe and one in Asia. In addition, we maintain 24 distribution and warehouse facilities. Listed below are the locations of our principal manufacturing facilities:

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      We are, from time to time, party to various routine legal proceedings arising out of our business. These proceedings primarily involve commercial claims, product liability claims, personal injury claims and workers’ compensation claims. We cannot predict the outcome of these lawsuits, legal proceedings and claims with certainty. Nevertheless, we believe that the outcome of any currently existing proceedings, even if determined adversely, would not have a material adverse effect on our business, financial condition and results of operations.

      No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 2003.

     (a) Market Information

      No trading market for our common stock currently exists.

     (b) Holders

      As of December 31, 2003, our parent, UCI Acquisition Holdings, Inc. was the sole holder of our common stock.

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     (c) Dividends

      We did not pay dividends in the period from the date of our incorporation on April 16, 2003 through December 31, 2003 on our common stock. It is our current policy to retain earnings to repay debt and finance our operations. In addition, our credit facility and indenture significantly restrict the payment of dividends on common stock.

     (d) Securities Authorized for Issuance under Equity Compensation Plans

      None of our securities are offered under any compensation plans. For a description of the stock option plan granting options for the purchase of securities of our parent, see Item 11 — “Executive Compensation.”

ITEM 6.     SELECTED FINANCIAL DATA.

      United Components was formed in connection with the Acquisition. The financial statements included in this Annual Report on Form 10-K (“Form 10-K”) are the combined financial statements of the vehicle parts business of UIS before the Acquisition and the consolidated financial statements of United Components, Inc. after the Acquisition. The financial data presented below for periods prior to the Acquisition are referred to as “Predecessor Company Combined,” and the financial data for periods after the Acquisition are referred to as “UCI Consolidated.” The selected financial data have been derived from our financial statements. The financial data as of December 31, 2003 and 2002 and for each of the years in the three-year period ended December 31, 2003 have been derived from the audited financial statements contained elsewhere in this Form 10-K. We derived the combined balance sheet data as of December 31, 1999, 2000 and 2001 and the combined statements of earnings for the 1999 and 2000 years from audited combined financial statements that are not included herein. The data for the periods after the Acquisition are based on a preliminary allocation of the Acquisition purchase price, which is based on preliminary estimates of the fair values of the assets acquired and liabilities assumed. The purchase price allocations are subject to change until all pertinent information regarding the Acquisition and the assets and liabilities of the Company are obtained and fully evaluated.

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(1)	Income statement data has been reclassified to conform with the December 2003 presentation. The reclassifications primarily move sales driven allowances from selling expense to reductions of sales and certain cost previously categorized as general expense to cost of sales. The net effect is a reduction of gross profit of approximately $13.6 million, $13.5 million, $11.9 million, $12.4 million and $14.0 million for the years ended December 31, 2003, 2002, 2001, 2000, and 1999, respectively, with an equal and offsetting reductions in operating expenses for each year. There is no effect on operating income or net income in any of the years.
(2)	As of January 1, 2002, in accordance with SFAS No. 142 “Goodwill and Other Intangible Assets,” we stopped amortizing goodwill. If we omitted the amortization of goodwill in 1999, 2000 and 2001, net income would increase by $0.6 million, $0.7 million and $0.6 million, respectively.
(3)	Prior to the Acquisition, the subsidiaries of UIS that we acquired operated as S corporations for Federal and state income tax purposes. Consequently, the historical combined financial statements do not include a provision for Federal and certain state income taxes for such periods. A provision for state income taxes has been made for those states not recognizing S corporation status. Pro forma net income has been computed as if we had been fully subject to Federal and state income taxes based on the tax laws in effect during the respective periods. See Notes B and I to the financial statements, included elsewhere in this Form 10-K.

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ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

      The following discussion of our financial condition and results of operations must be read together with the “Item 1. Business” section of this Form 10-K.

Overview

      Sales. We are among North America’s largest and most diversified companies servicing the vehicle replacement parts market, or the aftermarket. We supply a broad range of filtration products, fuel and cooling systems, engine management systems, driveline components and lighting systems to the automotive, trucking, marine, mining, construction, agricultural and industrial vehicle markets. We estimate that about 80% of our net sales in 2003 were made in the aftermarket, to a customer base that includes some of the largest and fastest growing companies servicing the aftermarket. As discussed in more detail in Item 1, the aftermarket has grown, and we believe will continue to grow, at least in the near term. We believe we are well positioned to participate in that growth.

      We believe we have leading market positions in our primary product lines. We continue to expand our product and service offerings to meet the needs of our customers, and we believe that we offer one of the most comprehensive lines of products in the vehicle replacement parts market consisting of approximately 60,000 part numbers. We believe our breadth of product offering is a key competitive advantage. This product breadth along with our extensive manufacturing and distribution capabilities, product innovation, and reputation for quality and service makes us a leader in our industry.

      Because most of our sales are to the aftermarket, we believe that our sales are primarily driven by the number of vehicles on the road, the average number of miles driven per year, the average age of the vehicle, the mix of light trucks to passenger cars on the road and the relative strength of our sales channels. Historically, our sales have not been materially adversely affected by market cyclicality, as we believe that our aftermarket sales are less dependent on economic conditions than our sales to OEMs, due to the non-discretionary nature of vehicle maintenance and repair.

      However, it is also important to note that in 2003 and 2002, 23% of our revenues were derived from our business with AutoZone, and our failure to maintain a healthy relationship with AutoZone would result in a significant decrease in our net sales. Even if we maintain our relationship, our net sales concentration as a result of this relationship increases the potential impact to our business that could result from any changes in the economic terms of this relationship. Any change in the terms of sales to this customer could have a material impact on our financial position and results of operations. Any changes could, for example, result in an increase in the time it takes for us to record net sales and collect on receivables. AutoZone has publicly announced its intent to transition its suppliers to a program where suppliers are paid when an AutoZone customer purchases the supplier’s product.

      Cost of Sales. Cost of sales includes all costs of manufacturing 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 fringe benefits, supplies, utilities, freight, depreciation, insurance, pension and post-retirement benefits, 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 steel and labor.

      In 2004, demand for steel is high and is resulting in supplier imposed surcharges for this raw material. While we believe that we will be able to obtain sufficient quantities to satisfy our needs, we believe we will be required to pay significantly higher prices for the material. Our intent is to increase prices to reflect this increased cost. Our ability to do so is uncertain at this time.

      Results for 2003 are materially impacted by several one-time cost adjustments, as well as non-cash Acquisition related charges. Management believes that these costs must be understood not only for a balanced comparison to 2002 results, but also to enable the reader to better project the future earnings and cash

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      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.

      Management intends to leverage the fixed portion of sales and warehousing as sales increase. Consequently, management thinks that sales and warehousing expense as a percentage of sales is a key measure and is working to reduce this percentage.

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

      Preliminary allocation of Acquisition purchase price. As explained in Note B to the financial statements presented elsewhere in this report, the allocation of the Acquisition purchase price is preliminary and is subject to change until all pertinent information regarding the Acquisition and the assets and liabilities of the Company are obtained and fully evaluated. Finalization of the allocation of the Acquisition purchase price could result in material changes to the balance sheet presented elsewhere in this report.

      Cash Generation. Net cash from operating activities was $137.4 million, capital expenditures were $43.4 million, and cash proceeds from the sale of capital assets was $2.5 million. The net cash generated from these operating activities was $96.5 million. All but $2.7 million of this amount was generated after the June 20, 2003 Acquisition.

Critical Accounting Policies

      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 to us in that they are important to our financial statements, and they require our most complex judgments in the preparation of the financial statements.

      Accounts receivable. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. These allowances are based on a combination of an aging analysis and our analyses of our history of write-offs. In addition, we evaluate allowance requirements if the financial condition of a particular customer were to deteriorate.

      Inventory. We record inventory at the lower of cost or market. Cost is determined using 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 upon transfer of title of product, which occurs upon shipment to the customer. Because we enter into sales rebate programs with some of our customers that require us to make rebate payments to them from time to time, we estimate amounts due under these sales rebate programs at the time of shipment. Net sales relating to any particular shipment are based upon the amount 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.

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      Additionally, we enter into formal and informal agreements with our customers that provide for sales discounts, marketing allowances, provided return allowances and performance incentives. The discounts, allowances and incentives are expensed as a reduction to sales, based on estimates of the criteria that give rise to the discount or allowance, 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.

      Impairment of intangible assets and tangible fixed assets. Our intangible assets and tangible fixed assets are held at historical cost, net of depreciation and amortization, less any provision for impairment. We periodically evaluate the realizability of our intangible or tangible fixed assets. We also perform a review of these assets if an indicator of impairment, such as an operating loss or cash outflow from operating activities or a significant adverse change in the business or market place, exists. Estimates of future cash flows used to test the asset for impairment are based on current operating projections extended to the useful life of the asset group and are, by their nature, subjective.

      We adopted SFAS 142 in 2002. In accordance with SFAS 142, we stopped amortizing goodwill on January 1, 2002. In lieu of amortization, we perform impairment analysis of our goodwill. Based on this analysis, we have concluded that there has not been an impairment. If we determine that goodwill has been impaired, we will record the impairment as a charge against income. Estimates of future discounted cash flows used in the impairment test are based on current operating projections, which 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 from actual results for each assumption, 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 from actual results for each assumption, 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 an increase of $43,000 or a decrease of $36,000 in annual post-retirement health costs.

      Insurance Reserves. Prior to the Acquisition, the Company had insurance under UIS’s master policies for group, worker’s compensation, automobile, product and general liability. These policies were subject to retrospective rating adjustments for which we were responsible. These adjustments were predicated upon paid losses, reserves and expenses. The projections involved in this estimate were subject to substantial uncertainty because of several unpredictable factors, including actual claims experience, regulatory changes, litigation trends and changes in inflation.

      As of the June 20, 2003 Acquisition, the Company is no longer covered by the UIS master insurance policies. As of that date, the Company has purchased insurance, which does not include retrospective rating adjustments but does include high deductibles for which the Company is responsible. Consequently, the Company is subject to the same substantial uncertainties as those described in the preceding paragraph. Estimated losses for which the Company is responsible are recorded in accrued expenses in the December 31, 2003 balance sheet.

      Environmental Expenditures. Our aggregate expenditures (both capital and operating) for compliance with laws and regulations related to the protection of the environment were approximately $1.0 million in 2003, compared to approximately $0.8 million in 2002 and approximately $0.7 million in 2001. The majority of our environmental expenditures relate to the proper disposal of environmentally sensitive waste. Management does not expect capital spending on environmental matters to increase materially over the near term; however, changes in environmental regulations, or the outcome of litigation, could result in additional requirements that could necessitate increased spending.

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Results of Operations

      The following table was derived from the United Components, Inc. consolidated and the Predecessor Company combined income statements for the years ended December 31, 2003, 2002 and 2001. To enable meaningful comparisons, the consolidated results of United Components, Inc., after the June 20, 2003 Acquisition, and the combined results of the Predecessor Company, before the June 20, 2003 Acquisition, have been combined in the table below. The amounts are presented in millions of dollars.

(1)

Prior to the Acquisition, the subsidiaries of UIS that we acquired operated as S corporations for Federal and state income tax purposes. The historical combined financial statements do not include a provision for Federal and certain state income taxes for such periods. A provision for state income taxes has been made for those states not recognizing S corporation status. Pro forma net income has been computed as if we had been fully subject to Federal and state income taxes based on the tax laws in effect during the respective periods. See Notes B and I to the financial statements.

Year Ended December 31, 2003 Compared with Year Ended December 31, 2002

      Net sales. Net sales increased $36.3 million, or 3.9%, from $923.0 million in 2002 to $959.3 million in 2003. The increase was volume driven by sales to the OEM, traditional and retail channels.

      Cost of sales. Cost of sales increased $95.8 million, or 13.4%, from $715.7 million in 2002 to $811.5 million in 2003. Gross margin decreased from 22.5% in 2002 to 15.4% in 2003. The decline in gross profit percentage is primarily attributable to one-time cost adjustments amounting to $21.0 million and the adverse effect of $32.0 million of non-cash Acquisition-related charges in 2003. Gross profit during 2003 was also adversely affected by higher pension and medical costs.

      The aforementioned $21.0 million of one-time cost adjustments includes: inventory valuation adjustments — ($12.6 million); provisions for environmental issues — ($4.6 million); and provisions for a patent dispute settlement, product line relocations, and costs relating to the upgrade of the Albion, Illinois manufacturing facility; and costs associated with the consolidation of our European filtration manufacturing operations — ($3.8 million).

      The aforementioned $32.0 million of non-cash Acquisition-related charges in 2003 includes $27.5 million of higher costs due to the sales of inventory that was written-up as part of the preliminary allocation of the

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      Excluding these aforementioned one-time items of $21.0 million and the non-recurring Acquisition-related $27.5 million inventory charge, gross profit for 2003 would have been $196.3 million, or 20.5% of sales, compared to $207.4 million, or 22.5% of sales, in 2002. Of the 2 percentage point decline in gross margin, 1.1 percentage points of the decline are due to the aforementioned higher medical and pension costs, as well as the non-cash higher depreciation that resulted from the Acquisition related step-up of property, plant and equipment.

      Selling and warehousing expenses. Selling and warehousing expenses of $67.8 million for 2003 are $0.1 million lower than 2002. In 2003, this cost is 7.1% of sales compared to 7.4% in 2002.

      General and administrative expenses. General and administrative expense increased by $6.2 million, or 18.0%, from $34.5 million in 2002 to $40.7 million in 2003. This increase is due to (i) $1.5 million of unusual costs incurred in connection with the transition to a new, more strategically focused stand-alone company, and (ii) the higher cost of operating as a stand-alone company after the Acquisition.

      Interest, net. Net interest changed from $4.3 million of net interest income in 2002 to $24.9 million of net interest expense in 2003. The $29.2 million adverse shift includes (i) a $2.6 million one-time cost of a bridge loan commitment fee incurred in connection with the Acquisition; (ii) $1.6 million of accelerated write-off of debt issuance costs because of voluntary prepayments of debt; (iii) $0.6 million of fees incurred in conjunction with a renegotiation of our bank loan; (iv) $21.5 million of interest expense on Acquisition-related debt; and (v) $2.9 million lower interest income on loans to the Predecessor Company’s previous owner.

      Income taxes. The change in income taxes is driven by changes in pre-tax income plus the use of a 39% incremental effective rate after the Acquisition in 2003. The higher rate is the result of the Company’s transition from S corporation filing status before the Acquisition to C corporation filing status after the Acquisition.

      Net Income. Due to the factors described above, net income declined $90.6 million from $103.6 million in 2002 to $13.0 million in 2003.

Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

      Net sales. Net sales increased $65.8 million, or 7.7%, from $857.2 million in 2001 to $923.0 million in 2002. The increase was driven primarily by continued growth in the aftermarket (excluding tires), which grew at an estimated 4.8% in 2002. This growth allowed many of our customers, especially in the retail channel, to increase same and new store sales and grow market share. Approximately $36.0 million of our fiscal 2002 sales resulted from increased sales to our existing retail customer base. The remainder of the increase in 2002, or $29.8 million, was divided between increased sales to our OES, OEM, traditional and heavy-duty customers.

      Cost of sales. Cost of goods sold increased $35.8 million, or 5.3%, from $679.9 million in 2001 to $715.7 million in 2002. Gross margin percentage increased from 20.7% for 2001 to 22.5% for 2002. The increase in the gross profit was primarily due to the contribution of the increased net sales cited above of $17.0 million, the effect of increased sales of higher margin products of $7.3 million and continued cost reduction initiatives at several of our facilities of $5.7 million.

      Selling and warehousing expenses. Selling and warehousing expenses increased by $2.5 million, or 3.8%, from $65.4 million in 2001 to $67.9 million during 2002. This increase was directly attributable to increased variable expenses associated with an increase in net sales. As a percentage of net sales, these expenses decreased from 7.6% in 2001 to 7.4% in 2002 as a result of continued cost improvements.

      General and administrative expenses. General and administrative expenses increased $0.6 million, or 1.8%, from $33.9 million in 2001 to $34.5 million in 2002. As of percentage of net sales, general and

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      Interest income, net. Net interest income decreased $1.0 million from $5.3 million or 18.9% in 2001 to $4.3 million in 2002. As a percentage of net sales, net interest income decreased from 0.6% in 2001 to 0.5% in 2002. The decrease was the result of a lower rate of return earned on amounts advanced to UIS, as well as a lower amount owing from UIS on which interest income was earned.

      Income taxes. Income taxes increased $1.1 million, or 33.3%, from $3.3 million in 2001 to $4.4 million in 2002. Taxes were based upon the most recent effective tax rates available and applicable to S corporations.

      Net income. Net income increased by $23.8 million, or 29.8% from $79.8 million in 2001 to $103.6 million in 2002. As a percentage of net sales, net income increased from 9.3% to 11.2%. The improvement in net income was due to the factors described above.

Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

      Net sales. Net sales decreased $15.6 million, or 1.8%, from $872.8 million in 2000 to $857.2 million in 2001. The decrease in net sales was primarily attributable to the loss of a cooling systems contract, which was partially offset by increased sales of approximately $28.6 million to existing customers in each of our aftermarket channels (retail, traditional and OES). In 2001, the aftermarket (excluding tires) grew by approximately 5.4% to $152 billion in total sales.

      Cost of sales. Cost of sales decreased $9.2 million, or 1.3%, from $689.1 million in 2000 to $679.9 million in 2001. Gross margin decreased from 21.0% for 2000 to 20.7% for 2001. The decrease in the gross margin percentage was primarily due to the decrease in net sales cited above and start-up expenses in our Saltillo, Mexico facility, partially offset by continued cost reduction efforts.

      Selling and warehousing expenses. Selling and warehousing expenses decreased by $3.5 million, or 5.1%, from $68.9 million in 2000 to $65.4 million in 2001. As a percentage of net sales, these expenses decreased from 7.9% in 2000 to 7.6% in 2001. The decrease was primarily attributable to the sale of certain foreign subsidiaries and headcount reductions as a result of cost saving initiatives.

      General and administrative expenses. General and administrative expenses decreased $4.1 million, or 10.8%, from $38.0 million in 2000 to $33.9 million in 2001. As a percentage of net sales, general and administrative expenses decreased from 4.4% in 2000 to 4.0% in 2001. The decrease was attributable to the sale of certain foreign subsidiaries and headcount reductions as a result of cost saving initiatives, offset partially by an increase in medical insurance costs.

      Interest income, net. Net interest income increased by $0.4 million, or 8.2%, from $4.9 million in 2000 to $5.3 million in 2001. As a percentage of net sales, net interest income remained constant at 0.6% in 2001. The absolute increase was attributable to an increase in interest earned from UIS due to an increase in the net amount due from UIS.

      Income taxes. Income taxes decreased $1.3 million, or 28.3%, from $4.6 million in 2000 to $3.3 million in 2001. Taxes were based upon the most recent effective tax rates available and applicable to S corporations.

      Net income. Net income increased by $4.0 million, or 5.3%, from $75.8 million in 2000 to $79.8 million in 2001. As a percentage of net sales, net income increased from 8.7% in 2000 to 9.3% in 2001, due to the factors described above.

Liquidity and Capital Resources

      The Company incurred substantial indebtedness in connection with the Acquisition. In addition to assuming $2 million of existing debt, the Company issued $230 million of senior subordinated notes and entered into its senior credit facilities. The senior credit facilities provided for term loans in a principal amount of $350 million ($50 million for Tranche A and $300 million for Tranche B) and a revolving credit facility that provides for revolving loans in an aggregate amount of up to $75.0 million. In connection with the Acquisition,

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      On December 22, 2003, the Company amended its senior credit facilities. Our borrowing rate was reduced by 0.5% by replacing the $297 million of outstanding principal amount under the Tranche B term loan with $297 million of borrowings under a new Tranche C term loan.

      At December 31, 2003, there was $522.3 million of debt outstanding. On March 1, 2004, the Company made a voluntary prepayment of $40 million of Tranche C debt. This reduced debt to $482.3 million. The Company funded this $40 million prepayment, as well as the $53 million of Tranche A and B debt repayments discussed above, with cash generated from operations.

      At the $482.3 million debt level, annual interest expense, including amortization of deferred financing costs and debt issuance cost, is approximately $34.2 million at December 31, 2003 borrowing rates. An increase in the interest rate of 0.25% in the variable interest rate would have increased the annual interest cost by $0.3 million. The Company’s significant debt service obligations could, under certain circumstances, have material consequences.

      The Company’s primary source of liquidity is cash flow from operations and borrowings under the $75.0 million revolving credit facility. Borrowings under the revolving credit facility are available to fund the Company’s working capital requirements, capital expenditures and other general corporate purposes. The Company expects to use temporary revolving credit borrowings from time to time throughout 2004 to fund peak cash requirements. $3.4 million of revolving credit borrowing capacity has been used to support outstanding letters of credit.

      Because of voluntary pre-payments, the company does not have any required repayments of Tranche C borrowings until December 2005. The $230 million senior subordinated notes are due in 2013. The Company’s ability to make scheduled payments of principal on, or to pay 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 its control.

      Based on the current level of operations, the Company believes that cash flow from operations and available cash, together with available borrowings under its revolving credit facility, will be adequate to meet liquidity needs and fund planned capital expenditures for the next two years. The Company may, however, need to refinance all or a portion of the principal amount of the notes and/or senior credit facility borrowings, on or prior to maturity, to meet liquidity needs in later years. If it is determined that refinancing is necessary, and the Company is unable to secure such financing on acceptable terms, then the Company may have insufficient liquidity to carry on its operations and meet its obligations at such time.

      The Company can give no assurance that its business will generate sufficient cash flow from operations, that any revenue growth or operating improvements will be realized, or that future borrowings will be available under its revolving credit facilities in an amount sufficient to enable it to service its indebtedness or to fund other liquidity needs. In addition, the Company can give no assurance that it will be able to refinance any of its indebtedness, including its senior credit facilities and the senior subordinated notes, on commercially reasonable terms or at all.

     Net cash provided by operating activities

      Net cash provided by operating activities for the years ended 2002 and 2003 was $93.7 million and $137.4 million, respectively. The $43.7 million increase in net cash provided by operating activities in the year ended 2003 as compared to the year ended 2002 was attributable to reductions in working capital partially offset by lower net income.

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     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 for the year ended 2002 and 2003 were $45.7 million and $43.4 million, respectively. Approximately $20.4 million of the 2003 capital expenditures was related to our long-term capital investment plan to increase capacity and reduce cost at our filtration facilities.

Impact of the Acquisition and Related Financing Transactions

      As a result of the Acquisition, our assets and liabilities were adjusted to their preliminary estimated fair value as of the closing of the Acquisition. Purchase price allocations are subject to adjustment until all pertinent information regarding the Acquisition is obtained and fully evaluated. As discussed above, the Company incurred significant indebtedness in connection with the Acquisition. Accordingly, our interest expense is higher than it was prior to the Acquisition. See Liquidity and Capital Resources, above, and Note B to the Condensed Financial Statements for information regarding the preliminary status of the allocation of the Acquisition purchase price and the impact of the Acquisition and the financing thereof. The excess of the total purchase price over the value of our net assets at closing of the Acquisition was allocated to goodwill and other intangible assets. These long-lived assets are subject to annual impairment review.

Contractual Obligations

      The following table is a summary of contractual cash obligations (excluding interest) at December 31, 2003:

      Included in the $77.8 million of purchase obligations is $7.1 million for property, plant and equipment. The remainder is for materials, supplies and services routinely used in our normal operations.

Recent Accounting Pronouncements

      In December 2003, the FASB issued SFAS No. 132R, “Employers’ Disclosure about Pensions and Other Postretirement Benefits.” SFAS No. 132R requires additional disclosures about defined benefit pension plans and other postretirement benefit plans. The standard requires, among other things, additional disclosures about the assets held in employer sponsored pension plans, disclosures relating to plan asset investment policy and practices, disclosure of expected contributions to be made to the plans and expected benefit payments to be made by the plans. Annual disclosures applicable to our U.S. pension and postretirement plans are required to be made in our financial statements for the year ended December 31, 2003. Annual disclosures relating to our non-U.S. plans will be required for the year ending December 31, 2004. We have adopted this pronouncement as of December 31, 2003 for all of our U.S. plans. See Note J to our consolidated financial statements for the required disclosures.

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Forward-Looking Statements

      In this annual report on Form 10-K, we make some “forward-looking” statements. These statements are included throughout this report on Form 10-K and relate to, among other things, analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “continue,” and other similar terms and phrases, including references to assumptions.

      These forward-looking statements are based on our expectations and beliefs concerning future events affecting us. They are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this report will be important in determining future results.

      Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this annual report on Form 10-K to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

ITEM 7A.     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, Spanish peseta, Canadian dollar and British pound. 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 2003, approximately 12% of our business was transacted in local currencies of foreign countries. While our international results of operations as measured in 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 were to decrease by 10%, our net income would have been lower by $0.3 million in 2003 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 shareholder’s equity. In the past the vehicle parts businesses of UIS have attempted to manage, and in the future we expect to continue to 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 transaction exposure. 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.

      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

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     Interest rate risk

      Borrowings under our senior credit facilities bear variable rates of interest. Under our senior credit facilities, we are required to provide interest rate protection on approximately $118 million of our senior term loan facilities borrowings. In August 2003, we entered into an interest rate swap for $118 million. This swap effectively converts $118 million of variable rate debt to fixed rate debt for the two years ended August 2005. The variable component of the interest rate on borrowings under the senior credit facilities is based on LIBOR. Under the swap we will pay 1.94% and will receive the then current LIBOR on $118 million.

      We utilize, and we will continue to utilize, sensitivity analyses to assess the potential effect of our variable rate debt. If variable interest rates were to increase by 0.25% per annum, the net impact would be a decrease of approximately $0.2 million on our net income and 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 not to engage in speculative transactions. Our policies with respect to the major areas of our treasury activity are set forth above.

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ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of United Components, Inc. and subsidiaries:

      We have audited the accompanying consolidated balance sheets of United Components, Inc. and subsidiaries (the “Company”) as of December 31, 2003, and the related consolidated statements of income, stockholder’s equity, and cash flows of the Company for the period from June 21, 2003 through December 31, 2003. We have also audited the accompanying consolidated balance sheets of the vehicle parts businesses of UIS Industries, Inc. (the “Predecessor Company”), as of December 31, 2002, and the related consolidated statements of income, stockholder’s equity, and cash flows for the period from January 1, 2003 through June 20, 2003 and for each of the years ended December 31, 2002 and 2001. These financial statements are the responsibility of the Company’s and Predecessor 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Components, Inc. and subsidiaries as of December 31, 2003 and of the Predecessor Company as of December 31, 2002, and the consolidated results of operations and cash flows of the Company for the period from June 21, 2003 through December 31, 2003 and of the Predecessor Company for the period from January 1, 2003 through June 20, 2003 and for each of the years ended December 31, 2002 and 2001 in conformity with accounting principles generally accepted in the United States of America.

/S/ GRANT THORNTON LLP

February 27, 2004

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UNITED COMPONENTS, INC. (“UCI”)

BALANCE SHEETS

The accompanying notes are an integral part of these statements.

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UNITED COMPONENTS, INC.

INCOME STATEMENTS