Affinia Group Intermediate 10Q 2007 Q3 Quarterly report

Affinia Group Intermediate Inactive 10-Q2007 Q3 Quarterly report

Content analysis

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549-1004

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2007

Affinia Group Intermediate Holdings Inc.

(Exact name of registrant as specified in its charter)


Delaware	Commission File No.:	34-2022081
(State or other jurisdiction of Incorporation or Organization)	333-128166-10	(I.R.S. Employer Identification Number)

1101 Technology Drive
Ann Arbor, MI 48108
(734) 827-5400

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)

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 and (2) has been subject to such filing requirements for the past 90 days.

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer Accelerated filer Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

Index

Affinia Group Intermediate Holdings Inc.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes ‘‘forward-looking statements’’ within the meaning of Section 27A of the Securities Act of 1933, as amended (the ‘‘Securities Act’’) and Section 21E of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). These forward-looking statements may include comments concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical. When used in this report, the words ‘‘estimates,’’ ‘‘expects,’’ ‘‘anticipates,’’ ‘‘projects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘believes,’’ ‘‘forecasts,’’ or future or conditi onal verbs, such as ‘‘will,’’ ‘‘should,’’ ‘‘could’’ or ‘‘may,’’ and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management’s examination of historical operating trends and data are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there is no assurance that these expectations, beliefs and projections will be achieved. With respect to all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Such risks, uncertainties and other important factors include, among others: our substantial leverage; limitations on flexibility in operating our business contained in our debt agreements; pricing and import pressures; the shift in demand from premium to economy products; our dependence on our largest customers; changing distribution channels; increasing costs for manufactured components, raw materials, crude oil and energy prices; our ability to achieve cost savings from our restructuring; the consolidation of distributors; risks associated with our non-US operations; product liability and customer warranty and recall claims; changes to environmental and automotive safety regulations; changes to anti-dumping rates; risk of impairment to intangibles and goodwill; risk of successful refinancing if re quired; non-performance by, or insolvency of, our suppliers or our customers; the threat of work stoppages and other labor disputes; challenges to our intellectual property portfolio; and our exposure to product liability and other liabilities for which Dana Corporation retained responsibility due to its Chapter 11 filing. Additionally, there may be other factors that could cause our actual results to differ materially from the forward-looking statements.

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PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

Affinia Group Intermediate Holdings Inc.
Unaudited Condensed Consolidated Balance Sheets
(Dollars in Millions)


	December 31, 2006				September 30, 2007
Assets
Current assets:
Cash and cash equivalents		$	70			$	59
Trade accounts receivable, less allowances of $5 million, in 2006 and 2007			351				402
Inventories, net			430				497
Other current assets			45				35
Total current assets			896				993
Property, plant and equipment, net			187				186
Goodwill			45				33
Other intangible assets, net			170				164
Deferred financing costs			18				16
Other long-term assets			65				83
Total assets		$	1,381			$	1,475
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$	210			$	244
Other accrued liabilities			143				167
Accrued payroll and employee benefits			36				30
Total current liabilities			389				441
Long-term debt			597				597
Other noncurrent liabilities			12				26
Total liabilities			998				1,064
Minority interest in consolidated subsidiaries			2				2
Contingencies and commitments
Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding			—				—
Additional paid in-capital			407				408
Accumulated deficit (includes impact from the application of FIN 48 in 2007 of $1 million)			(39	)			(35	)
Accumulated other comprehensive income			13				36
Shareholders’ equity			381				409
Total liabilities and shareholders’ equity		$	1,381			$	1,475

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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Affinia Group Intermediate Holdings Inc.
Unaudited Condensed Consolidated Statements of Operations
(Dollars in Millions)


	Three Months Ended September 30, 2006				Three Months Ended September 30, 2007				Nine Months Ended September 30, 2006				Nine Months Ended September 30, 2007
Net sales		$	548			$	541			$	1,658			$	1,617
Cost of sales			(450	)			(440	)			(1,369	)			(1,325	)
Gross profit			98				101				289				292
Selling, general and administrative expenses			(76	)			(78	)			(245	)			(240	)
Operating profit			22				23				44				52
Other income, net			1				—				5				3
Interest expense			(15	)			(15	)			(44	)			(45	)
Income before income tax provision			8				8				5				10
Income tax (benefit) provision			(4	)			4				1				5
Net income		$	12			$	4			$	4			$	5

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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Affinia Group Intermediate Holdings Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(Dollars in Millions)


	Nine Months Ended September 30, 2006				Nine Months Ended September 30, 2007
Operating activities
Net income		$	4			$	5
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			36				25
Stock-based compensation			—				1
Provision for deferred income taxes			(7	)			(15	)
Change in trade accounts receivable			(49	)			(51	)
Change in inventories			(12	)			(67	)
Change in other operating assets			3				10
Change in other operating liabilities			17				52
Change in other			15				37
Net cash provided by (used in) operating activities			7				(3	)
Investing activities
Proceeds from sales of assets			2				8
Additions to property, plant and equipment			(17	)			(21	)
Net cash used in investing activities			(15	)			(13	)
Financing activities
Short-term debt, net			1				—
Net cash provided by financing activities			1				—
Effect of exchange rate changes on cash			8				5
Change in cash and cash equivalents			1				(11	)
Cash and cash equivalents at beginning of the period			82				70
Cash and cash equivalents at end of the period		$	83			$	59
Supplemental cash flows information
Cash paid during the period for:
Interest		$	33			$	34
Income taxes		$	10			$	12

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Description of Business

On July 8, 2004, Affinia Group Inc. (‘‘Affinia’’), a company formed on June 28, 2004, wholly owned by Affinia Group Intermediate Holdings Inc. and controlled by affiliates of The Cypress Group L.L.C. (‘‘Cypress’’), entered into a stock and asset purchase agreement (the ‘‘Stock and Asset Purchase Agreement’’), as amended, with Dana Corporation (‘‘Dana’’). Affinia Group Intermediate Holdings Inc. is wholly owned by Affinia Group Holdings Inc., which is also controlled by Cypress. The Stock and Asset Purchase Agreement provided for the acquisition by Affinia of the outstanding shares of capital stock of certain subsidiaries and certain assets consisting primarily of Dana’s aftermarket business operations, which was completed on November 30, 2004 (the ‘‘Acquisition’’).

Affinia is a leading designer, manufacturer and distributor of on and off highway replacement products and services. Our broad range of replacement products are sold in North America, Europe, South America and Asia.

Note 2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Affinia Group Intermediate Holdings Inc. and its subsidiaries. In these notes to the condensed consolidated financial statements, the terms ‘‘the Company,’’ ‘‘we,’’ ‘‘our’’ and ‘‘us’’ refer to Affinia Group Intermediate Holdings Inc. and its subsidiaries on a consolidated basis.

The interim financial information is prepared in conformity with accounting principles generally accepted in the United States of America and such principles are applied on a basis consistent with information reflected in our Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations promulgated by the United States Securities and Exchange Commission. In the opinion of management, the interim financial information includes all adjustments and accruals, consisting only of normal recurring adjustments, which are necessary for a fair presentation of results for the respective interim period.

In 2006, the Emerging Issues Task Force (‘‘EITF’’) reached a consensus on Issue No. 06-03, How Sales Tax Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement (That is, Gross versus Net Presentation). This EITF issue clarifies that the presentation of taxes collected from customers and remitted to governmental authorities on a gross (included in revenues and costs) or net (excluded from revenues) basis is an accounting policy decision that should be disclosed pursuant to Accounting Principles Board (APB) Opinion No. 22, Disclosure of Accounting Policies. The EITF issue is effective f or the Company beginning in fiscal year 2007. We collect such taxes from our customers and account for them on a net (excluded from revenues) basis.

Note 3. New Accounting Pronouncements

In February 2007, Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards (‘‘SFAS’’) No. 159, The Fair Value Option for Financial Assets and Liabilities (‘‘SFAS No. 159’’). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are assessing what impact, if any, adoption of this statement would have on our results of operations and financial posi tion.

In September 2006, the FASB issued SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and

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132(R) (‘‘SFAS No. 158’’). SFAS No. 158 requires that we recognize the overfunded or underfunded status of our defined benefit and retiree medical plans (the ‘‘Plans’’) as an asset or liability on the 2007 year-end balance sheet, with changes in the funded status recognized through comprehensive income in the year in which they occur. SFAS No. 158 also requires us to measure the funded status of our Plans as of our year-end balance sheet date by no later than December 31, 2008. We are assessing what impact the adoption of this statement will have on our financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (‘‘SFAS No. 157’’), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective as of January 1, 2008. We are assessing what impact, if any, adoption of this statement would have on our results of operations and financial position.

Note 4. Accounting for Income Taxes

On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109 (‘‘FIN 48’’). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on an income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.

The Company applied the provisions of FIN 48 on January 1, 2007. The total amount of unrecognized tax benefits as of the date of adoption and September 30, 2007, was $3 million. As a result of the implementation of FIN 48, the Company recognized a $2 million increase in the liability for unrecognized tax benefits, a $1 million reduction to retained earnings and a $1 million increase to goodwill.

Included in the balance of unrecognized tax benefits at January 1, 2007 and September 30, 2007, are $2 million of tax benefits that, if recognized, would affect the effective tax rate. Also included in the balances of unrecognized tax benefits as of both periods, are $1 million of tax benefits that, if recognized, would result in adjustments to other accounts.

The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties as part of the income tax provision. Upon adoption of FIN 48 on January 1, 2007 and as of September 30, 2007 the Company’s accrual for interest and penalties is less than $1 million.

The Company is subject to taxation in the US and various state and foreign jurisdictions. For jurisdictions in which the Company transacts significant business, tax years ending December 31, 2004 and later remain subject to examination by tax authorities.

On July 12, 2007, the State of Michigan enacted the Michigan Business Tax as the replacement for the Michigan Single Business Tax, effective January 1, 2008. The new legislation imposes two taxes – a modified gross receipts tax and an income tax. The Michigan Business Tax did not have a material impact on the Company’s consolidated financial statements.

On July 2, 2007, a subsidiary of the Company converted from a corporation to a limited liability company. The change in the tax status of the subsidiary resulted in an increase to the Company’s deferred tax liabilities of approximately $1 million. This increase was recognized during the third quarter of 2007.

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Note 5. Inventories, net

Inventories, net consist of the following (Dollars in Millions):


	At December 31, 2006				At September 30, 2007
Raw materials		$	107			$	130
Work-in-process			30				33
Finished goods			342				375
Reserve			(49	)			(41	)
		$	430			$	497

Note 6. Comprehensive Income

The elements of comprehensive income are presented in the following table (Dollars in Millions):


	Three Months Ended September 30, 2006				Three Months Ended September 30, 2007			Nine Months Ended September 30, 2006				Nine Months Ended September 30, 2007
Net income		$	12			$	4		$	4			$	5
Additional pension liability, net of tax			(1	)			—			(1	)			—
Change in foreign currency translation adjustments, net of tax			—				10			8				23
Comprehensive income		$	11			$	14		$	11			$	28

Note 7. Goodwill

The following table summarizes goodwill activity for the first nine months of 2007 (Dollars in Millions):

In accordance with SFAS No. 109, Accounting for Income Taxes, the tax benefit for the excess of tax-deductible goodwill over the reported amount of goodwill is applied to first reduce the goodwill related to the Acquisition. The tax benefit for the excess of tax deductible goodwill has decreased reported goodwill by approximately $13 million in the first nine months of 2007. Once the reported amount of goodwill is reduced to zero, the remaining tax benefit reduces the basis of the intangible assets. Any remaining tax benefit reduces the income tax provision.

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Note 8. Commitments and Contingencies

A reconciliation of the changes in our product return reserves is as follows (Dollars in Millions):


	Nine Months Ended September 30, 2006				Nine Months Ended September 30, 2007
Beginning balance		$	19			$	18
Amounts charged to expense			38				42
Product returns processed			(38	)			(40	)
		$	19			$	20

At September 30, 2007, the Company had purchase commitments for property, plant and equipment of approximately $7 million.

During the first quarter of 2007 we signed a letter of credit in connection with a real estate lease. FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requires that this letter of credit be accounted for as a guarantee. The initial recognition and measurement of the fair value of this guarantee resulted in recognizing a $3 million increase in other noncurrent liabilities and other long-term assets.

Note 9. Legal Proceedings

The Company is party to various pending judicial and administrative proceedings arising in the ordinary course of business. These include, among others, proceedings based on product liability claims and alleged violations of environmental laws.

On March 3, 2006, Dana and forty of its domestic subsidiaries (the ‘‘Debtors’’) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the ‘‘Bankruptcy Code’’) in the United States Bankruptcy Court, Southern District of New York (the ‘‘Court’’) (Case No. 06-10354). The Debtors continue to operate their businesses as ‘‘debtors-in-possession’’ in accordance with applicable provisions of the Bankruptcy Code and orders of the Court. On September 26, 2007 Dana filed an adversary complaint (the ‘‘Dana Complaint’’) against Affinia Group Inc. and Affinia Canada Corp. (Adv. Pr. No. 07-02059) seeking turnover pursuant to the Purchase Agreement and section 542(a) of the Bankruptcy Code of a tax refund in the amount of $32.5 million. Dana alleges that the tax refund is an excluded asset that was not transferred pursuant to the Purchase Agreement. We dispute the allegations in the Dana Complaint and intend to vigorously oppose them. We have included this in other accrued liabilities.

In addition, on October 3, 2007, Dana filed a motion (‘‘Motion’’) pursuant to section 365 of the Bankruptcy Code to reject both the Stock and Asset Purchase Agreement and the Spicer Trademark License Agreement (‘‘Spicer Agreement’’), the rejection of which would enable Dana to disavow and abandon its obligations under these agreements. Pursuant to these agreements, Dana is contractually obligated to, among other things: (a) indemnify us for specified liabilities, including, among others, (i) liabilities arising out of legal proceedings commenced prior to the Acquisition, and (ii) liabilities for death, personal injury or other injury to persons (including, but not limited to, such liabilities that result from human exposure to asbestos) or property damage occurring prior to the Acquisition relating to the use or exposure to any of Dana’s products designed, manufactured, served or sold by Dana; and (b) license our use of the ‘‘Spicer’’ trademark. We intend to vigorously oppose the Motion. However, if Dana prevails on the Motion, it may be discharged entirely from its obligations under these agreements including its obligation to indemnify us for future defense settlements or payments in respect of any claim subject to its indemnification obligations. We may recover less than 100% of any indemnification obligations of Dana existing as of March 3, 2006. We do not know whether any insurance that may have been maintained by Dana will cover the costs for which Dana is contractually obligated to indemnify us. In addition, Dana may be discharged from its obligation to license our use of the ‘‘Spicer’’ trademark and the www.spicerchassis.com domain name. We cannot estimate the impact of Dana failing to honor these and other contractual obligations but such a failure could adversely affect our financial condition and results of operations.

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On January 30, 2006, Parker-Hannifin Corporation (‘‘Parker’’) filed a complaint and request for preliminary injunction against Wix Filtration Corp. (‘‘Wix’’), which is a wholly owned subsidiary of Affinia, alleging patent infringement of four US patents held by Parker. These patents cover an oil filter and fuel filter that Parker was selling to Wix for sale into the automotive aftermarket prior to the complaint date. Wix’s response to Parker’s preliminary injunction brief was filed on May 10, 2006 and the preliminary injunction hearing was held on August 23, 2006 in the US District Court for the Eastern District of California. On October 24, 2006, the court denied Parker’s preliminary injunction motion. Wix intends to continue to defend itself vigorously in this suit. Trial in the matter is currently set for May 26, 2008.

Note 10. Restructuring of Operations

In 2005, we announced two restructuring plans: (i) a restructuring plan that we announced at the beginning of 2005 as part of the Acquisition, also referred to herein as the acquisition restructuring and (ii) a restructuring plan that we announced at the end of 2005, also referred to herein as the comprehensive restructuring. We have completed the acquisition restructuring and we are in the second year of the comprehensive restructuring program. The following chart summarizes the timing of the comprehensive restructuring activity to date:


Facility	Closure Announcement Date	Date Closed
Southampton (UK)	December 2005	2nd Qtr. 2006
Erie (PA)	March 2006	4th Qtr. 2006
North East (PA)	March 2006	4th Qtr. 2006
McHenry (IL)	March 2006	4th Qtr. 2006
St. Catharines (ON, Canada)	June 2006	4th Qtr. 2006
Cambridge (ON, Canada)	September 2006	1st Qtr. 2007
Cuba (MO)	October 2006	2nd Qtr. 2007
Mississauga (ON, Canada)	November 2006	4th Qtr. 2006
Sudbury (ON, Canada)	March 2007	2nd Qtr. 2007
Mishawaka (IN)	October 2007	Open

In other comprehensive restructuring activity, we announced our intent to sell our Waupaca (WI) facility. In addition, Quinton Hazell Automotive Limited (a UK subsidiary) entered into warehousing and distribution agreement with Caterpillar Logistics Services (UK) Limited in 2006. The transition to the new warehousing and distribution center occurred during the second and third quarters of 2007. During this transition period, we began marketing our Nuneaton (UK) distribution facility for sale. In October 2007, we finalized the sale of the facility and we received $6 million and recorded a gain on sale of less than $1 million.

In connection with the comprehensive restructuring, we have recorded $90 million in restructuring costs to date. We recorded $23 million in 2005, $40 million in 2006 and $27 million during the first nine months of 2007. The charges relating to the first nine months of 2007 were recorded in selling, general and administrative expense and cost of sales which consists of employee termination costs, other exit costs and impairment costs. Severance costs are being accounted for in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities and SFAS No. 112, Employers’ Accounting for Postemployment Benefits – an amendment of FASB Statements No. 5 and 43. We currently estimate that we will incur approximately $62 million of cash and non-cash comprehensive restructuring plan costs during the remainder of 2007, 2008 and 2009. We continue to expect the total cash and non-cash comprehensive restructuring plan costs to aggregate to $152 million.

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The following summarizes the restructuring charges and activity for all the Company’s restructuring programs (Dollars in Millions):


Balance at December 31, 2006		$	13
Charges to expense:
Employee termination benefits	15
Asset write-offs expense	1
Other expenses	11
Total restructuring expenses			27
Cash payments and asset write-offs:
Cash payments			(28	)
Asset retirements			(1	)
Balance at September 30, 2007		$	11

At September 30, 2007, $11 million of restructuring charges remained in other accrued liabilities, relating to wage and healthcare continuation for severed employees and other termination costs, which are expected to be paid during 2007 and 2008.

Note 11. Segment and Geographic Information

The Company’s operating units have been aggregated into one reportable business segment, which is the manufacturing and distribution of on and off highway replacement products and services. The products, customer base, distribution channel, manufacturing process, procurement, and economic characteristics are similar throughout all of the Company’s operations.

Net sales by geographic region were determined based on origin of sale and are as follows (Dollars in Millions):


	Three Months Ended September 30, 2006			Three Months Ended September 30, 2007			Nine Months Ended September 30, 2006			Nine Months Ended September 30, 2007
United States		$	296		$	290		$	918		$	884
Canada			69			45			209			145
Brazil			63			73			181			203
Other countries			120			133			350			385
		$	548		$	541		$	1,658		$	1,617

Long-lived assets by geographic region are comprised of property, plant and equipment, goodwill, other intangible assets and deferred financing costs and are as follows (Dollars in Millions):


	December 31, 2006			September 30, 2007
United States		$	310		$	294
Canada			31			20
Brazil			6			6
Other countries			73			79
		$	420		$	399

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We offer primarily two types of products: brake and chassis products, which include brake drums, rotors, pads and shoes, hydraulic brake system components, steering, suspension and driveline components; and filtration products, which include oil, fuel, air and other filters. Additionally, we have European products, which mainly consist of our Quinton Hazell European parts operations. Quinton Hazell designs, manufactures, purchases and distributes a wide range of aftermarket motor vehicle components for customers throughout the United Kingdom and Continental Europe, primarily under the Quinton Hazell brand name. The Company’s sales by group of similar products are as follows (Dollars in Millions):


	Three Months Ended September 30, 2006				Three Months Ended September 30, 2007				Nine Months Ended September 30, 2006				Nine Months Ended September 30, 2007
Brake and Chassis products		$	306			$	287			$	934			$	856
Filtration products			176				186				527				553
European products			67				70				201				213
Eliminations and other			(1	)			(2	)			(4	)			(5	)
		$	548			$	541			$	1,658			$	1,617

Note 12. Stock Option Plans

On July 20, 2005, we adopted a stock incentive plan with a maximum of 227,000 shares of common stock subject to awards. As of September 30, 2007, 224,010 shares had been awarded, which included 33,357 vested shares and 190,653 unvested shares. Additionally, at September 30, 2007 there were 2,990 shares available for future stock option grants. Each option expires August 1, 2015. One-half of the options vest based on the performance of the Company and the remaining portion vests at the end of each year ratably over the period from the year of the grant until December 31, 2009. The exercise price is $100 per option.

We account for our employee stock options under the fair value method of accounting using a Black-Scholes model to measure stock-based compensation expense at the date of grant. Dividend yields were not a factor because there were no cash dividends declared during 2006 and the first nine months of 2007. Our weighted-average Black-Scholes fair value assumptions include:


	2006	2007
Effective term	6 years	5 years
Risk free interest rate	4.2%	4.7%
Expected volatility	40.0%	39.0%

The weighted fair value of the options granted was approximately $6 million as of September 30, 2007. The fair value of the stock option grants is amortized to expense over the vesting period. The Company reduces the overall compensation expense by a turnover rate consistent with historical trends. Stock-based compensation expense, which was recorded in selling, general and administrative expenses, and related income tax benefits was $0.4 million and $0.9 million for the nine month period ending September 30, 2006 and 2007, respectively. The following table summarizes option activity:


Outstanding at December 31, 2005	140,700
Granted	14,060
Forfeited	(5,500	)
Outstanding at December 31, 2006	149,260
Granted	82,050
Forfeited	(7,300	)
Balance at September 30, 2007	224,010

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Note 13. Financial Information for Guarantors and Non-Guarantors

In connection with the Acquisition on November 30, 2004, Affinia issued $300 million of 9% Senior Subordinated Notes due in 2014 to qualified institutional buyers and certain persons in offshore transactions, which were exchanged for $300 million of 9% Senior Subordinated Notes due 2014 registered under the Securities Act 1933 on November 2, 2005 (the ‘‘Notes’’). The Notes are guaranteed by all of Affinia’s wholly-owned domestic subsidiaries and by Affinia’s direct parent, Affinia Group Intermediate Holdings Inc. (referred to in the following tables as ‘‘Parent’’). These guarantors jointly and severally guarantee Affinia’s obligations under the Notes and such guarantees represent full and unconditional general obligations of each guarantor. In the following tables, ‘‘Issuer’’ refers to Affinia and ‘‘Guarantors’’ refers t o Affinia’s subsidiary guarantors. The Parent and the Guarantors also unconditionally guarantee Affinia’s borrowings under its senior secured credit facilities on the same basis.

The following unaudited information presents the Consolidating Condensed Balance Sheets as of December 31, 2006 and September 30, 2007, Consolidating Condensed Statements of Operations for the three and nine months ended September 30, 2006 and 2007, and the Consolidating Condensed Statements of Cash Flows for the nine months ended September 30, 2006 and 2007 to arrive at the information for the Company on a consolidated basis. Other separate financial statements and other disclosures concerning the Parent and the Guarantors are not presented because management does not believe that such information is material to investors.

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Balance Sheet
December 31, 2006
(Dollars in Millions)


	Parent			Issuer				Guarantor			Non- Guarantor			Eliminations				Consolidated Total
Assets
Current assets:
Cash and cash equivalents		$	—		$	19			$	—		$	51		$	—			$	70
Accounts receivable			—			27				190			134			—				351
Inventories			—			—				255			175			—				430
Other current assets			—			31				2			12			—				45
Total current assets			—			77				447			372			—				896
Property, plant, and equipment, net			—			10				89			88			—				187
Intercompany investments			381			1,019				421			241			(2,062	)			—
Intercompany receivables			—			(265	)			231			34			—				—
Investments and other assets			—			283				1			14			—				298
Total assets		$	381		$	1,124			$	1,189		$	749		$	(2,062	)		$	1,381
Liabilities and Equity
Current liabilities:
Accounts payable		$	—		$	11			$	104		$	95		$	—			$	210
Other accrued liabilities			—			76				39			28			—				143
Accrued payroll and employee benefits			—			19				5			12			—				36
Total current liabilities			—			106				148			135			—				389
Long-term debt			—			597				—			—			—				597
Deferred employee benefits and noncurrent liabilities			—			4				—			8			—				12
Total liabilities			—			707				148			143			—				998
Minority interest in consolidated subsidiaries			—			—				2			—			—				2
Shareholders’ equity			381			417				1,039			606			(2,062	)			381
Total liabilities and equity		$	381		$	1,124			$	1,189		$	749		$	(2,062	)		$	1,381

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Balance Sheet
September 30, 2007
(Dollars in Millions)


	Parent			Issuer				Guarantor			Non- Guarantor			Eliminations				Consolidated Total
Assets
Current assets:
Cash and cash equivalents		$	—		$	35			$	—		$	24		$	—			$	59
Accounts receivable			—			29				206			167			—				402
Inventories			—			—				285			212			—				497
Other current assets			—			6				4			25			—				35
Total current assets			—			70				495			428			—				993
Property, plant and equipment, net			—			11				88			87			—				186
Intercompany investments			409			1,066				431			282			(2,188	)			—
Intercompany receivables			—			(287	)			220			67			—				—
Investments and other assets			—			272				2			22			—				296
Total assets		$	409		$	1,132			$	1,236		$	886		$	(2,188	)		$	1,475
Liabilities and Equity
Current liabilities:
Accounts payable		$	—		$	10			$	120		$	114		$	—			$	244
Other accrued liabilities			—			52				38			77			—				167
Accrued payroll and employee benefits			—			8				7			15			—				30
Total current liabilities			—			70				165			206			—				441
Long-term debt			—			597				—			—			—				597
Deferred employee benefits and noncurrent liabilities			—			13				—			13			—				26
Total liabilities			—			680				165			219			—				1,064
Minority interest in consolidated subsidiaries			—			—				2			—			—				2
Shareholders’ equity			409			452				1,069			667			(2,188	)			409
Total liabilities and equity		$	409		$	1,132			$	1,236		$	886		$	(2,188	)		$	1,475

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2006
(Dollars in Millions)


	Parent			Issuer				Guarantor				Non- Guarantor				Eliminations				Consolidated Total
Net sales		$	—		$	—			$	315			$	322			$	(89	)		$	548
Cost of sales			—			—				(271	)			(268	)			89				(450	)
Gross profit			—			—				44				54				—				98
Selling, general and administrative expenses			—			(9	)			(31	)			(36	)			—				(76	)
Operating (loss) profit			—			(9	)			13				18				—				22
Other income, net			—			—				1				—				—				1
Interest expense			—			(15	)			—				—				—				(15	)
(Loss) income before taxes			—			(24	)			14				18				—				8
Income tax provision			—			(5	)			(1	)			2				—				(4	)
(Loss) income before equity interest in income			—			(19	)			15				16				—				12
Equity interest in income, net of tax			12			26				(3	)			9				(44	)			—
Net income (loss)		$	12		$	7			$	12			$	25			$	(44	)		$	12

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Statement of Operations
For the Nine Months Ended September 30, 2006
(Dollars in Millions)


	Parent			Issuer				Guarantor				Non- Guarantor				Eliminations				Consolidated Total
Net sales		$	—		$	—			$	979			$	955			$	(276	)		$	1,658
Cost of sales			—			—				(766	)			(879	)			276				(1,369	)
Gross profit			—			—				213				76				—				289
Selling, general and administrative expenses			—			(32	)			(114	)			(99	)			—				(245	)
Operating (loss) profit			—			(32	)			99				(23	)			—				44
Other income, net			—			1				2				2				—				5
Interest expense			—			(44	)			—				—				—				(44	)
(Loss) income before taxes			—			(75	)			101				(21	)			—				5
Income tax provision			—			(5	)			(1	)			7				—				1
(Loss) income before equity interest in income			—			(70	)			102				(28	)			—				4
Equity interest in income, net of tax			4			78				(8	)			24				(98	)			—
Net income (loss)		$	4		$	8			$	94			$	(4	)		$	(98	)		$	4

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2007
(Dollars in Millions)


	Parent			Issuer				Guarantor				Non- Guarantor				Eliminations				Consolidated Total
Net sales		$	—		$	—			$	297			$	328			$	(84	)		$	541
Cost of sales			—			—				(234	)			(290	)			84				(440	)
Gross profit			—			—				63				38				—				101
Selling, general and administrative expenses			—			(5	)			(35	)			(38	)			—				(78	)
Operating (loss) profit			—			(5	)			28				—				—				23
Other income, net			—			8				(10	)			2				—				—
Interest expense			—			(15	)			—				—				—				(15	)
(Loss) income before taxes			—			(12	)			18				2				—				8
Income tax (benefit) provision			—			(3	)			—				7				—				4
(Loss) income before equity interest in income			—			(9	)			18				(5	)			—				4
Equity interest in income, net of tax			4			15				2				18				(39	)			—
Net income (loss)		$	4		$	6			$	20			$	13			$	(39	)		$	4

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Statement of Operations
For the Nine Months Ended September 30, 2007
(Dollars in Millions)


	Parent			Issuer				Guarantor				Non- Guarantor				Eliminations				Consolidated Total
Net sales		$	—		$	—			$	911			$	947			$	(241	)		$	1,617
Cost of sales			—			—				(715	)			(851	)			241				(1,325	)
Gross profit			—			—				196				96				—				292
Selling, general and administrative expenses			—			(24	)			(111	)			(105	)			—				(240	)
Operating (loss) profit			—			(24	)			85				(9	)			—				52
Other income, net			—			27				(29	)			5				—				3
Interest expense			—			(45	)			—				—				—				(45	)
(Loss) income before taxes			—			(42	)			56				(4	)			—				10
Income tax (benefit) provision			—			(7	)			—				12				—				5
(Loss) income before equity interest in income			—			(35	)			56				(16	)			—				5
Equity interest in income, net of tax			5			47				11				41				(104	)			—
Net income (loss)		$	5		$	12			$	67			$	25			$	(104	)		$	5

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2006
(Dollars in Millions)


	Parent				Issuer				Guarantor				Non- Guarantor				Elimination				Consolidated Total
Operating activities
Net income (loss)		$	4			$	8			$	94			$	(4	)		$	(98	)		$	4
Adjustments to reconcile net income (loss) from continuing operations to net cash (used in) provided by operating activities:
Depreciation and amortization			—				7				17				12				—				36
Provision for deferred income taxes			—				(6	)			—				(1	)			—				(7	)
Equity in income			(4	)			(78	)			8				(24	)			98				—
Change in trade accounts receivable			—				—				(20	)			(29	)			—				(49	)
Change in inventories			—				—				(14	)			2				—				(12	)
Change in other operating assets			—				(7	)			(2	)			12				—				3
Change in other operating liabilities			—				4				11				2				—				17
Change in other			—				46				(89	)			58				—				15
Net cash (used in) provided by operating activities			—				(26	)			5				28				—				7
Investing activities
Proceeds from sale of assets			—				—				—				2				—				2
Additions to property, plant, and equipment			—				(3	)			(6	)			(8	)			—				(17	)
Net cash used in investing activities			—				(3	)			(6	)			(6	)			—				(15	)
Financing activities
Short-term debt, net			—				1				—				—				—				1
Net cash provided by financing activities			—				1				—				—				—				1
Effect of exchange rates on cash			—				—				—				8				—				8
Change in cash and cash equivalents			—				(28	)			(1	)			30				—				1
Cash and cash equivalents at beginning of period			—				44				1				37				—				82
Cash and cash equivalents at end of period		$	—			$	16			$	—			$	67			$	—			$	83

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Affinia Group Intermediate Holdings Inc.

Supplemental Guarantor
Unaudited Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2007
(Dollars in Millions)


	Parent				Issuer				Guarantor				Non- Guarantor				Elimination				Consolidated Total
Operating activities
Net income (loss)		$	5			$	12			$	67			$	25			$	(104	)		$	5
Adjustments to reconcile net income (loss) from continuing operations to net cash (used in) provided by operating activities:
Depreciation and amortization			—				8				9				8				—				25
Stock-based compensation			—				1				—				—				—				1
Provision for deferred income taxes			—				(7	)			—				(8	)			—				(15	)
Equity in income			(5	)			(47	)			(11	)			(41	)			104				—
Change in trade accounts receivable			—				(2	)			(16	)			(33	)			—				(51	)
Change in inventories			—				—				(30	)			(37	)			—				(67	)
Change in other operating assets			—				25				(2	)			(13	)			—				10
Change in other operating liabilities			—				(36	)			17				71				—				52
Change in other			—				64				(27	)			—				—				37
Net cash provided by (used in) operating activities			—				18				7				(28	)			—				(3	)
Investing activities
Proceeds from sale of assets			—				—				3				5				—				8
Additions to property, plant, and equipment			—				(2	)			(10	)			(9	)			—				(21	)
Net cash used in investing activities			—				(2	)			(7	)			(4	)			—				(13	)
Financing activities
Proceeds from debt			—				—				—				—				—				—
Net cash provided by (used in) financing activities			—				—				—				—				—				—
Effect of exchange rates on cash			—				—				—				5				—				5
Change in cash and cash equivalents			—				16				—				(27	)			—				(11	)
Cash and cash equivalents at beginning of period			—				19				—				51				—				70
Cash and cash equivalents at end of period		$	—			$	35			$	—			$	24			$	—			$	59

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Company Overview

Affinia is a global leader in the on and off highway replacement products and services industry. We derive approximately 95% of our sales from this industry and, as a result, are not directly affected by the market cyclicality of the automotive original equipment manufacturers. Our broad range of brake, filtration and chassis products are sold in North America, Europe, South America and Asia. In the first nine months of 2007 brake and chassis products and filtration products, which by their nature sustain significant wear and must routinely be replaced, represented 53% and 34% of our net sales, respectively. The remaining 13% of net sales were derived from our European products.

We believe our key advantages as a leading on and off highway replacement products and services company are a broad product offering, quality products, brand recognition (e.g., Wix and Raybestos), value-added services, and distribution and global sourcing capabilities. Due to these key advantages, we believe we hold the number one market position in North America in brake and filtration component sales and the number two market position in North America in chassis component sales. Among the value-added services we bring to our customers are a customer focused sales force, professional tech support, and e-cataloguing services to name a few. The value we bring to our customers has been recognized with numerous awards over the last several years. We believe that these key advantages strategically position us for growth in North America and globally.

Recent Developments

Prior to October of 2007, we used the Raybestos brand name under a licensing agreement. During the month of October 2007, we purchased the Raybestos brand name from Raybestos Product Company. With the purchase of the brand name we believe we have acquired one of the premier brand names in the aftermarket industry.

Over the last several years, our North American Brake products have experienced intensified competition from low cost offshore suppliers. Our comprehensive global restructuring plan is designed to meet the changing environment for Brake products. We have closed approximately 15 facilities during the last three years and have shifted some of the manufacturing base to countries such as China and Mexico. The Brake products gross margin continues to improve over the prior year. However, weaker than planned Brake products sales volume in 2007 has reduced the impact of cost savings from our comprehensive restructuring plan.

During the current year, our Brake and Chassis product sales have decreased. On a currency adjusted basis our Brake and Chassis product sales have decreased $97 million in comparison to the prior year nine months, which is largely driven by a decrease in U.S. and Canada Brake products. This decrease was partially planned as we exited some unprofitable Original Equipment Manufacturer (‘‘OEM’’) and comanufacturing contracts. Other factors for the decreased sales relate to the termination of a customer relationship and a product backlog which was due to line fill issues that occurred earlier in the year. The line fill issues in part occurred due to the strong orders as a result of our new ‘‘1-2-3’’ brake product offering and the product sourcing transition related to our comprehensive restructuring plan. As of the end of the third quarter, line fill has returned to industry standards.

Positioning through Restructuring

To successfully compete in today’s global market-driven economy, Affinia is focused on being a world class global manufacturer and distributor of on and off highway replacement products and services. The focus in our first three years has been on positioning ourselves through our restructuring programs. We believe these efforts are necessary in order to remain a leader in the on and off highway global replacement products and services industry.

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Manufacturing Expansion and Global Growth

We are also focusing on expanding manufacturing capabilities globally to position Affinia to take advantage of global growth opportunities. Our vision is to provide growth for our people, customers and investors. The initial manufacturing expansion and global growth efforts are outlined below:


	•	During April 2007 we entered into a joint venture agreement to manufacture brake components in India and China. We anticipate production to begin in the latter part of 2008.


	•	We opened a new filter manufacturing operation in Mexico in the third quarter of 2007 and production started in October 2007.


	•	We opened a new filter manufacturing plant in Ukraine on April 1, 2007 to help meet increased demand for filtration products in Eastern Europe.


	•	In April 2007, we announced a completely re-engineered brake offering to better meet the needs of the distributors and the professional technician. The introduction of our ‘‘1-2-3’’ brake product offering streamlines and simplifies the product offering into a single grade of hydraulics, two grades of rotors and three grades of friction.

Restructuring Activity

In our initial comprehensive restructuring plan announcement we expected the plan to be substantially complete by the end of 2007. We closed several facilities in 2006 and the first half of 2007. However, we were not able to meet the demand in 2007 for our new ‘‘1-2-3’’ brake product offering. To meet demand and retain our high standards for line fill, we were unable to proceed as quickly with the restructuring plan as originally expected. As a result, we believe we are approximately one year behind in our comprehensive restructuring and global growth plan. In connection with the comprehensive restructuring, we have recorded $90 million in restructuring costs to date. We recorded $23 million in 2005, $40 million in 2006 and $27 million during the first nine months of 2007. We currently estimate that we will incur approximately $62 million of cash and non-cash comprehensive restructuring plan costs during the remai nder of 2007, 2008 and 2009. We continue to expect the total cash and non-cash comprehensive restructuring plan costs to aggregate to $152 million.

The following chart summarizes the comprehensive restructuring activity since the December 2005 announcement of the plan.


Facility	Closure Announcement Date	Date Closed
Southampton (UK)	December 2005	2nd Qtr. 2006
Erie (PA)	March 2006	4th Qtr. 2006
North East (PA)	March 2006	4th Qtr. 2006
McHenry (IL)	March 2006	4th Qtr. 2006
St. Catharines (ON, Canada)	June 2006	4th Qtr. 2006
Cambridge (ON, Canada)	September 2006	1st Qtr. 2007
Cuba (MO)	October 2006	2nd Qtr. 2007
Mississauga (ON, Canada)	November 2006	4th Qtr. 2006
Sudbury (ON, Canada)	March 2007	2nd Qtr. 2007
Mishawaka (IN)	October 2007	Open

In other comprehensive restructuring activity, we announced our intent to sell our Waupaca (WI) facility in 2006. In addition, Quinton Hazell Automotive Limited (a UK subsidiary) entered into warehousing and distribution agreement with Caterpillar Logistics Services (UK) Limited in 2006. The transition to the new warehousing and distribution center occurred during the second and third quarters of 2007. During this transition period, we began marketing our Nuneaton distribution facility for sale. In October 2007, we finalized the sale of the facility and we received $6 million and recorded a gain on sale of less than $1 million.

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Critical Accounting Policies

The Company’s critical accounting policies are those related to asset impairment, inventories, revenue recognition, sales returns and rebates, estimated costs related to product warranties, pensions, income taxes, contingency reserves and restructuring expenses. These policies are more fully described in the notes to the combined and consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Except for income taxes, there have been no material changes from the methodology applied by management for critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The methodology applied to management’s estimate for income taxes changed as of January 1, 2007 due to the implementation of a new accounting interpretation, FIN 48, as described in ‘‘Note 4. Accounting for Uncertainty of Income Taxes.’’ We are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of income.

The preparation of interim financial statements involves the use of certain estimates that are consistent with those used in the preparation of the annual financial statements.

Basis of Presentation

The Company’s operating units have been aggregated into one reportable business segment, which is the manufacturing and distribution of on and off highway replacement products and services. We have identified in tabular format in the Results of Operations tables below the revenue by product.

Results of Operations

Three months ended September 30, 2006 compared to the three months ended September 30, 2007

The following table summarizes the consolidated results for the three months ended September 30, 2006 and the consolidated results for the three months ended September 30, 2007 (Dollars in Millions):


	Consolidated Three Months Ended September 30, 2006				Consolidated Three Months Ended September 30, 2007				Dollar Change			Percent Change
Net sales
Brake and Chassis products		$	306			$	287			($19	)		(6	%)
Filtration products			176				186			10			6	%
European products			67				70			3			4	%
Eliminations and other			(1	)			(2	)		(1	)		NM
Total net sales			548				541			(7	)		(1	%)
Cost of sales			(450	)			(440	)		10			2	%
Gross profit			98				101			3			3	%
Gross margin			18	%			19	%
Selling, general and administrative expenses⁽¹⁾			(76	)			(78	)		(2	)		(3	%)
Selling, general and administrative expenses as a percent of sales			14	%			14	%
Operating profit			22				23			1			5	%
Operating margin			4	%			4	%
Other income, net			1				—			(1	)		(100	%)
Interest expense			(15	)			(15	)		—			NM
Income before income tax provision			8				8			—			NM
Income tax (benefit) provision			(4	)			4			(8	)		(200	%)
Net income		$	12			$	4			(8	)		(67	%)

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(1)	We recorded $12 million and $10 million of restructuring costs in selling, general and administrative expenses for the third quarter of 2006 and 2007, respectively.

NM (Not Meaningful)

Net sales. Our Brake & Chassis product sales decreased in the third quarter of 2007 in comparison to the third quarter of 2006. The Brake and Chassis product sales decreased $29 million, excluding the effects of currency translation, for the reasons described below:


	•	Some sectors of our retail and traditional channels experienced soft market conditions in the third quarter of 2007 in comparison to the third quarter of 2006. These soft market conditions represented $10 million of the decrease in sales.


	•	As planned, certain unprofitable OEM and comanufacturing contracts have not been renewed, thus reducing sales and improving margins. These contracts represented approximately $23 million of the decrease in sales.

Offsetting the impact of the discontinued contracts and soft market conditions described above was a $4 million increase in export and original equipment service (‘‘OES’’) sales in U.S. and Canada.

Filtration products sales increased in the third quarter of 2007 in comparison to the third quarter of 2006, both domestically and internationally. On a currency adjusted basis, our sales in the third quarter at our filter companies in Poland and Venezuela grew by 14% and 64%, respectively, in comparison to the third quarter of 2006. Our filter sales in Poland increased due to the increased demand for filters in their domestic market, the addition of new products and the expansion into other European markets. Our filter sales in Venezuela increased due to market conditions in the country and a successful focus on heavy duty filtration products. On April 1, 2007 we opened a new plant in Ukraine, which contributed approximately $2 million in sales this quarter.

Our European product sales on a currency adjusted basis decreased $3 million, which was primarily attributed to our U.K. operations. During the second and third quarters of 2007, our U.K. operations have been transitioning to a new and more efficient distribution facility under a logistics outsourcing contract. During the transition period our line fill and delivery service dropped below normal levels, which had a negative impact on sales. By the end of the third quarter our line fill returned to normal levels and we are currently focusing on improving the delivery service.

Cost of sales/Gross margin. The gross margin in the third quarter increased to 19% from 18% in 2006. This increase in gross margin was due to improvements in our Brake and Chassis products as a result of the comprehensive restructuring program.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the third quarter of 2007 increased from the third quarter of 2006. The increase was due to workers compensation expense and the conversion of customers (change-over) to Affinia products.

Income tax provision. Income tax provision for the third quarter of 2007 increased by $8 million from the third quarter of 2006. Higher valuation allowances associated with our UK operations resulted in a $3 million increase. The increased valuation allowance resulted from greater losses than the prior year third quarter. In addition, the change in tax status of a subsidiary during the third quarter of 2007 resulted in a $1 million charge. The remaining increase in the tax provision was largely attributable to a lower estimated effective tax on non-U.S. earnings in the third quarter of 2006 compared to the third quarter of 2007.

Net income. Net income decreased from $12 million in the third quarter of 2006 to $4 million in the third quarter of 2007. The decrease in net income is due to the increase in tax provision for 2007.

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Results of Operations

Nine months ended September 30, 2006 compared to the nine months ended September 30, 2007

The following table summarizes the consolidated results for the nine months ended September 30, 2006 and the consolidated results for the nine months ended September 30, 2007 (Dollars in Millions):


	Consolidated Nine Months Ended September 30, 2006				Consolidated Nine Months Ended September 30, 2007				Dollar Change				Percent Change
Net sales
Brake and Chassis products		$	934			$	856			$	(78	)		(8	%)
Filtration products			527				553				26			5	%
European products			201				213				12			6	%
Eliminations and other			(4	)			(5	)			(1	)		(25	%)
Total net sales			1,658				1,617				(41	)		(2	%)
Cost of sales⁽¹⁾			(1,369	)			(1,325	)			44			3	%
Gross profit			289				292				3			1	%
Gross margin			17	%			18	%
Selling, general and administrative expenses⁽²⁾			(245	)			(240	)			5			2	%
Selling, general and administrative expenses as a percent of sales			15	%			15	%
Operating profit			44				52				8			18	%
Operating margin			3	%			3	%
Other income, net			5				3				(2	)		(40	%)
Interest expense			(44	)			(45	)			(1	)		2	%
Income before income tax provision			5				10				5			100	%
Income tax provision			1				5				4			NM
Net income		$	4			$	5			$	1			25	%

(1)	We recorded $1 million of restructuring costs in cost of sales in the first nine months of 2007.

(2)	We recorded $26 million of restructuring costs in selling, general and administrative expenses for both the first nine months of 2006 and 2007.

NM (Not Meaningful)

Net sales. Our Brake and Chassis product sales decreased in the first nine months of 2007 in comparison to 2006. The Brake and Chassis product sales decreased $97 million excluding the effects of currency translation for the reasons described below:


	•	Some sectors of our retail and traditional channels experienced soft market conditions in the first nine months of 2007 in comparison to 2006. These soft market conditions represented $32 million of the decrease in sales.


	•	As planned, certain unprofitable OEM and comanufacturing contracts have not been renewed, thus reducing sales and improving margins. These contracts represented approximately $55 million of the decrease in sales.


	•	A customer relationship was terminated in early 2006, representing approximately $10 million of the decrease in sales.

Filtration products sales increased in the first nine months of 2007 in comparison to the first nine months of 2006, both domestically and internationally. On a currency adjusted basis, our sales in the first nine months at our filter company in Poland and Venezuela grew by 22% and 60%, respectively, in comparison to the first nine months of 2006. Our filter sales in Poland increased due to the

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increased demand for filters in their domestic market, the addition of new products and the expansion into other European markets. Our filter sales in Venezuela increased due to market conditions in the country and a successful focus on heavy duty filtration products. On April 1, 2007 we opened a new plant in Ukraine, which has contributed approximately $3 million in sales during the first nine months of 2007.

European products sales excluding the effects of currency decreased by $6 million in the first nine months of 2007 in comparison to the first nine months of 2006. The decrease in sales on a currency adjusted basis is primarily attributed to our U.K. operations. During the second and third quarters of 2007, our U.K. operations have been transitioning to a new and more efficient distribution facility and eliminating certain unprofitable products from our product mix. During the transition period our line fill and delivery service has dropped below normal levels, which had a negative impact on sales. By the end of the third quarter our line fill returned to normal levels and we are currently focusing on improving the delivery service.

Cost of sales/Gross margin. The gross margin for the first nine months of 2007 increased to 18% from 17% in 2006. The comprehensive restructuring program and cost savings programs are the primary drivers behind the improved gross margin.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the first nine months of 2007 decreased slightly from the first nine months of 2006. During the first nine months of 2007, we had decreases in advertising, legal and professional expenses and compensation expenses. Offsetting these decreases was an increase in selling expenses related to the conversion of customers (change-over) to Affinia products.

Operating profit. Our operating profit increased in the first nine months of 2007 in comparison to the first nine months of 2006 due to the gross margin improvement and the reduction of selling, general and administrative expenses.

Interest expense. Interest expense in the first nine months of 2007 increased marginally in comparison to the first nine months of last year. Interest expense was slightly higher primarily due to a general increase in variable short term interest rates.

Income tax provision. Income tax provision for the first nine months of 2007 was $5 million compared to an income tax provision of $1 million for 2006. Approximately $1 million of the increase was attributable to the change in tax status of a subsidiary during 2007. The remaining increase in tax provision was due to the increase in income before tax provision and a lower estimated tax rate on non-U.S. earnings in 2006 compared to 2007.

Net income. The increase in the net income was due to the increase in gross margin, and the reduction of selling, general and administrative expenses, partially offset by higher income tax provision in the first nine months of 2007.

Liquidity and Capital Resources

The Company’s primary source of liquidity is cash flow from operations. We also have availability under our revolving credit facility and Receivables Facility (as defined below), subject to certain requirements. Our primary liquidity requirements are expected to be for debt servicing, working capital, restructuring obligations and capital spending. Our liquidity requirements are significant, primarily due to debt service requirements and restructuring.

As of September 30, 2007, we had $597 million in aggregate indebtedness, with an additional $97 million of borrowing capacity available under our revolving credit facility, after giving effect to $28 million in outstanding letters of credit, which reduced the amount available. We had no amounts outstanding under our trade accounts receivable securitization program (the ‘‘Receivables Facility’’) as of September 30, 2007 and December 31, 2006. The Receivables Facility provides for a maximum capacity of $100 million subject to certain adjustments. In addition, we had cash and cash equivalents of $70 million as of December 31, 2006 and $59 million as of September 30, 2007.

We spent $17 million and $21 million on capital expenditures during the first nine months of 2006 and 2007, respectively. Based on the current level of operations, the Company believes that cash flow

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from operations and available cash, together with available borrowings under its revolving credit facility and Receivables Facility, will be adequate to meet liquidity needs and restructuring plans and to fund planned capital expenditures.

Net cash provided by or used in operating activities

Net cash provided by or used in operating activities for the nine months ended September 30, 2006 and 2007 was a $7 million source of cash, and a $3 million use of cash, respectively. There were significant changes in the following operating activities:


	Nine Months Ended September 30, 2006				Nine Months Ended September 30, 2007
Summary of significant changes in operating activities:
Net income		$	4			$	5
Depreciation and amortization			36				25
Change in inventories			(12	)			(67	)
Change in other operating liabilities			17				52
Change in other			15				37
Subtotal			60				52
Other changes in operating activities			(53	)			(55	)
Net cash provided by or (used in) operating activities from cash flow statement		$	7			$	(3	)

Depreciation and amortization – Lower levels of capital spending and plant closures have resulted in a $47 million reduction in property, plant and equipment since the end of 2004, which has contributed to the decrease in depreciation expense of $11 million.

Inventories – Inventory increased $67 million from the end of 2006 mainly due to our restructuring program. We have been building inventory as we close plants and transition production to low cost sources.

Other operating liabilities – The change in other operating liabilities was a higher source of cash in 2007 compared to 2006 primarily due to a $34 million increase in accounts payable from the end of 2006. The increase in accounts payable is due to the timing of payments.

Other – The most significant change in other is related to the decrease of a non trade receivable, which was a tax refund from Canada. Refer to Item 1. Legal Proceedings for further information on the tax refund.

Net cash used in investing activities

Net cash used in investing activities for the nine months ended September 30, 2006 and 2007 was $15 million and $13 million, respectively. We received $8 million for proceeds from sales of assets in the first nine months of 2007, as compared to $2 million in 2006. The increase in proceeds mainly related to the sale of assets as part of the comprehensive restructuring plan.

Net cash provided by or used in financing activities

Net cash provided by financing activities for the nine months ended September 30, 2006 was $1 million compared to no activity for the nine months ending September 30, 2007.

Senior credit facilities. Our senior credit facilities consist of a revolving credit facility and a term loan facility. Our revolving credit facility provides for loans in a total principal amount of up to $125 million and matures in 2010. Our term loan facility provides for up to $350 million of which $297 million is outstanding at September 30, 2007 and matures in 2011. Proceeds from the term loan were used to fund the Acquisition.

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On November 30, 2004, in connection with the Acquisition, Affinia established financing arrangements with third-party lenders (the ‘‘lenders’’) that provide senior credit facilities consisting of a revolving credit facility and a term loan facility that are unconditionally guaranteed by the Company, and certain domestic subsidiaries of Affinia (collectively, the ‘‘Guarantors’’). The repayment of these facilities is secured by substantially all the assets of the Guarantors, including, but not limited to, a pledge of their capital stock and 65 percent of the capital stock of non-US subsidiaries owned directly by the Guarantors. The revolving credit facility, which expires on November 30, 2010, provides for borrowings of up to $125 million through a syndicate of lenders. The revolving credit facility also includes borrowing capacity available for letters of credit. As of September 30,&nbs p;2007, the Company had $28 million in outstanding letters of credit, none of which had been drawn against. There were no other amounts outstanding under the revolving credit facility at September 30, 2007. The term loan facility provided for a $350 million term loan with a maturity of seven years, of which $297 million was outstanding at September 30, 2007. On December 12, 2005, in connection with the comprehensive restructuring, certain provisions applicable to the senior credit facilities were amended.

The senior credit facilities, as amended, bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (i) the lender’s prime rate and (ii) the federal funds rate plus one-half of 1% or (b) LIBOR rate determined by reference to the costs of funds for deposits in US dollars for the interest period relevant to such borrowing adjusted for certain additional costs. The applicable margin for borrowings under the term loan facility is 2.00% with respect to base rate borrowings and 3.00% with respect to LIBOR borrowings. The applicable margin for borrowings under the revolving credit facility and the term loan facility may be reduced subject to our attaining certain leverage ratios or increased based on certain credit ratings as determined by Moody’s and Standard & Poor’s.

In addition to paying interest on the outstanding principal under the senior credit facilities, we are required to pay a commitment fee, which was less than $1 million in the first nine months of 2007 and 2006, to the lenders under the revolving credit facility in respect of the unutilized commitments at a rate equal to 0.50% per annum. We also paid customary letter of credit fees.

The senior credit facilities contain a number of covenants that, among other things and subject to certain exceptions, restrict our ability, and the ability of our subsidiaries, to sell assets, incur additional indebtedness or issue preferred stock, repay other indebtedness (including our senior subordinated notes), pay certain dividends and distributions or repurchase our capital stock, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or consolidations, enter into sale and leaseback transactions, engage in certain transactions with affiliates, amend certain material agreements governing our indebtedness (including our senior subordinated notes), and change the business conducted by us and our subsidiaries. In addition, the senior credit facilities contain the following financial covenants: a maximum total leverage ratio; a minimum interest coverage ratio; and a maximum capital expenditures limitation. As of September 30, 2007, we were in compliance with all of these covenants. Our covenant compliance levels and ratios for the quarter ended September 30, 2007 are as follows:

Covenant
Compliance
Level for the
Quarter Ended
September 30, 2007

Actual Ratios

Senior Credit Facilities

Minimum Adjusted EBITDA to cash interest ratio

2.25x

2.47x

Maximum net debt to Adjusted EBITDA ratio

4.50x

4.21x

Adjusted EBITDA is used to determine our compliance with many of the covenants contained in our senior credit facilities. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments permitted by our lenders in calculating covenant compliance under our senior credit facility.

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We believe that the inclusion of debt covenant related adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financing covenants.

The breach of covenants in our senior credit facilities that are tied to ratios based on Adjusted EBITDA could result in a default under those facilities and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result in a default under our indenture and trade accounts receivable securitization program. However, EBITDA and Adjusted EBITDA are not recognized terms under US GAAP (Accounting Principles Generally Accepted in the United States) and do not purport to be alternatives to net income as a measure of operating performance. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The 2006 Adjusted EBITDA was partially higher due to an $8 million add back of change- over expenses that was not allowed in 2007 , pursuant to the senior credit facilities.

The following table reconciles net income to EBITDA and Adjusted EBITDA (Dollars in Millions):


	Three Months Ended September 30, 2006				Three Months Ended September 30, 2007				Nine Months Ended September 30, 2006			Nine Months Ended September 30, 2007
Net income		$	12			$	4			$	4		$	5
Interest expense			15				15				44			45
Depreciation and amortization			13				9				36			25
Income tax (benefit) provision			(4	)			4				1			5
EBITDA			36				32				85			80
Restructuring charges⁽¹⁾			12				10				26			27
Other adjustments⁽²⁾			1				(1	)			9			—
Adjusted EBITDA		$	49			$	41			$	120		$	107

(1)

Comprehensive restructuring costs, which are principally related to severance, asset write-downs and related exit costs, are allowed to be added back to EBITDA in accordance with the terms of our senior credit facilities to arrive at adjusted EBITDA. In 2005, we commenced our comprehensive restructuring plan and we anticipate it occurring between 2006 and 2009.

(2)

Certain costs such as other non-recurring charges, which include inventory charges related to the comprehensive restructuring plan, are allowed to be added back to EBITDA in accordance with the terms of our senior credit facilities. Change-over costs of $8 million were added back in the first nine months of 2006, which is in accordance with our senior credit facilities. However, the senior credit facilities do not allow for change-over costs to be added back in 2007.

Indenture. The indenture governing the senior subordinated notes limits our (and most or all of our subsidiaries’) ability to incur additional indebtedness, pay dividends on or make other distributions or repurchase our capital stock, make certain investments, enter into certain types of transactions with affiliates, use assets as security in other transactions and sell certain assets or merge with or into other companies. Subject to certain exceptions, Affinia and its restricted subsidiaries are permitted to incur additional indebtedness, including secured indebtedness, under the terms of the senior subordinated notes.

The indenture also uses EBITDA adjusted as permitted under the indenture to determine compliance with various covenants under the indenture.

Receivables facility. Our off-balance sheet receivables facility provides up to $100 million in funding, based on availability of eligible receivables and satisfaction of other customary conditions. Under the receivables facility, receivables are sold by certain subsidiaries of our company to a wholly-owned bankruptcy remote finance subsidiary of the company, which transfers an undivided interest in the purchased receivables to a commercial paper conduit or its bank sponsor in exchange for cash.

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Affinia Group Inc., as the receivables collection agent, services, administers and collects the receivables under the receivables purchase agreement for which it receives a monthly servicing fee at a rate of 1.00% per annum of the average daily outstanding balance of receivables. The receivables facility fees include a usage fee paid by the finance subsidiary, that varies based upon the company’s leverage ratio as calculated under the senior credit facilities. Funded amounts under the receivables facility bear interest at a rate equal to the conduit’s pooled commercial paper rate plus the usage fee. At September 30, 2007, the usage fee margin for the receivables facility was 1.25% per annum of the amount funded. In addition, the finance subsidiary is required to pay a fee on the unused portion of the receivables facility that varies based upon the same ratio. At September 30, 2007, the unused fee was 0.50% per annum of the unused portion of the receivables facility.

Availability of funding under the receivables facility depends primarily upon the outstanding trade accounts receivable balance from time to time. Aggregate availability is determined by using a formula that reduces the gross receivables balance by factors that take into account historical default and dilution rates, obligor concentrations, average days outstanding and the costs of the facility. As of September 30, 2007, $255 million of our accounts receivable balance was considered eligible for financing under the program, of which approximately $79 million was available for funding. At September 30, 2007, we had no amount outstanding under this facility.

The receivables facility contains conditions, representations, warranties and covenants similar to those in the senior credit facilities. It also contains amortization events similar to the events of default under the senior credit facilities, plus amortization events relating to the quality and performance of the trade receivables. If an amortization event occurs, all of the cash flow from the receivables sold to the finance subsidiary will be allocated to the receivables facility until it is paid in full.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to various market risks including currency exchange rate risks, interest rate risks and commodity price risks. The Company seeks to mitigate these risks primarily by managing its operations. In addition, the Company may execute certain financial derivative transactions that are intended to offset any such risks that may not otherwise be addressed in the normal course of business.

Currency risk

We conduct business and maintain assets in North America, Europe, South America and Asia. Although we manage our businesses in such a way as to reduce a portion of the risks associated with operating internationally, changes in currency exchange rates may adversely impact our results of operations and financial position.

The results of operations and financial position of each of our operations are measured in their respective local (functional) currency. Business transactions denominated in currencies other than an operation’s functional currency produce foreign exchange gains and losses, as a result of the re-measurement process, as described in SFAS No. 52, Foreign Currency Translation. To the extent that net monetary assets or liabilities denominated in a non-local currency are generated, changes in an entity’s functional currency exchange rate versus each currency in which an entity transacts business have a varying impact on an entity’s results of operations and financial position, as reported in functional currency terms. Therefore, for entities that transact business in multiple currencies, we seek to minimi ze the net amount of revenue or expense denominated in non-local currencies. However, in the normal course of conducting international business, some amount of non-local currency exposure will exist. Therefore, management monitors these exposures and engages in business activities or financial hedge transactions intended to mitigate the potential financial impact due to changes in the respective exchange rates.

The Company’s consolidated results of operations and financial position, as reported in US dollars, are also affected by changes in currency exchange rates. The results of operations of non-US dollar functional entities are translated into US dollars for consolidated reporting purposes each

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period at the average currency exchange rate experienced during the period. To the extent that the US dollar may appreciate or depreciate over time, the contribution of non-US dollar denominated results of operations to the Company’s US dollar reported consolidated earnings will vary accordingly. Therefore, local currency denominated revenue and expenses of our non-US dollar functional operations may have a significant impact on the Company’s sales and, to a lesser extent, consolidated net income trends. In addition, a significant portion of the Company’s consolidated financial position is maintained at foreign locations and is denominated in functional currencies other than the US dollar. These non-US dollar denominated assets and liabilities are translated into US dollars at each respective currency’s exchange rate then in effect at the end of each reporting period, and the financial impact of such translation is reflected within the other comprehensive income component of sharehold ers’ equity. Accordingly, the amounts shown in our consolidated shareholders’ equity account will fluctuate depending upon the cumulative appreciation or depreciation of the US dollar versus each of the respective functional currencies in which the Company conducts business. Management seeks to mitigate the potential financial impact upon the Company’s consolidated results of operations due to exchange rate changes by engaging in business activities or financial derivative transactions that will generally offset underlying currency exposures. We do not engage in activities solely intended to counteract the impact that changes in currency exchange rates may have upon the Company’s US dollar reported statement of financial condition.

To date, our foreign currency exchange rate risk management efforts have primarily focused upon operationally managing the amount of net non-functional currency monetary assets or liabilities subject to the re-measurement process. In addition, we periodically execute short-term currency exchange rate forward contracts that are intended to mitigate the earnings impact related to the re-valuation of specific monetary assets or liabilities denominated in a currency other than a particular entity’s functional currency. As of September 30, 2007, we had currency exchange rate derivatives with a notional value of $97.1 million and a fair value net asset of $2.0 million.

Interest rate risk

At September 30, 2007, the Company’s financial position included $297 million of variable rate debt outstanding. Therefore, a hypothetical immediate 1% increase of the average interest rate on this debt would increase the future annual interest expense related to these debt obligations by $3.0 million.

In April 2006, the Company entered into pay-fixed interest rate swaps that effectively lock the amount of interest expense related to the first $150 million of our variable interest rate senior credit facility through April 30, 2008. In addition, during the third-quarter of 2007, the Company executed forward-starting pay-fixed interest rate swaps to effectively fix the net interest expense related to $150 million of our credit facility for the period following April 30, 2008 and ending on April 30, 2010.

The effect of these transactions is to reduce the net annual interest expense impact of a hypothetical immediate 1% increase of the average interest rate on the Company’s $297 million variable rate debt outstanding from $3.0 million to $1.5 million.

Under the provisions of the senior credit facilities with its banks, the Company is required to pay a fixed rate of interest on at least 40% of its debt, consisting of the aggregate obligations under the senior credit facility, the senior subordinated notes and any additional senior subordinated notes that might be issued in the future. At September 30, 2007, approximately 75% of the Company’s total debt obligations were fixed or effectively fixed-rate in nature.

As of September 30, 2007, the aggregate fair market value related of the interest rate swaps was approximately $0.6 million liability. The potential loss in fair value of these swaps arising from a hypothetical immediate decrease in interest rates of 50 basis points is approximately $1.7 million.

Commodity price risk management

The Company is exposed to adverse price movements or surcharges related to commodities that are used in the normal course of business operations. Management actively seeks to negotiate contractual terms with our customers and suppliers to limit the potential financial impact related to these exposures.

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Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 15a-5(c) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting them on a timely basis to information required to be included in our submissions and filings with the SEC. Management has concluded that the Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the period presented.

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PART II
OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding reportable legal proceedings is contained in Part I, ‘‘Item 3. Legal Proceedings’’ in our Annual Report on Form 10-K for the year ended December 31, 2006. The following describes legal proceedings, if any, that became reportable during the first nine months of 2007, and amends and restates descriptions of previously reported legal proceedings in which there have been material developments during such period.

In addition, on October 3, 2007, Dana filed a motion (‘‘Motion’’) pursuant to section 365 of the Bankruptcy Code to reject both the Stock and Asset Purchase Agreement and the Spicer Trademark License Agreement (‘‘Spicer Agreement’’), the rejection of which would enable Dana to disavow and abandon its obligations under these agreements. Pursuant to these agreements, Dana is contractually obligated to, among other things: (a) indemnify us for specified liabilities, including, among others, (i) liabilities arising out of legal proceedings commenced prior to the Acquisition, and (ii) liabilities for death, personal injury or other injury to persons (including, but not limited to, such liabilities that result from human exposure to asbestos) or property damage occurring prior to the Acquisition relating to the use or exposure to any of Dana’s products designed, manufactured, served or sold by Dana; and ( b) license our use of the ‘‘Spicer’’ trademark. We intend to vigorously oppose the Motion. However, if Dana prevails on the Motion, it may be discharged entirely from its obligations under these agreements including its obligation to indemnify us for future defense settlements or payments in respect of any claim subject to its indemnification obligations. We may recover less than 100% of any indemnification obligations of Dana existing as of March 3, 2006. We do not know whether any insurance that may have been maintained by Dana will cover the costs for which Dana is contractually obligated to indemnify us. In addition, Dana may be discharged from its obligation to license our use of the ‘‘Spicer’’ trademark and the www.spicerchassis.com domain name. We cannot estimate the impact of Dana failing to honor these and othe r contractual obligations but such a failure could adversely affect our financial condition and results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, ‘‘Item 1A. Risk Factors’’ in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 6. Exhibits

(a) Exhibits


	(31)	Certifications of Executive Officers pursuant to Rule 13a-14(a)


	(32)	Certifications of Executive Officers pursuant to 18 U.S.C. Section 1350(b)

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SIGNATURES

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

Date: November 9, 2007

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	7th grade Avg

Nine Months
Ended
September 30,
2007

Balance at December 31, 2006

Tax benefit reductions

Adjustment to tax basis of acquired assets and liabilities due to application of FIN 48

Balance at September 30, 2007