(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 ¨ No x

(Note: As a voluntary filer not subject to the filing requirements of Section 13 or 15(d) of the Exchange Act, the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant would have been required to file such reports) as if it were subject to such filing requirements).

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 1,000 shares outstanding of the registrant’s common stock as of ~~August 9,~~November 8, 2013 (all of which are privately owned and not traded on a public market).

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 “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” or future or conditional verbs, such as “could,” “may,” “should,” or “will,” 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. For a more detailed discussion of these risks and uncertainties, see Part I, “Item 1A. Risk Factors” in our Annual Report on form 10-K for the year ended December 31, 2012. 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, domestic and global economic conditions and the resulting impact on the availability and cost of credit; financial viability of key customers and key suppliers; our dependence on our largest customers; increased crude oil and gasoline prices and resulting reductions in global demand for the use of automobiles; the shift in demand from premium to economy products; pricing and pressures from imports; increasing costs for manufactured components, raw materials and energy; the expansion of return policies or the extension of payment terms; risks associated with our non-U.S. operations; risks related to our receivables factoring arrangements; product liability and warranty and recall claims brought against us; reduced inventory levels by our distributors resulting from consolidation and increased efficiency; environmental and automotive safety regulations; the availability of raw materials, manufactured components or equipment from our suppliers; challenges to our intellectual property portfolio; our ability to develop improved products; the introduction of improved products and services that extend replacement cycles otherwise reduce demand for our products; our ability to achieve cost savings from our restructuring plans; our ability to successfully effect dispositions of existing lines of business; our ability to successfully combine our operations with any businesses we have acquired or may acquire; risk of impairment charges to our long-lived assets; risk of impairment to intangibles and goodwill; the risk of business disruptions related to a variety of events or conditions including natural and man-made disasters; risks associated with foreign exchange rate fluctuations; risks associated with our expansion into new markets; the impact on our tax rate resulting from the mix of our profits and losses in various jurisdictions; reductions in the value of our deferred tax assets; difficulties in developing, maintaining or upgrading information technology systems; risks associated with doing business in corrupting environments; our substantial leverage and limitations on flexibility in operating our business contained in our debt agreements. Additionally, there may be other factors that could cause our actual results to differ materially from the forward-looking statements. Our forward–looking statements apply only as of the date of this report or as of the date they were made. We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.


(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013				Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Three Months Ended September 30, 2012			Three Months Ended September 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Net sales	$	373		$	396			$	737		$	769		$	375		$	401		$	1,112		$	1,170
Cost of sales		(284	)		(301	)			(571	)		(592	)		(287	)		(308	)		(858	)		(900	)

Gross profit		89			95				166			177			88			93			254			270
Selling, general and administrative expenses		(52	)		(51	)			(98	)		(99	)		(50	)		(57	)		(148	)		(161	)

Operating profit		37			44				68			78			38			36			106			109
Loss on extinguishment of debt		(1	)		(15	)			(1	)		(15	)		—			—			(1	)		(15	)
Other income (loss), net		—			(1	)			—			(2	)		2			(1	)		2			(3	)
Interest expense		(16	)		(28	)			(32	)		(43	)		(16	)		(15	)		(48	)		(58	)

Income from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest		20			—				35			18			24			20			59			33
Income tax provision		(9	)		(1	)			(14	)		(9	)		(10	)		(9	)		(24	)		(16	)
Equity in income (loss), net of tax		(1	)		—				—			—			1			(2	)		1			(2	)

Net income (loss) from continuing operations		10			(1	)			21			9
Net income from continuing operations															15			9			36			15
Loss from discontinued operations, net of tax		(42	)		—				(47	)		(4	)		(10	)		—			(57	)		(1	)
							��
Net income (loss)		(32	)		(1	)			(26	)		5			5			9			(21	)		14
Less: net income attributable to noncontrolling interest, net of tax		—			—				—			—			1			—			1			—

Net income (loss) attributable to the Company	$	(32	)	$	(1	)		$	(26	)	$	5		$	4		$	9		$	(22	)	$	14

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

Unaudited Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)


(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013			Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Three Months Ended September 30, 2012		Three Months Ended September 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Net income (loss)	$	(32	)	$	(1	)	$	(26	)	$	5		$	5	$	9		$	(21	)	$	14
Other comprehensive loss, net of tax:
Other comprehensive income (loss), net of tax:
Interest rate swap, net of tax		—			6			—			6			—		(1	)		—			5
Change in foreign currency translation adjustments		(23	)		(14	)		(11	)		(17	)		11		2			—			(15	)

Total other comprehensive loss		(23	)		(8	)		(11	)		(11	)
Total other comprehensive income (loss)														11		1			—			(10	)

Total comprehensive loss		(55	)		(9	)		(37	)		(6	)
Total comprehensive income (loss)														16		10			(21	)		4
Less: comprehensive income attributable to noncontrolling interest, net of tax		—			—			—			—			1		—			1			—

Comprehensive loss attributable to the Company	$	(55	)	$	(9	)	$	(37	)	$	(6	)
Comprehensive income (loss) attributable to the Company													$	15	$	10		$	(22	)	$	4

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


(Dollars in millions)	December 31, 2012			June 30, 2013			December 31, 2012			September 30, 2013
Assets
Current assets:
Cash and cash equivalents	$	51		$	55		$	51		$	86
Trade accounts receivable, less allowances of $3 million for 2012 and $4 million for 2013		163			191			163			182
Inventories, net		304			296			304			302
Current deferred taxes		13			23			13			23
Prepaid taxes		30			29			30			30
Other current assets		22			44			22			41

Total current assets		583			638			583			664
Property, plant, and equipment, net		119			117			119			124
Goodwill		24			24			24			25
Other intangible assets, net		88			85			88			85
Deferred financing costs		15			20			15			19
Deferred income taxes		106			93			106			97
Investments and other assets		25			20			25			21

Total assets	$	960		$	997		$	960		$	1,035

Liabilities and shareholder’s equity
Liabilities and shareholder’s equity (deficit)
Current liabilities:
Accounts payable	$	143		$	163		$	143		$	166
Notes payable		23			23			23			22
Other accrued expenses		68			66			68			92
Accrued payroll and employee benefits		17			19			17			21
Current liabilities of discontinued operations		—			5

Total current liabilities		251			276			251			301
Long-term debt		546			917			546			916
Deferred employee benefits and other noncurrent liabilities		12			9			12			14

Total liabilities		809			1,202			809			1,231

Contingencies and commitments
Shareholder’s equity:
Shareholder’s equity (deficit):
Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding		—			—			—			—
Additional paid-in capital		455			456			455			456
Accumulated deficit		(296	)		(642	)		(296	)		(634	)
Accumulated other comprehensive loss		(9	)		(20	)		(9	)		(19	)

Total shareholder’s equity of the Company		150			(206	)
Total shareholder’s equity (deficit) of the Company								150			(197	)
Noncontrolling interest in consolidated subsidiaries		1			1			1			1

Total shareholder’s equity		151			(205	)
Total shareholder’s equity (deficit)								151			(196	)

Total liabilities and shareholder’s equity	$	960		$	997
Total liabilities and shareholder’s equity (deficit)							$	960		$	1,035

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


(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Operating activities
Net income (loss)	$	(26	)	$	5		$	(21	)	$	14
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		11			12			17			17
Impairment of assets		62			—			88			—
Stock-based compensation		—			1			—			1
Loss on extinguishment of debt		1			15			1			15
Write-off of unamortized deferred financing costs		—			8			—			8
Write-off of original issue discount on Subordinated Notes		—			1			—			1
Provision for deferred income taxes		(28	)		13			(37	)		9
Change in trade accounts receivable		(20	)		(37	)		(8	)		(24	)
Change in inventories		2			(1	)		(13	)		(6	)
Change in other current operating assets		—			(34	)		(2	)		(33	)
Change in other current operating liabilities		68			33			50			51
Change in other		9			10			13			16

Net cash provided by operating activities		79			26			88			69
Investing activities
Proceeds from sales of assets		3			—			4			—
Investment in companies, net of cash acquired								—			(1	)
Change in restricted cash		4			—			1			—
Additions to property, plant and equipment		(11	)		(10	)		(19	)		(18	)

Net cash used in investing activities		(4	)		(10	)		(14	)		(19	)
Financing activities
Net decrease in other short-term debt		(5	)		—			(4	)		(1	)
Payments of other debt		(2	)		—			(2	)		—
Repayment of Secured Notes		(23	)		(195	)		(23	)		(195	)
Repayment of Subordinated Notes		—			(367	)		—			(367	)
Repayment of Term Loans								—			(1	)
Net payments of ABL Revolver		(35	)		—			(50	)		—
Proceeds from Senior Notes		—			250			—			250
Proceeds from Term Loans		—			667			—			667
Distribution to our shareholder		—			(351	)		—			(352	)
Payment of deferred financing costs		—			(15	)		—			(15	)

Net cash used in financing activities		(65	)		(11	)		(79	)		(14	)
Effect of exchange rates on cash		(1	)		(1	)		—			(1	)
Increase in cash and cash equivalents		9			4
Increase (decrease) in cash and cash equivalents								(5	)		35
Cash and cash equivalents at beginning of the period		54			51			54			51

Cash and cash equivalents at end of the period	$	63		$	55		$	49		$	86

Supplemental cash flows information
Cash paid during the period for:
Interest	$	31		$	38		$	42		$	46
Income taxes	$	11		$	10		$	16		$	15
Noncash investing and financing activities:
Additions to property, plant and equipment included in accounts payable	$	2		$	1		$	1		$	2

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

Affinia Group Intermediate Holdings Inc. is a global leader in the heavy duty and light vehicle replacement products and services industry. We derive approximately 98% of our sales from this industry. Our broad range of filtration, chassis and other products are sold in North America, Europe, South America, Asia and Africa. Our brands include WIX^®, Raybestos^®, Filtron^TM, Nakata^®, McQuay-Norris^® and ecoLAST^®. Additionally, we provide private label products for NAPA^®, CARQUEST^® and ACDelco^®. Affinia Group Inc. is 100% owned by Affinia Group Intermediate Holdings Inc., which, in turn, is 100% owned by Affinia Group Holdings Inc. (“Holdings”), a company controlled by affiliates of The Cypress Group L.L.C (“Cypress”).

Affinia Group Inc., the Company’s direct, 100% owned subsidiary and a Delaware corporation formed on June 28, 2004, entered into a stock and asset purchase agreement on November 30, 2004, as amended (the “Purchase Agreement”), with Dana Corporation (“Dana”). The Purchase Agreement provided for the acquisition by Affinia Group Inc. of substantially all of Dana’s aftermarket business operations (the “Acquisition”).

The accompanying Consolidated Financial Statements include the accounts of the Company and its subsidiaries. In these Notes to the Consolidated Financial Statements, the terms “the Company,” “Parent,” “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 (“U.S. GAAP”) and such principles are applied on a basis consistent with information reflected in our Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations promulgated by the SEC. 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 February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,”which requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This guidance is effective for reporting periods beginning after December 15, 2012. The implementation of ASU 2013-02 resulted in financial statement disclosure changes only. Please refer to “Note 16. Changes in Accumulated Other Comprehensive Income (Loss)” for disclosure.

In July 2012, the FASB amended Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill and Other” with ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-lived Intangible Assets for Impairment.” Under the revised guidance, an organization has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An organization electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is “more likely than not” that the asset is impaired. The guidance is effective for impairment tests for fiscal years beginning after September 15, 2012. We test indefinite-lived intangible assets for impairment on an annual basis as of December 31 of each year, unless conditions arise that would require a more frequent evaluation. Adoption of this guidance will not impact our financial condition or results of operations.

In July 2013, the FASB issued ASU 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.” ASU 2013-10 allows the Fed Funds Effective Swap Rate (OIS) to be designated as a U.S. benchmark interest rate for hedge accounting purposes, in addition to interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The Company does not anticipate the requirements of ASU 2013-10 will have a material impact on the condensed consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 clarifies guidance and eliminates diversity in practice on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective for annual reporting periods beginning on or after December 15, 2013 and subsequent interim periods. The Company is currently assessing the impact, if any, on the condensed consolidated financial statements.

On April 25, 2013, we refinanced our existing notes and credit facilities and made a distribution to Holdings, our shareholder. The refinancing consisted of the issuance of $250 million aggregate principal amount 7.75% Senior Notes due May 1, 2021 (the “Senior Notes”), a $200 million term loan due April 25, 2016 (“Term Loan B-1”), a $470 million term loan due April 25, 2020 (“Term Loan B-2,” and together with Term Loan B-1, the “Term Loans”), the proceeds of which we used, together with $31 million of cash on hand, to redeem our 10.75% Senior Secured Notes due 2016 (the “Secured Notes”), redeem our 9% Senior Subordinated Notes due 2014 (the “Subordinated Notes”), pay fees and expenses in connection with the refinancing transaction and make a $350 million distribution to Holdings. Holdings used the distribution to redeem its Preferred Shares, repay $61 million of the note (the “Seller Note”) issued by Holdings to Dana as part of the financing in connection with our acquisition of substantially all of the aftermarket business operations of Dana in 2004 and make a distribution of $133 million to its stockholders. We replaced our existing asset-based revolving credit facility (the “Old ABL Revolver”) with a new asset-based revolving credit facility (our “ABL Revolver”) on April 25, 2013. The ABL Revolver matures on April 25, 2018 and comprises a revolving credit facility of up to $175 million for borrowings solely to the U.S. domestic borrowers, including (a) a $30 million sub-limit for letters of credit and (b) a $15 million swingline facility. Availability under the ABL Revolver is based upon monthly (or more frequent under certain circumstances) borrowing base valuations of our eligible inventory and accounts receivable, among other things, and is reduced by certain reserves in effect from time to time.

During the second quarter of 2013, we made a distribution of $351 million to Holdings of which $350 million related to the refinancing, as previously described, and $1 million related to the payment of ~~Holdings~~Holdings’ operating expenses. Subsequently in the third quarter of 2013, we made an additional $1 million distribution related to our deferred compensation plan.

Our debt consists of notes that are publicly traded, an ABL Revolver, term loans and other short-term borrowings. Our debt consisted of the following:

The fair value framework requires the categorization of our debt into three levels based upon the assumptions (inputs) used to determine fair value. The fair value of debt and the categorization of the hierarchy level of fair value, net of discount, are as follows:


(Dollars in millions)	Book Value of Debt		Fair Value Factor			Fair Value of Debt		Book Value of Debt		Fair Value Factor			Fair Value of Debt
Senior subordinated notes, due November 2014⁽¹⁾	$	367		100.25	%	$	368	$	367		100.25	%	$	368
Senior secured notes, due August 2016⁽¹⁾		179		108.43	%		194		179		108.43	%		194
ABL revolver, due May 2017⁽²⁾		—		100	%		—		—		100	%		—
Other debt⁽²⁾		23		100	%		23		23		100	%		23

Total fair value of debt at December 31, 2012						$	585						$	585

We replaced our Old ABL Revolver with a new ABL Revolver on April 25, 2013. The ABL Revolver comprises a revolving credit facility of up to $175 million for borrowings available solely to the U.S. domestic borrowers, including (a) a $30 million sub-limit for letters of credit and (b) a $15 million swingline facility. Availability under the ABL Revolver is based upon monthly (or more frequent under certain circumstances) borrowing base valuations of our eligible inventory and accounts receivable, among other things, and is reduced by certain reserves in effect from time to time.

At ~~June~~September 30, 2013, there were no outstanding borrowings under the ABL Revolver. We had an additional ~~$125~~$124 million of availability after giving effect to $10 million in outstanding letters of credit and less than $1 million for borrowing base reserves as of ~~June~~September 30, 2013.

Guarantees and collateral. The indebtedness, obligations and liabilities under the ABL Revolver are unconditionally guaranteed jointly and severally on a senior secured basis by Parent and certain of its current and future U.S. subsidiaries, and are secured, subject to permitted liens and other exceptions and exclusions, by a first-priority lien on accounts receivable, inventory, cash, deposit accounts, securities accounts and proceeds of the foregoing and certain assets related thereto and a second-priority lien on the collateral that secures the Term Loans on a first-priority basis.

Mandatory prepayments. If at any time the outstanding borrowings under the ABL Revolver (including outstanding letters of credit and swingline loans) exceed the lesser of (i) the borrowing base as in effect at such time and (ii) the aggregate revolving commitments as in effect at such time, the borrowers will be required to prepay an amount equal to such excess and/or cash collateralize outstanding letters of credit.

Voluntary prepayments. Subject to certain conditions, the ABL Revolver allows the borrowers to voluntarily reduce the amount of the revolving commitments and to prepay the loans without premium or penalty other than customary breakage costs for LIBOR rate contracts.

Interest rates and fees. Outstanding borrowings under the ABL Revolver accrue interest at an annual rate of interest equal to (i) a base rate plus the applicable spread, as set forth below or (ii) a LIBOR rate plus the applicable spread, as set forth below. Swingline loans bear interest at a base rate plus the applicable spread. The Company will pay a commission on letters of credit issued under the New ABL Revolver at a rate equal to the applicable spread for loans based upon the LIBOR rate.


Level	Average Aggregate Availability	Base Rate Loans and Swingline Loans			LIBOR Loans			Average Aggregate Availability	Base Rate Loans and Swingline Loans			LIBOR Loans
I	<$50,000,000		1.00	%		2.00	%	<$50,000,000		1.00	%		2.00	%
II	> $50,000,000 but< $100,000,000		0.75	%		1.75	%	> $50,000,000 but< $100,000,000		0.75	%		1.75	%
III	> $100,000,000		0.50	%		1.50	%	> $100,000,000		0.50	%		1.50	%

The borrowers will pay certain fees with respect to the ABL Revolver, including (i) an unused commitment fee on the undrawn portion of the credit facility of 0.25% per annum in the event that more than 50% of the commitments (excluding swingline loans) under the credit facility are utilized, and 0.375% per annum in the event that less than or equal to 50% of the commitments (excluding swingline loans) under the credit facility are utilized and (ii) customary annual administration fees and fronting fees in respect of letters of credit equal to 0.125% per annum on the stated amount of each letter of credit outstanding during each fiscal quarter. During an event of default, all loans and other obligations under the ABL Revolver may bear interest at a rate 2.00% in excess of the otherwise applicable rate of interest.

Cash Dominion. Commencing on the day that an event of default occurs or availability under the ABL Revolver is less than the greater of 12.5% of the total borrowing base and $17.5 million and continuing until no event of default has existed and availability has been greater than such thresholds at all times for 60 consecutive days, amounts in the Company’s deposit accounts and the deposit accounts of the guarantors (other than certain excluded accounts) will be transferred daily into a blocked account held by the administrative agent and applied to reduce the outstanding amounts under the ABL Revolver.

Covenants. The ABL Revolver contains negative covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to: create liens and encumbrances; incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital stock; amend certain material governance documents; change the nature of the business of the borrowers and their subsidiaries; redeem or repurchase capital stock or prepay, redeem or repurchase certain debt; engage in certain transactions with affiliates; change the borrowers’ fiscal periods; and enter into certain restrictive agreements. The ABL Revolver also contains certain customary affirmative covenants and events of default, including a change of control.

In addition, commencing on the day that an event of default occurs or availability under the ABL Revolver is less than the greater of 10.0% of the total borrowing base and $15.0 million and continuing until no event of default has existed and availability under the ABL Revolver has been greater than such thresholds at all times, in each case, for 30 consecutive days, Parent will be required to maintain a fixed charge coverage ratio of at least 1.0x measured for the last 12-month period. As of ~~August 9,~~November 8, 2013, the Company remained in compliance with all debt covenants. The fixed charge coverage ratio was ~~2.40x~~2.17x as of ~~June~~September 30, 2013. If none of the covenant triggers have occurred, the impact of falling below the fixed charge coverage ratio would not be a default but instead would limit our ability to pursue certain operational or financial transactions (e.g. acquisitions).

Senior Notes.On April 25, 2013, Affinia Group Inc. issued $250 million of Senior Notes as part of the refinancing. The Senior Notes accrue interest at the rate of 7.75% per annum, payable semi-annually on May 1 and November 1 of each year, commencing November 1, 2013. The Senior Notes will mature on May 1, 2021. The terms of the Indenture provide that, among other things, the Senior Notes rank equally in right of payment to all of the Company’s and ~~the Guarantors’~~all of Affinia Group Inc.’s 100% owned current and future domestic subsidiaries (the “Guarantors”) existing and future senior debt and senior in right of payment to all of the Company’s and Guarantors’ existing and future subordinated debt. The Senior Notes are structurally subordinated to all of the liabilities and obligations of the Company’s subsidiaries that do not guarantee the Senior Notes. The Senior Notes are effectively junior in right of payment to all of the Company’s and the Guarantors’ secured indebtedness, including the Term Loans and the ABL Revolver, to the extent of the value of the collateral securing such indebtedness. The outstanding balance of the Senior Notes at ~~June~~September 30, 2013 was $250 million.

Guarantees. The Guarantors guarantee the Company’s obligations under the Notes on a senior unsecured basis.

Interest Rate. Interest on the Notes accrues at a rate of 7.75% per annum. Interest on the Notes is payable in cash semiannually in arrears on May 1 and November 1 of each year, commencing on November 1, 2013.

Other Covenants. The Indenture contains affirmative and negative covenants that, among other things, limit or restrict the Company’s ability (as well as those of the Company’s subsidiaries) to: incur additional debt; provide guarantees and issue mandatorily redeemable preferred stock; pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments including the prepayment of certain indebtedness; enter into agreements that restrict distributions from restricted subsidiaries; sell or otherwise dispose of assets, including capital stock of restricted subsidiaries; enter into transactions with affiliates; create or incur liens; and merge, consolidate or sell substantially all of its assets.

Events of Default. The Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amount of the then outstanding Notes may declare the principal, premium, if any, interest and other monetary obligations on all the Notes to be due and payable immediately.

On April 25, 2013, the Company entered into (i) a Term Loan B-1 in an aggregate principal amount of $200 million and (ii) a Term Loan B-2 in an aggregate principal amount of $470 million. The Term Loan B-1 was offered at a price of 99.75%, of their face value, resulting in approximately $199 million of net proceeds for the Term Loan B-1. The Term Loan B-2 was offered at a price of 99.50%, of their face value, resulting in approximately $468 million of net proceeds for the Term Loan B-2. The $1 million and $2 million original issue discount for the Term Loan B-1 and Term Loan B-2, respectively, will be amortized based on the effective interest rate method and included in interest expense until the Term Loans mature. The Term Loan B-1 amortizes in quarterly installments in an amount equal to 1.00% per annum, with the balance due on April 25, 2016. The Term Loan B-2 amortizes in quarterly installments in an amount equal to 1.00% per annum, with the balance due on April 25, 2020. As of ~~June~~September 30, 2013, $199 million principal amount of Term Loan B-1 was outstanding, net of a $1 million issue discount which is being amortized until the Term Loan B-1 matures and ~~$468~~$467 million principal amount of Term Loan B-2 was outstanding, net of a $2 million issue discount which is being amortized until the Term Loan B-2 matures.

Guarantees and collateral. The indebtedness, obligations and liabilities under the Term Loan Facility are unconditionally guaranteed jointly and severally on a senior secured basis by Parent and certain of its current and future U.S. subsidiaries, and are secured, subject to permitted liens and other exceptions and exclusions, by a first-priority lien on substantially all tangible and intangible assets of the borrower and each guarantor (including (i) a perfected pledge of all of the capital stock of the borrower and each direct, wholly-owned material subsidiary held by the borrower or any guarantor (subject to certain limitations with respect to foreign subsidiaries) and (ii) perfected security interests in, and mortgages on, equipment, general intangibles, investment property, intellectual property, material fee-owned real property, intercompany notes and proceeds of the foregoing) except for certain excluded assets and the collateral securing the ABL Revolver on a first priority basis, and a second-priority lien on the collateral securing the ABL Revolver on a first-priority basis.

Mandatory prepayments. The Term Loan Facility requires the following amounts to be applied to prepay the Term Loans, subject to certain thresholds, exceptions and reinvestment rights: 100% of the net proceeds from the incurrence of indebtedness (other than permitted indebtedness), 100% of the net proceeds of certain asset sales (including insurance or condemnation proceeds), other than the collateral securing the ABL Revolver on a first-priority basis, and 50% of excess cash flow with stepdowns to 25% and 0% based on certain leverage targets.

Mandatory prepayments will be allocated ratably between Term Loan B-1 and Term Loan B-2 and, within each, will be applied to reduce remaining amortization payments in the direct order of maturity for the immediately succeeding eight quarters and, thereafter, pro rata.

Voluntary Prepayments. The Company may voluntarily prepay outstanding Term Loans in whole or in part at any time without premium or penalty (other than a 1.00% premium payable until, in the case of the Term Loan B-1, six months following April 25, 2013 and, in the case of the Term Loan B-2, one year following April 25, 2013, on (i) the amount of loans prepaid or refinanced with proceeds of long-term bank debt financing or any other financing similar to such borrowings having a lower effective yield or (ii) the amount of loans the terms of which are amended to the same effect), subject to payment of customary breakage costs in the case of LIBOR rate loans. Optional prepayments of the Term Loans will be applied to the remaining installments thereof at the direction of the Company.

Interest Rates. Outstanding borrowings under the Term Loan Facility accrue interest at an annual rate of interest equal to (i) a base rate plus the applicable spread or (ii) a LIBOR rate plus the applicable spread. The applicable margin for borrowings under the Term Loan B-1 is 1.75% with respect to base rate borrowings and 2.75% with respect to LIBOR rate borrowings, and the applicable margin for borrowing under the Term Loan B-2 is 2.50% with respect to base rate borrowings and 3.50% with respect to LIBOR rate borrowings. The LIBOR rate is subject to a floor of 0.75% per annum with respect to Term Loan B-1 and 1.25% per annum with respect to Term Loan B-2. Overdue principal with respect to the Term Loans will bear interest at a rate 2.00% in excess of the otherwise applicable rate of interest and other overdue amounts with respect to the Term Loans will bear interest at a rate 2.00% in excess of the rate applicable to base rate borrowings.

Covenants. The Term Loan Facility contains negative covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to create liens and encumbrances; incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital stock; amend certain material governance documents; change the nature of the business of the borrower and its subsidiaries; redeem or repurchase capital stock or prepay, redeem or repurchase certain debt; engage in certain transactions with affiliates; change the borrower’s fiscal periods; and enter into certain restrictive agreements. The Term Loan Facility also contains certain customary affirmative covenants and events of default, including a change of control.

During the second quarter of 2013, we recorded a write-off of $5 million to interest expense for unamortized deferred financing costs associated with the redemption of our Secured Notes and Subordinated Notes. We also recorded during the second quarter of 2013 a write-off of $3 million to interest expense for the replacement of our Old ABL Revolver with a new ABL Revolver. In addition, we recorded $14 million in total deferred financing costs related to the issuance of our Senior Notes and Term Loans as part of the refinancing and $1 million in total deferred financing costs associated with the ABL Revolver. The unamortized deferred financing costs will be charged to interest expense over the next eight years for the Senior Notes, seven years for Term Loan B-2, five years for ABL Revolver and three years for Term Loan B-1.

During the second quarter of 2012, we recorded a write-off of less than $1 million to interest expense for unamortized deferred financing costs associated with the redemption of $22.5 million of the Secured Notes. Additionally, we recorded $1 million in total deferred financing costs related to our Old ABL Revolver.

The following table summarizes the deferred financing activity from December 31, 2012 to ~~June~~September 30, 2013:


(Dollars in millions)
Balance at December 31, 2012	$	15		$	15
Amortization		(2	)		(3	)
Write-off of unamortized deferred financing costs		(8	)		(8	)
Deferred financing costs		15			15

Balance at June 30, 2013	$	20
Balance at September 30, 2013				$	19

In the fourth quarter of 2011, we committed to a plan to sell the Brake North America and Asia group. In accordance with ASC Topic 205,“Presentation of Financial Statements,” the Brake North America and Asia group qualified as a discontinued operation. The consolidated statements of operations for all periods presented have been adjusted to reflect this group as a discontinued operation. The consolidated statements of cash flows for all periods presented were not adjusted to reflect this group as a discontinued operation.

On November 30, 2012, we distributed our Brake North America and Asia group to the shareholders of Holdings, the Company’s parent company and sole stockholder. The new organization is led by the management team from the Company’s former Brake North America and Asia group, with oversight provided by a separate board of directors. On March 25, 2013, the new organization announced that it had been acquired by a group of investors.

To effect the transaction, we distributed 100% of the capital stock of BPI Holdings International, Inc. (“BPI”), an entity formed for the purpose of completing the transaction and which owns the assets and operations comprising the Company’s former Brake North America and Asia group, to Holdings. Thereafter, Holdings distributed such capital stock to the holders of Holdings common stock and to the holders of Holding’s 9.5% Class A Convertible Participating Preferred Stock, par value $0.01 per share (“Preferred Stock”), on apro rata basis as if each of the shares of Preferred Stock outstanding at the time of the distribution had been converted into Holdings common stock in accordance with its terms prior to the distribution. The fair value of the capital stock distributed to the shareholders of Holdings was $63 million. In addition, noncontrolling interest decreased by $13 million due to the distribution of BPI.

In connection with the distribution, the Company received a $70 million cash dividend from BPI, which BPI funded through $76.5 million in borrowings under a new credit facility that is not guaranteed by, or an obligation of, the Company or any of its subsidiaries. BPI held $11 million in cash that was included in the distribution on November 30, 2012.

Affinia and BPI entered into a transition services agreement (“TSA”) effective with the distribution on November 30, 2012. The TSA provides for certain administrative and other services and support to be provided by us to BPI and to be provided by BPI to us. Most of the transition services will expire during 2013. We anticipate that our chassis products group (“Chassis”) will become stand alone and will no longer require the services of BPI to warehouse and distribute chassis product sometime in 2014. The TSAs and the distribution services were established as arm length transactions and are intended for the contracting parties to recover costs of the services. On the date of the distribution, we no longer had any influence over BPI. We evaluated all potential variable interests between Affinia and BPI and determined that we are not the primary beneficiary of BPI. Consequently, we deconsolidated BPI on the date of the distribution.

The table below summarizes the Brake North America and Asia group’s net sales, income (loss) before income tax benefit (provision), income tax benefit (provision), loss from discontinued operations, net of tax, net income attributable to noncontrolling interest, net of tax and loss attributable to the discontinued operations.

Also included in loss from discontinued operations, net of tax in the first six months of 2013 was an expense related to a discontinued operation that was sold in 2010. We recorded during the first six months of 2013, a $5 million expense partially offset by a $2 million tax benefit. Please refer to “Note 12. Legal Proceedings” for a description of this expense.

The Company’s financial derivative assets and liabilities consist of standard currency forward contracts and interest rate swaps. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

All derivative instruments are recognized on our balance sheet at fair value. The fair value measurements of our currency forward contracts and interest rate swaps are based upon Level 2 inputs consisting of observable market data, as reported by a recognized independent third-party financial information provider. Based upon the Company’s periodic assessment of our own creditworthiness, and of the creditworthiness of the counterparties to our derivative instruments, fair value measurements are not adjusted for nonperformance risk.

Our currency forward contracts are valued using then-current spot and forward market data as provided by external financial institutions. We enter into short-term currency forward contracts with banking institutions of only the highest tiered credit ratings and thus the counterparty credit risk associated with these contracts is not considered significant.

Our currency forward contracts are not designated as hedges of specific monetary asset balances subject to currency risks. The Company does not seek hedge accounting treatment for its currency forward contacts because the earnings impact from both the underlying exposures and the hedge transactions are recognized in each accounting period. Changes in the fair value of these currency forward contracts are recognized in income each accounting period. At ~~June~~December 31, 2012, the aggregate notional amount of our currency forward contracts was $69 million having a fair market value of less than $1 million in assets and liabilities. At September 30, 2013, the aggregate notional amount of our currency forward contracts was ~~$102~~$75 million having a fair market value of less than $1 million in assets and ~~$1 million in~~ liabilities.

The Company’s outstanding currency forward contracts are recorded in the Consolidated Balance Sheets as “Other current assets” or “Other accrued expenses,” accordingly. Currency forward contract gains and losses are recognized in “Other ~~loss,~~income (loss), net” in the Consolidated Statements of Operations in the reporting period of occurrence. The Company has not recorded currency forward contract gains (losses) to other comprehensive income (loss) nor has it reclassified prior period currency derivative results from other comprehensive income (loss) to earning during the last twelve months. The Company does not anticipate that it will record any currency forward contract gains or losses to other comprehensive income (loss) or that it will reclassify prior period currency forward contract results from other comprehensive income (loss) to earnings in the next twelve months.

~~The notional amount and fair value of our outstanding currency forward contracts were as follows:~~

Currency forward contract gains and losses are recognized in “Other ~~loss,~~income (loss), net” in the Consolidated Statements of Operations in the reporting period of occurrence. The short-term currency exchange rate forward contracts are intended to offset the currency exchange gain (loss) related to the re-measurement process. The currency forward contract gains and losses are as follows:


(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013		Six Months Ended June 30, 2012		Six Months Ended June 30, 2013		Three Months Ended September 30, 2012		Three Months Ended September 30, 2013		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2013
Loss on derivative instruments	$	(1	)	$	—	$	—	$	—
Gain (loss) on derivative instruments										$	2	$	—	$	2	$	—

On April 25, 2013, we entered into interest rate swaps having an aggregate notional value of $300 million to effectively fix the rate of interest on a portion of our Term Loan B-2 until April 25, 2020. The Company funds its business operations with a combination of fixed and floating-rate debt. Therefore, our reported results from operations may be adversely impacted by rising interest rates. The Company’s interest rate risk policy seeks to minimize the long-term cost of debt, subject to a limitation of the maximum percentage of net floating-rate debt versus total debt outstanding.

While our policy does not require that we maintain a specific ratio of net floating-rate debt as a proportion of total debt outstanding, we use interest rate swaps to manage the ratio of net floating-rate debt to total debt outstanding within our policy target range, thereby reducing the potential impact that interest rate variability may have on our consolidated financial results. Our policy strictly prohibits the use of interest rate derivatives to generate trading profits or to otherwise speculate on interest rate movements.

We have designated our interest rate swaps as “cash flow” hedges as described in ASC 815, “Derivatives and Hedging” (“ASC 815”). At the inception of the hedge, the Company formally documents its hedge relationships and risk management objectives and strategy for undertaking the hedge. In addition, the documentation identifies the interest rate swaps as a hedge of specific interest payments on variable rate debt, with the objective to perfectly offset the variability of interest expense as related to specific floating-rate debt. We also specify that the effectiveness of the interest rate swaps in mitigating interest expense variability shall be assessed using the “Hypothetical Derivative Method” as described in ASC 815.

The interest rate swaps are recorded in the Consolidated Balance Sheets as “Other current assets” or “Other accrued expenses,” accordingly. In compliance with ASC 815, the Company formally assesses the effectiveness of its interest rate swaps at inception and on a quarterly basis thereafter. These assessments have established that swaps have been, and are expected to continue to be, highly effective at offsetting the interest expense variability of the underlying floating rate debt and are therefore eligible for cash flow hedge accounting treatment, pursuant to ASC 815.

Changes in the fair value of derivatives designated as cash flow hedges are recorded to other comprehensive income (loss), to the extent such cash flow hedges are effective. Amounts are reclassified from other comprehensive income (loss) when the underlying hedged items are recognized, during the period that a hedge transaction is terminated, or whenever a portion of the hedge transaction results are deemed ineffective. We reclassified $1 million from other comprehensive income (loss) into interest expense in the first nine months of 2013. There have been no gains or losses reclassified from other comprehensive income (loss) into earnings due to hedge ineffectiveness related to any of the Company’s interest rate swap transactions, nor were there gains or losses reclassified to income due to early termination of designated cash-flow hedge transactions as of ~~June~~September 30, 2013.

The notional amount and fair value of interest rate swaps outstanding are as follows:


(Dollars in millions)	Notional Amount		Fair Value		Notional Amount		Fair Value
As of June 30, 2013	$	300	$	9
As of September 30, 2013					$	300	$	8
As of December 31, 2012	$	—	$	—	$	—	$	—

Inventories are valued at the lower of cost or market. Cost is determined on the FIFO basis for all domestic inventories or average cost basis for non-U.S. inventories. Inventories are reduced by an allowance for slow-moving and obsolete inventories based on management’s review of on-hand inventories compared to historical and estimated future sales and usage. A summary of inventories, net is provided in the table below:


(Dollars in millions)	At December 31, 2012		At June 30, 2013		At December 31, 2012		At September 30, 2013
Raw materials	$	77	$	65	$	77	$	67
Work- in- process		19		17		19		17
Finished goods		208		214		208		218

	$	304	$	296	$	304	$	302

Goodwill as of December 31, 2012 and ~~June~~September 30, 2013 was $24 million and $25 million, respectively. Goodwill as of September 30, 2013 consisted of the following: $22 million for the acquisition of NAPD in 2010, ~~and~~ $2 million for a minor acquisition in ~~2008.~~2008 and $1 million for a minor acquisition in 2013. Goodwill is not amortized, but instead the Company evaluates goodwill for impairment, as of December 31 of each year, unless conditions arise that would require a more frequent evaluation.

At ~~June~~September 30, 2013, the Company had purchase commitments for property, plant and equipment of approximately $8 million.

A reconciliation of the changes in our return reserves, which is included in other accrued expenses, is as follows:


(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Beginning balance	$	11		$	8		$	11		$	8
Amounts charged to revenue		10			10			14			12
Returns processed		(7	)		(10	)		(11	)		(10	)

Ending balance	$	14		$	8		$	14		$	10

The total amount of unrecognized tax benefits as of December 31, 2012 and ~~June~~September 30, 2013 was $1 million, and if recognized, would affect the effective tax rate. The Company recognizes interest related to unrecognized tax benefits in interest expense and recognizes penalties as part of the income tax provision. As of ~~June~~September 30, 2013, the Company’s accrual for interest and penalties was less than $1 million. The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. For jurisdictions in which the Company transacts significant business, tax years ended December 31, 2004 and later remain subject to examination by tax authorities. We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

Various claims, lawsuits and administrative proceedings are pending or threatened against us and our subsidiaries, arising from the ordinary course of business with respect to commercial, intellectual property, product liability and environmental matters. We believe that the ultimate resolution of the foregoing matters will not have a material effect on our financial condition or results of operations or liquidity.

On September 30, 2011, we entered into a settlement agreement with Satisfied Brake Products Inc. (“Satisfied”) for $10 million to settle our claims against Satisfied for their theft of our trade secrets. Upon execution of the settlement agreement, $2.5 million was due immediately and up to an additional $7.5 million is to be provided after liquidation of Satisfied’s business. On September 30, 2011, we recorded a gain of $2.5 million in continuing operations in the consolidated financial statements. Additionally, we recorded $4 million as a gain in continuing operations in the first ~~six~~nine months of 2012. The remaining claim against Satisfied was included in the distribution of the Brake North America and Asia group to our shareholders.

On January 28, 2013, Walker Morris, counsel for Neovia Logistics Services (U.K.) Limited (“Neovia”) (formerly known as Caterpillar Logistics Services (U.K.) Limited) notified us that Quinton Hazell Automotive Limited (“QHAL”) intended to appoint administrators (comparable to a bankruptcy filing in the United States) and that Neovia may pursue a claim against us for liabilities arising out of a Logistics Services Agreement dated May 5, 2006 among Neovia, QHAL and Affinia Group Inc. (the “LSA”). In connection with our prior sale of QHAL and its related companies to Klarius Group Ltd. (“KGL”), Affinia Group Inc. assigned the LSA to KGL, KGL agreed to indemnify Affinia Group Inc. against any liability under the LSA and the other companies in the QHAL group agreed to provide a guarantee to Affinia Group Inc. against these liabilities. KGL and QHAL have both appointed administrators. By letter dated February 15, 2013, Neovia, through its counsel Walker Morris, notified us that Neovia is asserting a claim against Affinia Group Inc. for liabilities arising under the LSA, including asserted unpaid invoices totaling 5.7 million pounds. On March 28, 2013, we were served with a demand for arbitration by Neovia. We filed our response on April 29, 2013. ~~Based~~In the first quarter of 2013, we recorded an expense for $5 million, partially offset by a $2 million tax benefit, based on our early evaluations of the Neovia claim. In the third quarter of 2013, we re-evaluated the claim and have increased our estimate of the reserve to $9 million. We intend to vigorously defend this matter. During the third quarter of 2013, we ~~have~~revised the presentation of the Neovia claim which was previously recorded ~~an estimated reserve of $5 million~~ in ~~current liabilities of~~loss from discontinued operations, ~~related to the Neovia claim~~net of tax, for $3 million in the first quarter of 2013. ~~We intend to vigorously defend this matter.~~The reserve of $9 million for the Neovia claim is now presented within selling, general and administrative expenses in the unaudited consolidated statements of operations for the first nine months of 2013.

The Company has various accruals for civil liability, including product liability, and other costs. If there is a range of equally probable outcomes, we accrue at the lower end of the range. The Company had $1 million and $11 million accrued as of December 31, 2012 and ~~June~~September 30, 2013, respectively, in other accrued expenses. The increase in the accrual from December 31, 2012 to September 30, 2013 was mainly due to the Neovia claim. In addition, we have various other claims that are reasonably possible of occurrence that range from less than $1 million to ~~$12~~$11 million in the aggregate. There are no recoveries expected from third parties.

The products, customer base, distribution channel, manufacturing process, procurement are similar throughout all of the Company’s operations. However, due to different economic characteristics in the Company’s operations and in conformity with ASC Topic 280, “Segment Reporting,” the Company presented two separate reportable segments: (1) the On and Off-highway reportable segment, which aggregates the Filtration, Chassis and Affinia South America operating segments and (2) Discontinued operation, which includes our Brake North America and Asia group. Because of the distribution of our Brake North America and Asia group, it was classified as discontinued operations and, as such, is not presented in the net sales and operating profit segment tables below. The Company evaluates the performance of its segments based primarily on revenue growth and operating profit. The allocation of income taxes is not evaluated at the segment level. See “Note 6. Discontinued Operation—Brake.” Segment net sales, operating profit, total assets, depreciation and amortization and capital expenditures were as follows:


	Net Sales											Net Sales
(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013			Six Months Ended June 30, 2012			Six Months Ended June 30, 2013		Three Months Ended September 30, 2012			Three Months Ended September 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
On and Off-Highway segment	$	374		$	397		$	738		$	769	$	375		$	401		$	1,113		$	1,170
Corporate, eliminations and other		(1	)		(1	)		(1	)		—		—			—			(1	)		—

	$	373		$	396		$	737		$	769	$	375		$	401		$	1,112		$	1,170


												Operating Profit
(Dollars in millions)												Three Months Ended September 30, 2012			Three Months Ended September 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
On and Off-Highway segment												$	48		$	50		$	132		$	142
Corporate, eliminations and other													(10	)		(14	)		(26	)		(33	)

												$	38		$	36		$	106		$	109


	Operating Profit												Total Assets
(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013			Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			December 31, 2012		September 30, 2013
On and Off-Highway segment	$	49		$	52		$	84		$	92		$	720	$	801
Corporate, eliminations and other		(12	)		(8	)		(16	)		(14	)		240		234

	$	37		$	44		$	68		$	78		$	960	$	1,035


	Depreciation and Amortization								Depreciation and Amortization
(Dollars in millions)	Three Months Ended June 30, 2012		Three Months Ended June 30, 2013		Six Months Ended June 30, 2012		Six Months Ended June 30, 2013		Three Months Ended September 30, 2012		Three Months Ended September 30, 2013		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2013
On and Off-Highway segment	$	3	$	4	$	8	$	9	$	5	$	5	$	13	$	14
Corporate, eliminations and other		2		2		3		3		1		—		4		3

	$	5	$	6	$	11	$	12	$	6	$	5	$	17	$	17


	Capital Expenditures								Capital Expenditures
(Dollars in millions)	Three Months Ended June 30, 2012		Three Months Ended June 30, 2013		Six Months Ended June 30, 2012		Six Months Ended June 30, 2013		Three Months Ended September 30, 2012		Three Months Ended September 30, 2013		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2013
On and Off-Highway segment	$	3	$	6	$	5	$	9	$	5	$	8	$	10	$	17
Corporate, eliminations and other		—		—		—		1		—		—		—		1

Total from continuing operations		3		6		5		10		5		8		10		18
Discontinued operations		3		—		6		—		3		—		9		—

	$	6	$	6	$	11	$	10	$	8	$	8	$	19	$	18

Net sales by geographic region were determined based on origin of sale and are as follows:


(Dollars in millions)	Three Months Ended June 30, 2012		Three Months Ended June 30, 2013		Six Months Ended June 30, 2012		Six Months Ended June 30, 2013		Three Months Ended September 30, 2012		Three Months Ended September 30, 2013		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2013
Brazil	$	97	$	105	$	199	$	206	$	100	$	105	$	299	$	311
Canada		19		19		36		36		19		17		55		53
Poland		38		42		72		76		36		43		108		119
Other countries		27		39		54		72		36		48		90		120

Total other countries		181		205		361		390		191		213		552		603
United States		192		191		376		379		184		188		560		567

	$	373	$	396	$	737	$	769	$	375	$	401	$	1,112	$	1,170

Geographic data for long-lived assets are comprised of property, plant and equipment, goodwill, other intangible assets and deferred financing costs and are as follows:


(Dollars in millions)	December 31, 2012		June 30, 2013		December 31, 2012		September 30, 2013
Brazil	$	14	$	12	$	14	$	12
China		17		17		17		18
Poland		29		26		29		28
Other countries		9		10		9		13

Total other countries		69		65		69		71
United States		177		181		177		182

	$	246	$	246	$	246	$	253

We offer primarily two types of products: filtration products, which include oil, fuel, air and other filters and chassis products, which include steering, suspension and driveline components. Additionally, we have Affinia South America products, which offer chassis, filtration and other products. The Company’s sales by group of similar products are as follows:


(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013			Six Months Ended June 30, 2012			Six Months Ended June 30, 2013		Three Months Ended September 30, 2012		Three Months Ended September 30, 2013		Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Filtration products	$	215		$	229		$	420		$	444	$	212	$	234	$	632		$	678
Chassis products		55			51			103			97		50		50		153			147
Affinia South America products		104			117			215			228		113		117		328			345
Corporate, eliminations and other		(1	)		(1	)		(1	)		—		—		—		(1	)		—

	$	373		$	396		$	737		$	769	$	375	$	401	$	1,112		$	1,170

On July 20, 2005, Affinia Group Holdings Inc. adopted the Affinia Group Holdings Inc. 2005 Stock Incentive Plan, which we refer to as our 2005 Stock Plan. The 2005 Stock Plan permits the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock and other stock-based awards to employees, directors or consultants of Affinia Group Holdings Inc. and its affiliates. A maximum of 350,000 shares of Affinia Group Holdings Inc. common stock may be subject to awards under the 2005 Stock Plan.

A table of the 2005 Stock Plan balances for the restricted stock units, stock options, deferred compensation shares and stock awards is summarized below.


	December 31, 2012		June 30, 2013		December 31, 2012		September 30, 2013
Restricted stock units		242,000		242,000		242,000		261,559
Stock options		26,835		26,488		26,835		26,355
Deferred compensation shares		30,235		33,854		30,235		37,744
Stock award		163		163		163		163
Shares available		50,767		47,495		50,767		24,179

Number of shares of common stock subject to awards		350,000		350,000		350,000		350,000

As of ~~June~~September 30, 2013, ~~26,488~~26,355 stock options had been awarded, which included exercised options of 3,000, vested options of ~~22,988~~22,855 and 500 unvested options. Pursuant to the terms of the 2005 Stock Plan, each option expires on August 1, 2015. The Board of Directors approved an equitable adjustment to the exercise price isfrom $100 per ~~option.~~

~~We account for our employee stock~~option to $62.87 per option in recognition of the impact on the value of the options ~~under~~from the ~~fair value method~~cash distribution to Holdings’ stockholders made as part 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 on or prior to the date of grants. Our weighted-average Black-Scholes fair value assumptions include:~~refinancing.

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 tax related income tax benefits were nil for each of the ~~six~~nine month periods ending ~~June~~September 30, 2012 and 2013, respectively.

The RSUs are governed by the 2005 Stock Plan and a Restricted Stock Unit Award Agreement.

The RSUs are subject to performance-based and market-based vesting restrictions, which differ from the performance and time-based vesting restrictions applicable to the exchanged stock options. The RSUs will vest if (i) the RSU holder remains employed with Affinia Group Holdings Inc. on the date that either of the following vesting conditions occurs and (ii) either of the following vesting conditions occurs on or prior to the date on which Cypress ceases to hold any remaining Affinia Group Holdings Inc. common stock:

As of ~~June~~September 30, 2013, ~~242,000~~261,559 RSUs had been awarded and remained outstanding, none of which have vested. In connection with the distribution of our Brake North America and Asia group to the shareholders of Holdings, our Board of Directors determined that the distribution would constitute a “Qualifying Termination” under each of the RSU Agreements for the 62,000 RSUs granted to employees of the Brake North America and Asia group.

We estimate the fair value of market-based RSUs using a Monte Carlo simulation model on the date of grant. ~~Our weighted-average Monte Carlo fair value assumptions include:~~

In the event that either of the performance-based conditions (Cypress Scenario or IPO Scenario) are met, the fair value of the RSUs will be recognized in stock-based compensation expense either 1) pro rata over the requisite service term including a cumulative catch-up related to service provided through the date the performance condition is met or 2) in full once the respective market-based condition is met or 3) in full if the requisite service period has already passed when the

performance condition is met. Stock-based compensation expense, which would be recorded in selling, general and administrative expenses, and tax related income tax benefits was not recorded for ~~2012~~the first nine months of 2013 as neither of the performance conditions have been met. If the RSUs do not vest prior to ten years from the date of grant then the RSUs will expire. If the performance condition is met on the ~~242,000~~outstanding RSUs ~~the amount of expense~~ we ~~would have to record is $19 million under the Cypress scenario or $22 million under the IPO scenario and BPI would~~will record expense ~~related to the RSUs granted to its employees.~~at that point in time.

We started a deferred compensation plan in 2008 that permits executives to defer receipt of all or a portion of the amounts payable under our non-equity incentive compensation plan. All amounts deferred are treated solely for purposes of the plan to have been notionally invested in the common stock of Affinia Group Holdings Inc. As such, the accounts under the plan will reflect investment gains and losses associated with an investment in the Affinia Group Holdings Inc.’s common stock. We match 25% of the deferral with an additional notional investment in common stock of Affinia Group Holdings Inc., which is subject to vesting as provided in the plan. During the third quarter of 2013, we awarded additional 3,422 vested shares and 809 unvested shares to make our participants whole after the cash distribution to Holdings’ stockholders impacted the value of their shares. As of ~~June~~September 30, 2013, ~~33,854~~37,744 shares had been awarded, which included ~~18,349~~19,227 shares issued to executives, 14,814 vested notional shares not issued ~~of 12,542~~ and ~~2,963~~3,703 unvested notional shares. Deferred compensation expense, which was recorded in selling, general and administrative expenses, and tax related income tax benefits were less than $1 million and $1 million for the first ~~six~~nine months of 2012 and 2013, respectively. The deferred compensation plan will not be offered in 2013.

We have agreements with third party financial institutions to factor certain receivables on a non-recourse basis. The terms of the factoring arrangements provide for the factoring of certain U.S. and Canadian Dollar denominated receivables, which are purchased at the face value amount of the receivable discounted at the applicable rate of LIBOR plus a spread on the purchase date. The amount factored is not contractually defined by the factoring arrangements and our use will vary each month based on the amount of underlying receivables and the cash flow needs of the Company.

During the first ~~six~~nine months of 2012, the total accounts receivable factored was ~~$333~~$505 million and the cost incurred on factoring was $3$4 million, which includes our Brake North America and Asia group. During the first ~~six~~nine months of 2013, the total accounts receivable factored was ~~$256~~$402 million and the cost incurred on factoring was $2$3 million. Accounts receivable factored by us are accounted for as a sale and removed from the balance sheet at the time of factoring and the cost of the factoring is presented in either other income (loss) or discontinued operations if it relates to our Brake North America and Asia group.

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three ~~and six~~ months ended ~~June~~September 30, 2013:


(Dollars in millions)	Interest rate swap, net of tax		Pension adjustments			Foreign currency translation adjustment			Total accumulated other comprehensive loss			Interest rate swap, net of tax			Pension adjustments			Foreign currency translation adjustment			Total accumulated other comprehensive loss
Balance at April 1, 2013	$	—	$	(2	)	$	(10	)	$	(12	)
Balance at July 1, 2013												$	6		$	(2	)	$	(24	)	$	(20	)
Other comprehensive income (loss) before reclassifications		6		—			(14	)		(8	)		(2	)		—			2			—
Amounts reclassified from accumulated other comprehensive income		—		—			—			—			1			—			—			1

Net current-period other comprehensive income (loss)		6		—			(14	)		(8	)		(1	)		—			2			1

Balance at June 30, 2013	$	6	$	(2	)	$	(24	)	$	(20	)
Balance at September 30, 2013												$	5		$	(2	)	$	(22	)	$	(19	)

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the nine months ended September 30, 2013:


(Dollars in millions)	Interest rate swap, net of tax		Pension adjustments			Foreign currency translation adjustment			Total accumulated other comprehensive loss			Interest rate swap, net of tax		Pension adjustments			Foreign currency translation adjustment			Total accumulated other comprehensive loss
Balance at January 1, 2013	$	—	$	(2	)	$	(7	)	$	(9	)	$	—	$	(2	)	$	(7	)	$	(9	)
Other comprehensive income (loss) before reclassifications		6		—			(17	)		(11	)		4		—			(15	)		(11	)
Amounts reclassified from accumulated other comprehensive income		—		—			—			—			1		—			—			1

Net current-period other comprehensive income (loss)		6		—			(17	)		(11	)		5		—			(15	)		(10	)

Balance at June 30, 2013	$	6	$	(2	)	$	(24	)	$	(20	)
Balance at September 30, 2013												$	5	$	(2	)	$	(22	)	$	(19	)

As required by U.S. GAAP, effective January 1, 2010, we accounted for Venezuela as a highly inflationary economy because the three-year cumulative inflation rate for Venezuela using the blended Consumer Price Index (which is associated with the city of Caracas) and the National Consumer Price Index (developed commencing in 2008 and covering the entire country of Venezuela) exceeded 100%.

Effective January 1, 2010, our Venezuelan subsidiary uses the U.S. Dollar as its functional currency. The financial statements of our subsidiary must be re-measured into the Company’s reporting currency (U.S. Dollar) and future exchange gains and losses from the re-measurement of monetary assets and liabilities are reflected in current earnings, rather than exclusively in the equity section of the balance sheet, until such time as the economy is no longer considered highly inflationary. The local currency in Venezuela is the Bolivar Fuerte (“VEF”).

On January 11, 2010, the Venezuelan government devalued the country’s currency. The official exchange rate moved from 2.15 VEF per U.S. Dollar to 2.60 for essential goods and 4.30 for non-essential goods and services with our products falling into the non-essential category. Our business in Venezuela was unsuccessful in obtaining U.S. Dollars at the official exchange rate of 4.30. However, the Central Bank of Venezuela began regulating another rate in May of 2010, which was the official parallel market rate of 5.30 VEF to the U.S. Dollar. The Central Bank of Venezuela also imposed volume restrictions on use of the regulated parallel market. The Company has used the regulated parallel market rate which has been constant at 5.30 VEF per U.S. Dollar since May 2010.

On February 8, 2013, the Venezuelan government announced another devaluation of the currency to 6.30 VEF per U.S. Dollar and it eliminated the regulated parallel market rate of 5.3 VEF per U.S. Dollar. We used the official exchange rate of 6.30 VEF per U.S. Dollar to translate the financial statements of our Venezuelan subsidiary to comply with the regulations of Venezuela and are analyzing the impact of the volume restrictions on our business. The currency exchange limitations to date have not had a material effect on our 2013 earnings and cash flow. The one-time devaluation had a $2 million negative impact on our pre-tax net income during the first ~~six~~nine months of 2013.

For the first ~~six~~nine months of 2012, our Venezuelan subsidiary represented approximately 3% of our consolidated net sales and it had a net income attributable to the Company of $2$3 million. The Venezuelan subsidiary also had $15 million of total assets and $12 million of total liabilities as of December 31, 2012. For first ~~six~~nine months of 2013, our Venezuelan subsidiary represented approximately 4%5% of our consolidated net sales and it had a net income attributable to the Company of $1$4 million. The Venezuelan subsidiary also had ~~$22~~$28 million of total assets and ~~$17~~$20 million of total liabilities as of ~~June~~September 30, 2013.

On October 15, 2013, we announced that we will relocate our corporate office from Ann Arbor, Michigan to Gastonia, North Carolina, which is home to our Filtration group. The transition to the new corporate headquarters will occur in phases during 2014. We are still in the planning stages of this transition and as a consequence the expected costs of this reorganization plan are still being formulated.

Affinia Group Intermediate Holdings Inc. (presented as “Parent” in the following schedules), through its 100% owned subsidiary, Affinia Group Inc. (presented as Issuer in the following schedules), issued $250 million of Senior Notes on April 25, 2013. As of ~~June~~September 30, 2013, there were $250 million of Senior Notes outstanding. The notes were offered only to qualified institutional buyers and certain persons in offshore transactions

The Senior Notes are fully, irrevocably, unconditionally and jointly and severally guaranteed on a senior unsecured basis. The Senior Notes are general obligations of the Issuer and guaranteed by the Parent and ~~all of~~ the ~~Issuer’s 100% owned current and future domestic subsidiaries (the “Guarantors”).~~Guarantors.

The following unaudited information presents Condensed Consolidating Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2013, Condensed Consolidating Statements of Comprehensive Loss for the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2013, Condensed Consolidating Balance Sheets as of December 31, 2012 and ~~June~~September 30, 2013 and Condensed Consolidating Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2013 of (1) the Parent, (2) the Issuer, (3) the Guarantors, (4) the Non-Guarantors, and (5) eliminations to arrive at the information for the Company on a consolidated basis.


(Dollars in millions)	Parent			Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total			Parent		Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total
Net sales	$	—		$	—		$	210		$	261		$	(98	)	$	373		$	—	$	—		$	202		$	286		$	(113	)	$	375
Cost of sales		—			—			(171	)		(211	)		98			(284	)		—		—			(159	)		(241	)		113			(287	)

Gross profit		—			—			39			50			—			89			—		—			43			45			—			88
Selling, general and administrative expenses		—			(11	)		(20	)		(21	)		—			(52	)		—		(13	)		(16	)		(21	)		—			(50	)

Operating profit (loss)		—			(11	)		19			29			—			37			—		(13	)		27			24			—			38
Other income (loss), net		—			—			(1	)		1			—			—			—		—			(1	)		3			—			2
Loss from extinguishment of debt		—			(1	)		—			—			—			(1	)
Interest expense		—			(16	)		—			—			—			(16	)		—		(15	)		—			(1	)		—			(16	)

Income (loss) from continuing operations before income tax provision, net of tax, equity in loss, net of tax and noncontrolling interest		—			(28	)		18			30			—			20
Income (loss) from continuing operations before income tax provision, net of tax, equity in income, net of tax and noncontrolling interest																				—		(28	)		26			26			—			24
Income tax provision		—			(2	)		—			(7	)		—			(9	)		—		(2	)		—			(8	)		—			(10	)
Equity in loss, net of tax		(32	)		(2	)		(18	)		(1	)		52			(1	)
Equity in income, net of tax																				4		34			12			1			(50	)		1

Net income (loss) from continuing operations		(32	)		(32	)		—			22			52			10
Net income from continuing operations																				4		4			38			19			(50	)		15
Loss from discontinued operations, net of tax		—			—			(2	)		(40	)		—			(42	)		—		—			(3	)		(7	)		—			(10	)

Net loss		(32	)		(32	)		(2	)		(18	)		52			(32	)
Net income																				4		4			35			12			(50	)		5
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			—			—			—			—		—			1			—			—			1

Net loss attributable to the Company	$	(32	)	$	(32	)	$	(2	)	$	(18	)	$	52		$	(32	)
Net income attributable to the Company																			$	4	$	4		$	34		$	12		$	(50	)	$	4


(Dollars in millions)	Parent			Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total			Parent			Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total
Net sales	$	—		$	—		$	409		$	498		$	(170	)	$	737		$	—		$	—		$	611		$	784		$	(283	)	$	1,112
Cost of sales		—			—			(336	)		(405	)		170			(571	)		—			—			(495	)		(646	)		283			(858	)

Gross profit		—			—			73			93			— ��			166			—			—			116			138			—			254
Selling, general and administrative expenses		—			(22	)		(35	)		(41	)		—			(98	)		—			(35	)		(51	)		(62	)		—			(148	)

Operating profit (loss)		—			(22	)		38			52			—			68			—			(35	)		65			76			—			106
Loss on extinguishment of debt		—			(1	)		—			—			—			(1	)		—			(1	)		—			—			—			(1	)
Other income (loss), net		—			1			(3	)		2			—			—			—			1			(4	)		5			—			2
Interest expense		—			(32	)		—			—			—			(32	)		—			(47	)		—			(1	)		—			(48	)

Income (loss) from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest		—			(54	)		35			54			—			35			—			(82	)		61			80			—			59
Income tax provision		—			(2	)		—			(12	)		—			(14	)		—			(4	)		—			(20	)		—			(24	)
Equity in income (loss), net of tax		(26	)		30			6			—			(10	)		—			(22	)		64			18			1			(60	)		1

Net income (loss) from continuing operations		(26	)		(26	)		41			42			(10	)		21			(22	)		(22	)		79			61			(60	)		36
Loss from discontinued operations, net of tax		—			—			(11	)		(36	)		—			(47	)		—			—			(14	)		(43	)		—			(57	)

Net income (loss)		(26	)		(26	)		30			6			(10	)		(26	)		(22	)		(22	)		65			18			(60	)		(21	)
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			—			—			—			—			—			1			—			—			1

Net income (loss) attributable to the Company	$	(26	)	$	(26	)	$	30		$	6		$	(10	)	$	(26	)	$	(22	)	$	(22	)	$	64		$	18		$	(60	)	$	(22	)

																													��
(Dollars in millions)	Parent			Issuer			Guarantor		Non-Guarantor			Eliminations			Consolidated Total			Parent			Issuer			Guarantor		Non-Guarantor		Eliminations			Consolidated Total
Net income (loss)	$	(26	)	$	(26	)	$	30	$	6		$	(10	)	$	(26	)	$	(22	)	$	(22	)	$	65	$	18	$	(60	)	$	(21	)
Other comprehensive loss, net of tax:
Other comprehensive income, net of tax:
Change in foreign currency translation adjustments		(11	)		(11	)		—		(11	)		22			(11	)		—			—			—		—		—			—

Total other comprehensive loss		(11	)		(11	)		—		(11	)		22			(11	)
Total other comprehensive income																			—			—			—		—		—			—

Total comprehensive income (loss)		(37	)		(37	)		30		(5	)		12			(37	)		(22	)		(22	)		65		18		(60	)		(21	)
Less: comprehensive income attributable to noncontrolling interest, net of tax		—			—			—		—			—			—			—			—			1		—		—			1

Comprehensive income (loss) attributable to the Company	$	(37	)	$	(37	)	$	30	$	(5	)	$	12		$	(37	)	$	(22	)	$	(22	)	$	64	$	18	$	(60	)	$	(22	)


(Dollars in millions)	Parent			Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total			Parent		Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total
Net sales	$	—		$	—		$	209		$	227		$	(40	)	$	396		$	—	$	—		$	204		$	241		$	(44	)	$	401
Cost of sales		—			—			(165	)		(176	)		40			(301	)		—		—			(166	)		(186	)		44			(308	)

Gross profit		—			—			44			51			—			95			—		—			38			55			—			93
Selling, general and administrative expenses		—			(7	)		(22	)		(22	)		—			(51	)		—		(16	)		(17	)		(24	)		—			(57	)

Operating profit (loss)		—			(7	)		22			29			—			44			—		(16	)		21			31			—			36
Loss on extinguishment of debt		—			(15	)		—			—			—			(15	)
Other loss, net		—			—			—			(1	)		—			(1	)		—		(1	)		—			—			—			(1	)
Interest expense		—			(27	)		—			(1	)		—			(28	)		—		(15	)		—			—			—			(15	)

Income (loss) from continuing operations before income tax benefit (provision), equity in income (loss), net of tax and noncontrolling interest		—			(49	)		22			27			—			—
Income tax benefit (provision)		—			5			—			(6	)		—			(1	)
Income (loss) from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest																				—		(32	)		21			31			—			20
Income tax provision																				—		(2	)		(2	)		(5	)		—			(9	)
Equity in income (loss), net of tax		(1	)		43			5			—			(47	)		—			9		43			24			(2	)		(76	)		(2	)

Net income (loss) from continuing operations		(1	)		(1	)		27			21			(47	)		(1	)
Income (loss) from discontinued operations, net of tax		—			—			16			(16	)		—			—
Net income from continuing operations																				9		9			43			24			(76	)		9
Loss from discontinued operations, net of tax																				—		—			—			—			—			—

Net income (loss)		(1	)		(1	)		43			5			(47	)		(1	)
Net income																				9		9			43			24			(76	)		9
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			—			—			—			—		—			—			—			—			—

Net income (loss) attributable to the Company	$	(1	)	$	(1	)	$	43		$	5		$	(47	)	$	(1	)
Net income attributable to the Company																			$	9	$	9		$	43		$	24		$	(76	)	$	9


(Dollars in millions)	Parent		Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total			Parent		Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated Total
Net sales	$	—	$	—		$	413		$	431		$	(75	)	$	769		$	—	$	—		$	617		$	672		$	(119	)	$	1,170
Cost of sales		—		—			(329	)		(338	)		75			(592	)		—		—			(495	)		(524	)		119			(900	)

Gross profit		—		—			84			93			—			177			—		—			122			148			—			270
Selling, general and administrative expenses		—		(12	)		(43	)		(44	)		—			(99	)		—		(28	)		(65	)		(68	)		—			(161	)

Operating profit (loss)		—		(12	)		41			49			—			78			—		(28	)		57			80			—			109
Loss on extinguishment of debt		—		(15	)		—			—			—			(15	)		—		(15	)		—			—			—			(15	)
Other loss, net		—		—			(1	)		(1	)		—			(2	)		—		(1	)		(1	)		(1	)		—			(3	)
Interest expense		—		(42	)		—			(1	)		—			(43	)		—		(57	)		—			(1	)		—			(58	)

Income (loss) from continuing operations before income tax benefit (provision), equity in income, net of tax and noncontrolling interest		—		(69	)		40			47			—			18
Income tax benefit (provision)		—		2			—			(11	)		—			(9	)
Equity in income, net of tax		5		72			20			—			(97	)		—
Income (loss) from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest																			—		(101	)		56			78			—			33
Income tax provision																			—		—			—			(16	)		—			(16	)
Equity in income (loss), net of tax																			14		115			44			(2	)		(173	)		(2	)

Net income from continuing operations		5		5			60			36			(97	)		9			14		14			100			60			(173	)		15
Income (loss) from discontinued operations, net of tax		—		—			12			(16	)		—			(4	)		—		—			15			(16	)		—			(1	)

Net income		5		5			72			20			(97	)		5			14		14			115			44			(173	)		14
Less: net income attributable to noncontrolling interest, net of tax		—		—			—			—			—			—			—		—			—			—			—			—

Net income attributable to the Company	$	5	$	5		$	72		$	20		$	(97	)	$	5		$	14	$	14		$	115		$	44		$	(173	)	$	14


(Dollars in millions)	Parent			Issuer			Guarantor		Non-Guarantor			Eliminations			Consolidated Total			Parent			Issuer			Guarantor		Non-Guarantor			Eliminations			Consolidated Total
Net income	$	5		$	5		$	72	$	20		$	(97	)	$	5		$	14		$	14		$	115	$	44		$	(173	)	$	14
Other comprehensive loss, net of tax:
Other comprehensive income (loss), net of tax:
Interest rate swap, net of tax		6			6			—		—			(6	)		6			5			5			—		—			(5	)		5
Change in foreign currency translation adjustments		(17	)		(17	)		—		(17	)		34			(17	)		(15	)		(15	)		—		(15	)		30			(15	)

Total other comprehensive loss		(11	)		(11	)		—		(17	)		28			(11	)		(10	)		(10	)		—		(15	)		25			(10	)

Total comprehensive income (loss)		(6	)		(6	)		72		3			(69	)		(6	)
Total comprehensive income																			4			4			115		29			(148	)		4
Less: comprehensive income attributable to noncontrolling interest, net of tax		—			—			—		—			—			—			—			—			—		—			—			—

Comprehensive income (loss) attributable to the Company	$	(6	)	$	(6	)	$	72	$	3		$	(69	)	$	(6	)
Comprehensive income attributable to the Company																		$	4		$	4		$	115	$	29		$	(148	)	$	4


(Dollars in millions)	Parent			Issuer			Guarantor			Non-Guarantor		Eliminations			Consolidated Total			Parent			Issuer			Guarantor		Non-Guarantor		Eliminations			Consolidated Total
Assets
Current assets:
Cash and cash equivalents	$	—		$	24		$	—		$	31	$	—		$	55		$	—		$	53		$	—	$	33	$	—		$	86
Trade accounts receivable		—			2			60			129		—			191			—			—			50		132		—			182
Inventories, net		—			—			171			125		—			296			—			—			166		136		—			302
Other current assets		—			33			9			54		—			96			—			30			7		57		—			94

Total current assets		—			59			240			339		—			638			—			83			223		358		—			664
Investments and other assets		—			189			36			17		—			242			—			148			74		25		—			247
Intercompany investments		(206	)		757			648			—		(1,199	)		—			(197	)		1,154			704		—		(1,661	)		—
Intercompany receivables (payables)		—			(262	)		(99	)		361		—			—			—			(625	)		221		404		—			—
Property, plant and equipment, net		—			2			49			66		—			117			—			2			53		69		—			124

Total assets	$	(206	)	$	745		$	874		$	783	$	(1,199	)	$	997		$	(197	)	$	762		$	1,275	$	856	$	(1,661	)	$	1,035

Liabilities and shareholder’s equity
Current liabilities:
Accounts payable	$	—		$	12		$	91		$	60	$	—		$	163		$	—		$	7		$	90	$	69	$	—		$	166
Notes payable		—			—			—			23		—			23			—			—			—		22		—			22
Accrued payroll and employee benefits		—			5			5			9		—			19			—			4			6		11		—			21
Other accrued expenses		—			7			21			38		—			66			—			23			24		45		—			92
Current liabilities of discontinued operations		—			5			—			—		—			5

Total current liabilities		—			29			117			130		—			276			—			34			120		147		—			301
Deferred employee benefits and noncurrent liabilities		—			4			—			5		—			9			—			8			1		5		—			14
Long-term debt		—			917			—			—		—			917			—			916			—		—		—			916

Total liabilities		—			950			117			135		—			1,202			—			958			121		152		—			1,231
Total shareholder’s equity		(206	)		(205	)		757			648		(1,199	)		(205	)		(197	)		(196	)		1,154		704		(1,661	)		(196	)

Total liabilities and shareholder’s equity	$	(206	)	$	745		$	874		$	783	$	(1,199	)	$	997		$	(197	)	$	762		$	1,275	$	856	$	(1,661	)	$	1,035


(Dollars in millions)	Parent		Issuer			Guarantor			Non-Guarantor			Elimination		Consolidated Total			Parent		Issuer			Guarantor			Non-Guarantor			Elimination		Consolidated Total
Operating activities
Net cash provided by operating activities	$	—	$	63		$	2		$	14		$	—	$	79		$	—	$	70		$	6		$	12		$	—	$	88
Investing activities
Change in restricted cash		—		—			—			4			—		4			—		—			—			1			—		1
Additions to property, plant and equipment		—		—			(3	)		(8	)		—		(11	)		—		—			(7	)		(12	)		—		(19	)
Proceeds from sales of assets		—		—			1	��		2			—		3			—		—			1			3			—		4

Net cash used in investing activities		—		—			(2	)		(2	)		—		(4	)		—		—			(6	)		(8	)		—		(14	)
Financing activities
Net decrease in other short-term debt		—		—			—			(5	)		—		(5	)		—		—			—			(4	)		—		(4	)
Payments of other debt		—		—			—			(2	)		—		(2	)		—		—			—			(2	)		—		(2	)
Repayment on Secured Notes		—		(23	)		—			—			—		(23	)		—		(23	)		—			—			—		(23	)
Net payments of ABL Revolver		—		(35	)		—			—			—		(35	)		—		(50	)		—			—			—		(50	)

Net cash used in financing activities		—		(58	)		—			(7	)		—		(65	)		—		(73	)		—			(6	)		—		(79	)
Effect of exchange rates on cash		—		—			—			(1	)		—		(1	)		—		—			—			—			—		—
Increase in cash and cash equivalents		—		5			—			4			—		9
Decrease in cash and cash equivalents																		—		(3	)		—			(2	)		—		(5	)
Cash and cash equivalents at beginning of the period		—		9			—			45			—		54			—		9			—			45			—		54

Cash and cash equivalents at end of the period	$	—	$	14		$	—		$	49		$	—	$	63		$	—	$	6		$	—		$	43		$	—	$	49

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are an innovative global leader in the heavy duty and light vehicle replacement products and services industry, which is also referred to as the aftermarket. Our extensive aftermarket product offering consists principally of filtration and chassis products. Our filtration products group (also referred to as “Filtration”) is Affinia’s largest business unit, having contributed approximately 58% of global revenues for the first ~~six~~nine months of 2013. Our Filtration products fit medium and heavy duty trucks, light vehicles, equipment in the off-highway market (i.e., residential and non-residential construction, mining, forestry and agricultural) and equipment for industrial and marine applications. Our chassis products fit light vehicles, medium and heavy duty trucks, trailers and all-terrain vehicles. In addition, we provide aftermarket products and distribution services in South America. We believe that the growth of the global aftermarket, from which we derived approximately 98% of our net sales in 2012, is predominantly driven by the size, age and use of vehicles and equipment in operation. Only 2% of our sales come from original equipment manufacturers (“OEM”).

We market our continuing products under a variety of well-known brands, including WIX^®, Raybestos^®, Filtron^TM, Nakata^®, McQuay-Norris^® and ecoLAST^® and ACDelco^®. Additionally, we provide private label products to large aftermarket distributors, including NAPA^® and CARQUEST^®. We believe that we have achieved our leading market positions due to the quality and reputation of our brands and products among professional installers, who are the primary decision makers for the purchase of the products we supply to the aftermarket. We have also developed and accumulated a comprehensive product offering covering a wide selection of vehicles in the market today across a diverse range of end markets, including heavy duty trucks, light vehicles, equipment in the off-highway market (i.e., residential and non-residential construction, mining, forestry and agricultural) and equipment for industrial and marine applications.

Our Filtration, South America and Chassis product groups fit with our strategic initiatives of growth and profitability. Revenues have grown significantly in the past three years in all product groups, as shown in the chart below. The net sales by geography and product grouping for our continuing operations, together with major brands, for the year ended December 31, 2012 are also illustrated in the charts below.

Filtration is Affinia’s largest business unit, having contributed approximately 58% of global revenues for the first ~~six~~nine months of 2013. Filtration’s products include oil, air, fuel, cabin air, coolant, hydraulic and other filters for many types of vehicles and machinery. The products are sold under well-known brands, such as WIX^® and Filtron^®, and private label brands including NAPA and CARQUEST.

The numerous strengths of Filtration have led to its #1 market position in the North America filtration aftermarket and #1 market position in Poland. Affinia Filtration is among the leading global manufacturers and distributors of aftermarket filters for heavy-duty and off-highway applications, including on-highway trucks, residential and non-residential construction equipment, agricultural, mining, forestry and industrial equipment, severe service vehicles, medium-duty vehicles and marine applications. Filtration’s full line of heavy-duty products is a key differentiator versus automotive and light truck filtration competitors. In contrast to most automotive and light truck competitors, Affinia is able to provide customers with a full suite of filtration options. Furthermore, heavy-duty filtration products are generally more technologically advanced and are thus typically priced three to four times higher than similar automotive and light truck products, affording greater value to our customers which translates into higher margin opportunities.

Filtration’s automotive and light truck products are at the forefront of filter technology and performance. The portfolio of premium line and value line products are designed for a variety of applications, including passenger vehicles, sport utility vehicles, motorcycles and ATVs.

Filtration has a very strong customer base for both its heavy duty and light duty products supported by relationships that go back over forty years. Filtration provides its customers with an extensive range of products and services which has built customer loyalty and repeat business. Filtration provides its customers with large breadth of products, allowing them to source nearly all of their filtration needs from Affinia, regardless of price point or targeted end market. Filtration’s customers include automotive aftermarket distributors, heavy-duty distributors and automotive aftermarket retailers.

Our South America products group has experienced 23% growth since 2009 due mainly to its distribution operations, which we have invested in to grow this business. Based on management estimates and certain information from third parties, we believe that we hold the #2 market position in Brazilian aftermarket parts distribution by net sales for the year ended December 31, 2012.

Our Chassis products group net sales have grown 27% since 2009 and we share a leading position in the supply of chassis products in North America for the year ended December 31, 2012.

The following are major transformation projects we have completed or are in the process of completing in our continuing operations:

As a result of our initiative to focus on operational efficiency, we divested ourselves of our Brake North America and Asia Group in 2012 and our Quinton Hazell Group in 2010. We recognized in 2004 that the aforementioned groups were in need of extensive changes, and as a result, we incurred $147 million in restructuring costs, $75 million in acquisition costs and $107 million in capital expenditures to transform these companies. We believe that the divestitures have substantially increased our ability to generate cash flow. We anticipate that without the significant cash usage of our disposed groups we will be able to make strides into lowering our debt levels. Our strategy is to position ourselves as a global filtration, chassis and distribution business. With the transformation of our company, we believe our strategy will leave us well positioned to generate strong cash flows in the future and expand our global manufacturing and distribution capabilities throughout the world.

On November 30, 2012, we distributed our Brake North America and Asia group to Holdings, the Company’s parent company and sole stockholder. Holdings subsequently distributed the group to its shareholders. At the date of distribution the organization was led by the management team from the Company’s former Brake North America and Asia group, with oversight provided by a separate board of directors.

On April 25, 2013, we refinanced our existing notes and credit facilities. The refinancing consisted of the issuance of $250 million aggregate principal amount 7.75% Senior Notes due May 1, 2021 (the “Senior Notes”), a $200 million term loan due April 25, 2016 (“Term Loan B-1”), a $470 million term loan due April 25, 2020 (“Term Loan B-2,” and together with Term Loan B-1, the “Term Loans”), the proceeds of which we used, together with $31 million of cash on hand, to redeem our 10.75% Senior Secured Notes due 2016 (the “Secured Notes”), redeem our 9% Senior Subordinated Notes due 2014 (the “Subordinated Notes”), pay fees and expenses in connection with the refinancing transaction and make a $350 million distribution to Holdings. Holdings used the distribution to redeem its Preferred Shares, repay $61 million of the note (the “Seller Note”) issued by Holdings to Dana as part of the financing in connection with our acquisition of substantially all of the aftermarket business operations of Dana in 2004 and make a distribution of $133 million to its stockholders.

We typically conduct business with our customers pursuant to short-term contracts and purchase orders. However, our business is not characterized by frequent customer turnover due to the critical nature of long-term relationships in our industry. The expectation of quick turnaround times for car repairs and the broad proliferation of available part numbers require a large investment in inventory and strong fulfillment capabilities in order to deliver high fill rates and quick cycle times. Large aftermarket distributors typically source their product lines at a particular price point and product category with one “full-line” supplier, such as us, which covers substantially all of their product requirements. Switching to a new supplier typically requires that a distributor or supplier make a substantial investment to purchase, or “changeover” to, the new supplier’s products. In addition, the end user of our products, who is most frequently a professional installer, requires consistently high quality products because it is industry practice to replace, free of any labor or service charge, malfunctioning parts.

Our Markets.We believe that future growth in aftermarket product sales will be driven by the following key factors: (1) growth in global vehicle population; (2) growth in global commercial vehicle population; (3) increase in average age of vehicles in the United States and other key countries around the world and (4) increase in vehicle related regulation and legislation. Growth in sales in the aftermarket does not always have a direct correlation to sales growth for aftermarket suppliers like us. For example, as automotive parts distributors have consolidated during the past several years, they have reduced purchases from manufacturers as they focused on reducing their combined inventories. The automotive distributors are also focused on reducing inventories due to the recent decline in miles driven.

Raw Materials and Manufactured Components.Our variable costs are proportional to sales volume and mix and are comprised primarily of raw materials, labor and certain overhead costs. Our fixed costs are not significantly influenced by volume in the short term and consist principally of selling, general and administrative expenses, depreciation and other facility-related costs.

We use a broad range of manufactured components and raw materials in our products, including raw steel, steel-related components, filtration media, aluminum, brass, iron, rubber, resins, plastics, paper and packaging materials. We purchase raw materials from a wide variety of domestic and international suppliers, and we have not, in recent years, experienced any significant shortages of these items and normally do not carry inventories of these items in excess of those reasonably required to meet our production and shipping schedules.

Seasonality.Our working capital requirements are significantly impacted by the seasonality of the aftermarket. In a typical year, we build inventory during the first and second quarters to accommodate our peak sales during the second and third quarters. Our working capital requirements therefore tend to be highest from March through August. In periods of weak sales, inventory can increase beyond typical seasonal levels, as our product delivery lead times are less than two days while certain components we purchase from overseas require lead times of approximately 90 days.

Global Developments. The aftermarket has also experienced increased price competition from manufacturers based in China and other lower labor cost countries. We responded to this challenge by expanding our manufacturing capacity in China, Mexico, Poland and Ukraine. Additionally, we are meeting this challenge through restructuring and outsourcing initiatives, as well as through ongoing cost reduction programs.

Three months ended ~~June~~September 30, 2012 compared to the three months ended ~~June~~September 30, 2013

Net sales.Consolidated sales increased by ~~$23~~$26 million in the ~~second~~third quarter of 2013 in comparison to the ~~second~~third quarter of 2012 due to increased sales of our Filtration products and Affinia South America products. The following table summarizes the consolidated net sales results for the three months ended ~~June~~September 30, 2012 and the consolidated net sales results for the three months ended ~~June~~September 30, 2013:


(Dollars in millions)	Consolidated Three Months Ended June 30, 2012			Consolidated Three Months Ended June 30, 2013			Dollar Change			Percent Change			Currency Effect⁽¹⁾			Consolidated Three Months Ended September 30, 2012		Consolidated Three Months Ended September 30, 2013		Dollar Change		Percent Change			Currency Effect⁽¹⁾
Net sales
Filtration products	$	215		$	229		$	14			7	%	$	(2	)	$	212	$	234	$	22		10	%	$	(3	)
Affinia South America products		104			117			13			13	%		(8	)		113		117		4		4	%		(16	)
Chassis products		55			51			(4	)		-7	%		—			50		50		—		—			—

On and Off-highway segment		374			397			23			6	%		(10	)		375		401		26		7	%		(19	)
Corporate, eliminations and other		(1	)		(1	)		—			—			—			—		—		—		—			—

Total net sales	$	373		$	396		$	23			6	%	$	(10	)	$	375	$	401	$	26		7	%	$	(19	)

The following table summarizes the consolidated results for the three months ended ~~June~~September 30, 2012 and the consolidated results for the three months ended ~~June~~September 30, 2013:


(Dollars in millions)	Consolidated Three Months Ended June 30, 2012			Consolidated Three Months Ended June 30, 2013			Dollar Change			Percent Change			Consolidated Three Months Ended September 30, 2012			Consolidated Three Months Ended September 30, 2013			Dollar Change			Percent Change
Net Sales	$	373		$	396		$	23			6	%	$	375		$	401		$	26			7	%
Cost of sales		(284	)		(301	)		(17	)		6	%		(287	)		(308	)		(21	)		7	%

Gross profit		89			95			6			7	%		88			93			5			6	%
Gross margin		24	%		24	%								24	%		23	%
Selling, general and administrative expenses⁽¹⁾		(52	)		(51	)		1			-2	%		(50	)		(57	)		(7	)		-14	%
Selling, general and administrative expenses as a percent of sales		14	%		13	%								13	%		14	%

Operating profit (loss)
On and Off-highway segment		49			52			3			6	%		48			50			2			4	%
Corporate, eliminations and other		(12	)		(8	)		4			33	%		(10	)		(14	)		(4	)		-40	%

Operating profit		37			44			7			19	%		38			36			(2	)		-5	%
Operating margin		10	%		11	%								10	%		9	%
Loss on extinguishment of debt		(1	)		(15	)		(14	)		-1400	%
Other loss, net		—			(1	)		(1	)		NM
Other income (loss), net														2			(1	)		(3	)		-150	%
Interest expense		(16	)		(28	)		(12	)		75	%		(16	)		(15	)		1			-6	%

Income from continuing operations, before income tax provision, equity in loss, net of tax and noncontrolling interest		20			—			(20	)		-100	%
Income from continuing operations, before income tax provision, equity in income (loss), net of tax and noncontrolling interest														24			20			(4	)		-17	%
Income tax provision		(9	)		(1	)		8			-89	%		(10	)		(9	)		1			-10	%
Equity in loss, net of tax		(1	)		—			1			100	%
Equity in income (loss), net of tax														1			(2	)		(3	)		-300	%

Net income (loss) from continuing operations		10			(1	)		(11	)		-110	%
Net income from continuing operations														15			9			(6	)		-40	%
Loss from discontinued operations, net of tax		(42	)		—			42			100	%		(10	)		—			10			100	%

Net loss		(32	)		(1	)		31			97	%
Net income														5			9			4			80	%
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			NM			1			—			(1	)		NM

Net loss attributable to the Company	$	(32	)	$	(1	)	$	31			97	%
Net income attributable to the Company													$	4		$	9		$	5			125	%

Gross profit/gross margin. Gross profit increased by $6$5 million during the ~~second~~third quarter of 2013 in comparison to the ~~second quarter of 2012. Gross margin remained at 24% in the second quarter of 2013 in comparison to the second~~third quarter of 2012. The increase in gross profit was mainly due to the ~~$8 million~~ increase in sales volume partially offset by unfavorable currency translation effects of $2$4 million and operating costs of $1 million. The previously mentioned sales volume increase resulted in a $10 million increase in gross profit. Gross margin decreased in the third quarter of 2013 to 23% from 24% in the third quarter of 2012. The decrease in gross margin related in part to higher freight and operating costs in the third quarter of 2013 in comparison to the third quarter of 2012.

Selling, general and administrative expenses.Selling, general and administrative expenses ~~decreased~~increased by $1$7 million during the ~~second~~third quarter of 2013 in comparison to the ~~second~~third quarter of 2012 due to an increase in an accrual of $4 million related to a ~~decrease~~claim brought against us by Neovia, $2 million in ~~benefit related~~one-time environmental costs.

Operating profit/operating margin.Operating profit ~~increased~~decreased by $7$2 million in the ~~second~~third quarter of 2013 in comparison to the ~~second~~third quarter of 2012 due to a higher ~~gross profit~~selling, general and administrative expenses in the current quarter. The operating profit in the On and Off-highway segment increased by $3$2 million due to a higher gross profit in the ~~second~~third quarter of 2013 in comparison to the ~~second~~third quarter of 2012. Additionally, the operating loss in the Corporate, eliminations and other segment ~~decreased~~increased by $4 million in the ~~second~~third quarter of 2013 in comparison to the ~~second~~third quarter of 2012 due to a ~~reduction~~$4 million increase in ~~corporate costs~~an accrual for ~~items such as benefit related expenses.~~

~~Loss on extinguishment of debt.~~~~During the second quarter of 2013, we refinanced our debt structure and as~~ a ~~result incurred a loss due to early retirement of the Secured Notes.~~

~~Interest expense.~~~~Interest expense increased~~claim brought against us by $12 million due to the refinancing of our debt in the second quarter of 2013 in comparison to the second quarter of 2012. As part of the refinancing, we incurred a write-off of unamortized deferred financing costs and an additional one-time interest expense.Neovia.

Income tax provision. The income tax provision was $1$9 million and $9$10 million for the ~~second~~third quarter of 2013 and 2012, respectively. The effective tax rate was similar in the ~~second~~third quarter of 2013 in comparison to the ~~second~~third quarter of 2012.

Loss from discontinued operations, net of tax. The loss from discontinued operations, net of tax was ~~$42~~$10 million in the ~~second~~third quarter of 2012 due to the Brake North America and Asia group which had a ~~$3 million, net of tax, loss from operations, $62~~$26 million impairment charge to reduce the carrying value of the business to expected realizable value and offsetting ~~these~~those amounts was ~~$23~~$9 million related to a tax benefit for the ~~impairment.~~impairment and $7 million income from operations, net of tax.

Net ~~loss.~~income.Net ~~loss decreased~~income increased in the ~~second~~third quarter of 2013 in comparison to the ~~second~~third quarter of 2012 due mainly to a lower loss from discontinued operations, net of tax and partially offset by ~~the loss on extinguishment of debt.~~a lower operating profit.

~~Six~~Nine months ended ~~June~~September 30, 2012 compared to the ~~six~~nine months ended ~~June~~September 30, 2013

Net sales.Consolidated sales increased by ~~$32~~$58 million in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012 due to increased sales in our Filtration and Affinia South America products. The following table summarizes the consolidated net sales results for the ~~six~~nine months ended ~~June~~September 30, 2012 and the consolidated net sales results for the ~~six~~nine months ended ~~June~~September 30, 2013:


(Dollars in millions)	Consolidated Six Months Ended June 30, 2012			Consolidated Six Months Ended June 30, 2013		Dollar Change			Percent Change			Currency Effect⁽¹⁾			Consolidated Nine Months Ended September 30, 2012			Consolidated Nine Months Ended September 30, 2013		Dollar Change			Percent Change			Currency Effect⁽¹⁾
Net sales
Filtration products	$	420		$	444	$	24			6	%	$	(2	)	$	632		$	678	$	46			7	%	$	(5	)
Affinia South America products		215			228		13			6	%		(22	)		328			345		17			5	%		(38	)
Chassis products		103			97		(6	)		-6	%		—			153			147		(6	)		-4	%		—

On and Off-highway segment		738			769		31			4	%		(24	)		1,113			1,170		57			5	%		(43	)
Corporate, eliminations and other		(1	)		—		1			100	%		—			(1	)		—		1			100	%		—

Total net sales	$	737		$	769	$	32			4	%	$	(24	)	$	1,112		$	1,170	$	58			5	%	$	(43	)

The following table summarizes the consolidated results for the ~~six~~nine months ended ~~June~~September 30, 2012 and the consolidated results for the ~~six~~nine months ended ~~June~~September 30, 2013:


(Dollars in millions)	Consolidated Six Months Ended June 30, 2012			Consolidated Six Months Ended June 30, 2013			Dollar Change			Percent Change			Consolidated Nine Months Ended September 30, 2012			Consolidated Nine Months Ended September 30, 2013			Dollar Change			Percent Change
Net Sales	$	737		$	769		$	32			4	%	$	1,112		$	1,170		$	58			5	%
Cost of sales		(571	)		(592	)		(21	)		4	%		(858	)		(900	)		(42	)		5	%

Gross profit		166			177			11			7	%		254			270			16			6	%
Gross margin		23	%		23	%								23	%		23	%
Selling, general and administrative expenses⁽¹⁾		(98	)		(99	)		(1	)		1	%		(148	)		(161	)		(13	)		9	%
Selling, general and administrative expenses as a percent of sales		13	%		13	%								13	%		14	%

Operating profit (loss)
On and Off-highway segment		84			92			8			10	%		132			142			10			8	%
Corporate, eliminations and other		(16	)		(14	)		2			13	%		(26	)		(33	)		(7	)		-27	%

Operating profit		68			78			10			15	%		106			109			3			3	%
Operating margin		9	%		10	%								10	%		9	%
Loss on extinguishment of debt		(1	)		(15	)		(14	)		-1400	%		(1	)		(15	)		(14	)		1400	%
Other income (loss), net		—			(2	)		(2	)		NM			2			(3	)		(5	)		-250	%
Interest expense		(32	)		(43	)		(11	)		34	%		(48	)		(58	)		(10	)		21	%

Income from continuing operations, before income tax provision, equity in income (loss), net of tax and noncontrolling interest		35			18			(17	)		-49	%		59			33			(26	)		-44	%
Income tax provision		(14	)		(9	)		5			-36	%		(24	)		(16	)		8			-33	%
Equity in income (loss), net of tax		—			—			—			NM			1			(2	)		(3	)		-300	%

Net income from continuing operations		21			9			(12	)		-57	%		36			15			(21	)		-58	%
Loss from discontinued operations, net of tax		(47	)		(4	)		43			91	%		(57	)		(1	)		56			98	%

Net income (loss)		(26	)		5			31			119	%		(21	)		14			35			167	%
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			NM			1			—			(1	)		NM

Net income (loss) attributable to the Company	$	(26	)	$	5		$	31			119	%	$	(22	)	$	14		$	36			164	%

Gross profit/gross margin. Gross profit increased by ~~$11~~$16 million during the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012. Gross margin remained at 23% in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012. The increase in gross profit was mainly due to the increase ~~of $13 million~~ in sales volume and a decrease of $2$4 million in material and manufacturing costs, partially offset by an increase of $3 million in operating costs and unfavorable currency translation effects of $4$8 million. The previously mentioned sales volume increase resulted in a $23 million increase in gross profit.

Selling, general and administrative expenses.Selling, general and administrative expenses increased by $1$13 million during the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012. Our selling, general and administrative expenses for the first ~~six~~nine months of 2012 were lower due to a favorable Satisfied legal settlement of $4 million, ~~partially offset by a decrease in benefit related costs in~~and our selling, general and administrative expenses for the first ~~six~~nine months of ~~2013.~~2013 were higher due to an increase in an accrual for a claim brought against us by Neovia for $9 million and $2 million in one-time environmental costs.

Operating profit/operating margin.Operating profit increased by ~~$10~~$3 million in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012 due to a higher gross ~~profit.~~profit, partially offset by higher selling, general and administrative expenses. The operating profit in the On and Off-highway segment increased by $8$10 million due to a higher gross profit in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012. Additionally, the operating loss in the Corporate, eliminations and other segment increased by $7 million in the first nine months of 2013 in comparison to the first nine months of 2012 due to a claim brought against us by Neovia for $9 million.

Loss on extinguishment of debt.During the first ~~six~~nine months of 2013, we refinanced our debt structure and as a result incurred a loss due to early retirement of the Secured Notes.

Interest expense.Interest expense increased by ~~$11~~$10 million ~~due to the refinancing of our debt~~ in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012. ~~As part of the~~The increase was mainly due to one-time refinancing ~~we incurred a~~costs, which included additional interest expense and write-off of unamortized deferred financing ~~costs and an additional one-time interest expense.~~

Income tax provision. The income tax provision was $9$16 million and ~~$14~~$24 million for the first ~~six~~nine months of 2013 and 2012, respectively. The effective tax rate was similar in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012.

Loss from discontinued operations, net of tax. The loss from discontinued operations, net of tax was ~~$47~~$57 million in the first ~~six~~nine months of 2012 and $4$1 million in the first ~~six~~nine months of 2013. We recorded $1 million during the first ~~six~~nine months of 2013 ~~a $5 million accrual for a claim brought against us, net of a $2 million tax benefit, and $1 million~~ related to the distribution of our Brake North America and Asia group in 2012. The ~~claim related to a previously owned discontinued operation. The~~ Brake North America and Asia group reported a loss of ~~$47~~$57 million in the first ~~six~~nine months of 2012 of which $8$1 million related to a loss from operations, net of tax, ~~$62~~$88 million impairment charge to reduce the carrying value of the business to expected realizable value, and offsetting these amounts was ~~$23~~$32 million, which related to a tax benefit for the impairment.

Net income (loss).Net income increased in the first ~~six~~nine months of 2013 in comparison to the net loss in the first ~~six~~nine months of 2012 due mainly to a lower loss from discontinued operations, net of tax, and partially offset by the loss on extinguishment of debt.


(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013			Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Three Months Ended September 30, 2012			Three Months Ended September 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Net sales
United States	$	192		$	191		$	376		$	379		$	184		$	188		$	560		$	567
Foreign		181			205			361			390			191			213			552			603

Total net sales	$	373		$	396		$	737		$	769		$	375		$	401		$	1,112		$	1,170

United States sales as a percent of total sales		51	%		48	%		51	%		49	%		49	%		47	%		51	%		48	%
Foreign sales as a percent of total sales		49	%		52	%		49	%		51	%		51	%		53	%		49	%		52	%

United States.Net sales increased in the first ~~six~~nine months of 2013 in comparison to first ~~six~~nine months of 2012 due to an increase in Filtration products sales partially offset by a decrease in chassis products sales.

Foreign. Net sales increased in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012 due to increased sales in our Brazilian and Argentinean distribution companies and our Poland and Venezuela Filtration products, partially offset by unfavorable currency translation effects in Brazilian Real and Argentinean Peso.

Income from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest by geographic region was as follows:


(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2013			Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Three Months Ended September 30, 2012			Three Months Ended September 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Income (loss) from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest
United States	$	(10	)	$	(27	)	$	(19	)	$	(29	)	$	(2	)	$	(11	)	$	(21	)	$	(45	)
Foreign		30			27			54			47			26			31			80			78

Total income from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest	$	20		$	—		$	35		$	18		$	24		$	20		$	59		$	33

United States. Loss from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest increased in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012 due to loss on the extinguishment of debt, partially offset by an increase in gross profit.

The United States income from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest was lower than the foreign income from continuing operations before income tax provision, equity in loss, net of tax and noncontrolling interest due to the inclusion of corporate costs in our United States operations and higher profitability of some of our subsidiaries in foreign locations. The majority of our debt relates to our United States operations and as a consequence almost all of the associated interest expense is allocated to our domestic operations. During the first ~~six~~nine months of 2013, our United States operations had ~~$42~~$57 million of interest expense and our foreign operations had $1 million of interest expense.

Foreign. Income from continuing operations before income tax provision, equity in income (loss), net of tax and noncontrolling interest decreased in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012. The majority of the decrease was due to unfavorable currency translation effects, partially offset by an improvement in gross profit, which was driven by an increase in sales volume.

The Company’s primary source of liquidity is cash flow from operations and available borrowings from our ABL Revolver. Our liquidity requirements are significant and are expected to be primarily for debt servicing, working capital and capital spending.

We are ~~significantly~~ leveraged as a result of the refinancing that occurred in April 2013. As of ~~June~~September 30, 2013, the Company had ~~$940~~$938 million in aggregate indebtedness. As of ~~June~~September 30, 2013, we had an additional ~~$125~~$124 million of borrowing capacity available under our ABL Revolver after giving effect to $10 million in outstanding letters of credit, none of which was drawn against, and less than $1 million for borrowing base reserves. In addition, we had cash and cash equivalents of $51 million and ~~$55~~$86 million as of December 31, 2012 and ~~June~~September 30, 2013, respectively.

We spent ~~$11~~$19 million and ~~$10~~$18 million in capital expenditures during the first ~~six~~nine months of 2012 and 2013, respectively, which ~~includes $6~~included $9 million in capital expenditures during the first ~~six~~nine months of 2012 related to a discontinued operation. The cash flow from operations on an annual basis has historically been adequate to meet our liquidity needs. Based on the current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our ABL Revolver, will be adequate to meet our short term and long term liquidity needs.

Our ABL Revolver matures in April 2018, our Senior Notes mature in May 2021, our Term Loan B-1 matures in April 2016 and our Term Loan B-2 matures in April 2020. Furthermore, if we were to undertake a significant acquisition or capital improvement plan, we may need additional sources of liquidity. We expect to meet any such liquidity needs by entering into new or additional credit facilities and/or offering new or additional debt securities, but whether such sources of liquidity will be available to us at any given point in the future will depend on a number of factors that are outside of our control, including general market conditions.

Overview. On April 25, 2013, we replaced our existing asset-based revolving credit facility (the “Old ABL Revolver”) with a new asset-based revolving credit facility (our “ABL Revolver”). The ABL Revolver comprises a revolving credit facility of up to $175 million for borrowings solely to the U.S. domestic borrowers, including (a) a $30 million sub-limit for letters of credit and (b) a $15 million swingline facility. Availability under the ABL Revolver is based upon monthly (or more frequent under certain circumstances) borrowing base valuations of our eligible inventory and accounts receivable, among other things, and is reduced by certain reserves in effect from time to time. There were no outstanding borrowings on the ABL Revolver at ~~June~~September 30, 2013.

Voluntary Prepayments. Subject to certain conditions, the ABL Revolver allows the borrowers to voluntarily reduce the amount of the revolving commitments and to prepay the loans without premium or penalty other than customary breakage costs for LIBOR rate contracts.

Interest rates and fees. Outstanding borrowings under the ABL Revolver accrue interest at an annual rate of interest equal to (i) a base rate plus the applicable spread, as set forth below or (ii) a LIBOR rate plus the applicable spread, as set forth below. Swingline loans bear interest at a base rate plus the applicable spread. The Company will pay a commission on letters of credit issued under the ABL Revolver at a rate equal to the applicable spread for loans based upon the LIBOR rate.


Level	Average Aggregate Availability	Base Rate Loans and Swingline Loans			LIBOR Loans			Average Aggregate Availability	Base Rate Loans and Swingline Loans			LIBOR Loans
I	<$50,000,000		1.00	%		2.00	%	<$50,000,000		1.00	%		2.00	%
II	> $50,000,000 but< $100,000,000		0.75	%		1.75	%	> $50,000,000 but< $100,000,000		0.75	%		1.75	%
III	> $100,000,000		0.50	%		1.50	%	> $100,000,000		0.50	%		1.50	%

The borrowers will pay certain fees with respect to the ABL Revolver, including (i) an unused commitment fee on the undrawn portion of the credit facility of 0.25% per annum in the event that more than 50% of the commitments (excluding swingline loans) under the credit facility are utilized, and 0.375% per annum in the event that 50% or less of the commitments (excluding swingline loans) under the credit facility are utilized and (ii) customary annual administration fees and fronting fees in respect of letters of credit equal to 0.125% per annum on the stated amount of each letter of credit outstanding during each fiscal quarter. During an event of default, all loans and other obligations under the ABL Revolver may bear interest at a rate 2.00% in excess of the otherwise applicable rate of interest.

The ABL Revolver also contains certain customary affirmative covenants and events of default, including a change of control. As of ~~June~~September 30, 2013, we were in compliance in all material respects with all covenants and provisions contained in the ABL Revolver.

Overview. On April 25, 2013, Affinia Group Inc. issued $250 million of Senior Notes as part of the refinancing. The Senior Notes accrue interest at the rate of 7.75% per annum, payable semi-annually on May 1 and November 1 of each year, commencing November 1, 2013. The Senior Notes will mature on May 1, 2021. The terms of the Indenture provide that, among other things, the Senior Notes rank equally in right of payment to all of the Company’s and the Guarantors’ existing and future senior debt and senior in right of payment to all of the Company’s and Guarantors’ existing and future subordinated debt. The Senior Notes are structurally subordinated to all of the liabilities and obligations of the Company’s subsidiaries that do not guarantee the Senior Notes. The Senior Notes are effectively junior in right of payment to all of the Company’s and the Guarantors’ secured indebtedness, including the Term Loans and the ABL Revolver, to the extent of the value of the collateral securing such indebtedness. The outstanding balance of the Senior Notes at ~~June~~September 30, 2013 was $250 million.

Guarantees. The Guarantors guarantee the Company’s obligations under the Notes on a senior unsecured basis.

Redemption Following Public Equity Offering. Prior to May 1, 2016 and subject to certain conditions the Company may redeem up to 35% of the aggregate principal amount of the Notes issued under the Indenture with the proceeds of an equity offering upon at least 15 but not more than 60 days’ prior notice at a redemption price equal 107.75% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, thereon, to the date of redemption, provided that at least 65% of the sum of the aggregate principal amount of notes originally issued under the Indenture and the aggregate principal amount of any additional notes issued under the Indenture after the issue date remains outstanding immediately after the occurrence of each such redemption and provided, further, that each such redemption occurs within 120 days of the date of closing of each such equity offering.

Optional Redemption. On and after May 1, 2016, the Company may at its option redeem the Notes, in whole or in part, upon at least 15 but not more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued interest to the redemption date, if redeemed during the 12-month period commencing on May 1 of the years set forth below:

Prior to May 1, 2016, the Company may redeem the Notes, in whole or in part, upon at least 15 but not more than 60 days’ prior notice at a price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of the redemption, plus (iii) accrued and unpaid interest, if any, thereon, to the date of redemption.

Repurchase upon Change of Control. Upon the occurrence of a change in control (as defined in the Indenture), the Company will be required to make an offer to repurchase all of the Notes in cash at a price equal to 101% of the aggregate principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.

As of ~~June~~September 30, 2013, we were in compliance in all material respects with all covenants and provisions contained in the senior indenture.

Overview. On April 25, 2013, the Company entered into (i) a Term Loan B-1 in an aggregate principal amount of $200 million and (ii) a Term Loan B-2 in an aggregate principal amount of $470 million. The Term Loan B-1 was offered at a price of 99.75%, of their face value, resulting in approximately $199 million of net proceeds for the Term Loan B-1. The Term Loan B-2 was offered at a price of 99.50%, of their face value, resulting in approximately $468 million of net proceeds for the Term Loan B-2. The $1 million and $2 million discount for the Term Loan B-1 and Term Loan B-2, respectively, will be amortized based on the effective interest rate method and included in interest expense until the Term Loans mature. The Term Loan B-1 amortizes in quarterly installments in an amount equal to 1.00% per annum, with the balance due on April 25, 2016. The Term Loan B-2 amortizes in quarterly installments in an amount equal to 1.00% per annum, with the balance due on April 25, 2020. As of ~~June~~September 30, 2013, $199 million principal amount of Term Loan B-1 was outstanding, net of a $1 million issue discount which is being amortized until the Term Loan B-1 matures and ~~$468~~$467 million principal amount of Term Loan B-2 was outstanding, net of a $2 million issue discount which is being amortized until the Term Loan B-2 matures.

The Term Loan Facility also contains certain customary affirmative covenants and events of default, including a change of control. As of ~~June~~September 30, 2013, we were in compliance in all material respects with all covenants and provisions contained in the Term Loan Facility.

Net cash provided by operating activities is summarized in the table below for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2013:


(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Net income (loss)	$	(26	)	$	5		$	(21	)	$	14
Impairment of assets		62			—			88			—
Loss on extinguishment of debt		1			15			1			15
Write-off of unamortized deferred financing costs		—			8			—			8
Change in trade accounts receivable		(20	)		(37	)		(8	)		(24	)
Change in other current operating liabilities		68			33			50			51

Subtotal		85			24			110			64
Other changes in operating activities		(6	)		2			(22	)		5

Net cash provided by operating activities	$	79		$	26		$	88		$	69

Net income (loss) – Net ~~loss decreased~~income increased in the first ~~six~~nine months of 2013 in comparison to the first ~~six~~nine months of 2012 was due mainly to a ~~decrease in the~~lower loss from discontinued operations, net of tax, ~~in the first six months of 2013 in comparison to the first six months of 2012,~~and partially offset by the higher loss on ~~the~~ extinguishment of debt in ~~the first six months of~~ 2013.

Impairment of assets – We recorded a ~~$62~~$88 million impairment related to our Brake North America and Asia group, which was a discontinued operation, in ~~June~~September 2012.

Loss on extinguishment of debt – During the first ~~six~~nine months of 2013, we refinanced our debt structure and as a result incurred a loss due to early retirement of the Secured Notes.

Write-off of unamortized deferred financing costs – We recorded a write-off of $8 million in the first ~~six~~nine months of 2013 to interest expense for unamortized deferred financing costs associated with the refinancing of our debt.

Change in trade accounts receivable – The change in trade accounts receivable was ~~a $20~~an $8 million and ~~$37~~$24 million use of cash in the first ~~six~~nine months of 2012 and 2013, respectively. The change in trade accounts receivables was due to timing of payments and decreased level of factoring in the first ~~six~~nine months of 2013 due to the disposition of our Brake North America and Asia group.

Change in other current operating liabilities – The change in other current operating liabilities was a ~~$68~~$50 million and ~~$33~~$51 million source of cash during the first ~~six~~nine months of 2012 and 2013, respectively. The change was primarily due to a decrease in the source of cash from accounts payable, which was a ~~$63~~$37 million and a ~~$24~~$23 million source of cash in the first ~~six~~nine months of 2012 and 2013, respectively. Accounts payable fluctuates from quarter to quarter due to the timing of payments.

Net cash used in investing activities is summarized in the table below for the first ~~six~~nine months of 2012 and 2013:


(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Proceeds from sales of assets	$	3		$	—		$	4		$	—
Investment in companies, net of cash acquired								—			(1	)
Change in restricted cash		4			—			1			—
Additions to property, plant and equipment		(11	)		(10	)		(19	)		(18	)

Net cash used in investing activities	$	(4	)	$	(10	)	$	(14	)	$	(19	)

Net cash used in financing activities is summarized in the table below for the first ~~six~~nine months of 2012 and 2013:


(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2013			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2013
Net decrease in other short-term debt	$	(5	)	$	—		$	(4	)	$	(1	)
Payments of other debt		(2	)		—			(2	)		—
Repayment on Secured Notes		(23	)		(195	)
Repayment on Subordinated Notes		—			(367	)
Repayment of Secured Notes								(23	)		(195	)
Repayment of Subordinated Notes								—			(367	)
Repayment on Term Loans								—			(1	)
Net payments of ABL Revolver		(35	)		—			(50	)		—
Proceeds from Senior Notes		—			250			—			250
Proceeds from Term Loans		—			667			—			667
Distribution to our shareholder		—			(351	)		—			(352	)
Payment of deferred financing costs		—			(15	)		—			(15	)

Net cash used in financing activities	$	(65	)	$	(11	)	$	(79	)	$	(14	)

During the first ~~six~~nine months of 2013, we refinanced our existing notes and credit facilities. The refinancing consisted of $250 million of Senior Notes due 2021, a $200 million Term Loan B-1 due 2016, a $470 million Term Loan B-2 due 2020, the proceeds of which we used, together with $31 million of cash on hand, to redeem our Secured Notes and our Subordinated Notes, make a distribution of $350 million to Holdings and pay fees and expenses in connection with the refinancing transactions. We had two other minor transactions, each for $1 million, that increased the distribution to our shareholder to $352 million during the first nine months of 2013.

During the first ~~six~~nine months of 2012, we redeemed $22.5 million of our Secured Notes and reduced the Old ABL Revolver using cash provided by operating activities. In the first nine months of 2012, we were able to reduce the ABL Revolver due to the cash provided by operating activities, which included an increase in accounts receivable factored.

We are exposed to various market risks, such as currency exchange and interest rate fluctuation. Where necessary to minimize such risks we may enter into financial derivative transactions; however, we do not enter into derivatives or other financial instruments for trading or speculative purposes.

We conduct business throughout the world. 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 ASC Topic 830,“Foreign Currency Matters.” To the extent that our business activities create monetary assets or liabilities denominated in a non-local currency, 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 minimize the net amount of cash flows and balances 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 may engage in business activities or execute financial hedge transactions intended to mitigate the potential financial impact due to changes in the respective exchange rates.

Our consolidated results of operations and financial position, as reported in U.S. Dollars, are also affected by changes in currency exchange rates. The results of operations of non-U.S. Dollar functional entities are translated into U.S. Dollars for consolidated reporting purposes each period at the average currency exchange rate experienced during the period. To the extent that the U.S. Dollar may appreciate or depreciate over time, the contribution of non-U.S. Dollar denominated results of operations to our U.S. Dollar reported consolidated earnings will vary accordingly. Therefore, changes in the various local currency exchange rates, as applied to the revenue and expenses of our non-U.S. Dollar operations may have a significant impact on our sales and, to a lesser extent, consolidated net income trends. In addition, a significant portion of our consolidated financial position is maintained at foreign locations and is denominated in functional currencies other than the U.S. Dollar. The non-U.S. Dollar denominated monetary assets and liabilities are translated into U.S. Dollars at each respective currency’s exchange rate then in effect at the end of each reporting period. The financial impact of the translation process is reflected within the other comprehensive income component of shareholder’s equity. Accordingly, the amounts shown in our consolidated shareholder’s equity account will fluctuate depending upon the cumulative appreciation or depreciation of the U.S. Dollar versus each of the respective functional currencies in which we conduct business. Management seeks to lessen the potential financial impact upon our consolidated results of operations due to exchange rate changes by engaging in business activities or by executing financial derivative transactions intended to mitigate specific transactional underlying currency exposures. We do not engage in activities solely intended to counteract the impact that changes in currency exchange rates may have upon our U.S. Dollar reported statement of financial condition nor do we engage in currency transactions for speculative purposes.

Our foreign currency exchange rate risk management efforts primarily focus upon operationally managing the net amount of non-functional currency denominated monetary assets and liabilities. In addition, we routinely execute short-term currency exchange rate forward contracts intended to mitigate the earnings impact related to the re-measurement process. At ~~June~~September 30, 2013, we had currency exchange rate derivatives with an aggregate notional value of ~~$102~~$75 million having a fair market value of less than $1 million in assets and ~~$1 million in~~ liabilities.

We are exposed to the risk of rising interest rates to the extent that we fund operations with short-term or variable-rate borrowings. At ~~June~~September 30, 2013, the Company’s ~~$940~~$938 million of aggregate debt outstanding consisted of ~~$690~~$688 million of floating-rate debt and $250 million of fixed-rate debt.

Pursuant to our written interest rate risk management policy we actively monitor and manage our fixed versus floating rate debt composition within a specified range. At quarter-end, fixed rate debt comprised approximately 27% of our total debt. Based on the amount of floating-rate debt outstanding at ~~June~~September 30, 2013, a 1% rise in interest rates would result in approximately $7 million in incremental interest expense.

In April 2013, the Company entered into interest rate swaps having an aggregate notional value of $300 million to effectively fix the rate of interest on a portion of our variable rate Term Loan B-2 until April 2020. These transactions contain embedded floating rate floors of 1.25% which mirror the floating rate floors contained in the Term Loan B-2. Based on the amount of floating-rate debt outstanding at ~~June~~September 30, 2013, the interest rate swaps would reduce the incremental interest expense from a 1% rise in interest rates from $7 million to $4 million. As of ~~June~~September 30, 2013, the aggregate fair value of the interest rate swap was an asset of $9$8 million. We estimate that a 50 basis point decrease of interest rates would reduce the fair value of the interest rate swaps by $7$6 million.

We are 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.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the quarter ended ~~June~~September 30, 2013.

During the quarter ended ~~June~~September 30, 2013, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2012, 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. There have been no material changes to the risk factors disclosed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012.

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.


Delaware		34-2022081
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1101 Technology Drive, Ann Arbor, Michigan		48108
(Address of Principal Executive Offices)		(Zip Code)


Part I FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)			4

Unaudited Condensed Consolidated Statements of Operations—Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2012 and 2013			4

Unaudited Condensed Consolidated Statements of Comprehensive ~~Loss—~~Income (Loss)—Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2012 and 2013			5

Unaudited Condensed Consolidated Balance Sheets—December 31, 2012 and ~~June~~September 30, 2013			6

Unaudited Condensed Consolidated Statements of Cash Flows—~~Six~~Nine Months Ended ~~June~~September 30, 2012 and 2013			7

Notes to Unaudited Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32

Item 3. Quantitative and Qualitative Disclosures About Market Risk			47

Item 4. Controls and Procedures			48

Part II OTHER INFORMATION

Item 1. Legal Proceedings			48

Item 1A. Risk Factors			48

~~Item 6. Exhibits~~			49

Item 6. Exhibits			49

Signatures			50


(Dollars in millions)	Sources				Uses
Term Loan B-1⁽¹⁾	$	199	Redeemed Secured Notes		$	180
Term Loan B-2⁽¹⁾		468	Redeemed Subordinated Notes			367
Senior Notes		250	Distribution to Shareholder:
Cash on hand		31	Redeemed Holdings’ Preferred Shares⁽²⁾	156
			Repaid Holdings’ Seller Note⁽²⁾	61
			Distribution to Holdings’ Stockholders⁽²⁾	133

			Total distribution to Shareholder⁽²⁾			350
			Interest payments on Secured and Subordinated Notes			21
			Call premium on Secured Notes			15
			Deferred financing costs⁽³⁾			15

	$	948			$	948


	2012			2013
Weighted-average effective term		5.1 years			5.1 years
Weighted-average risk free interest rate		4.34	%		4.33	%
Weighted-average expected volatility		39.9	%		39.9	%
Weighted-average fair value of options (Dollars in millions)	$	1		$	1


(Dollars in millions)	Notional Amount		Asset Derivative		Liability Derivative
As of June 30, 2013	$	102	$	1	$	1
As of December 31, 2012	$	69	$	—	$	—


	Options
Outstanding at December 31, 2012		23,835
Forfeited/expired		(~~347~~480	)

Outstanding at ~~June~~September 30, 2013		~~23,488~~23,355


	Cypress Scenario			IPO Scenario
Effective term		0.6 years			1.4 years
Expected volatility		70	%		70	%
Fair value of an RSU	$	107.92		$	124.41
Expected expense (Dollars in millions)	$	19		$	22


	RSUs
Outstanding at December 31, 2012		242,000
Granted		— 55,170
Forfeited/expired		— (35,611	)

Outstanding at ~~June~~September 30, 2013		~~242,000~~261,559


2016	105.813	%
2017	103.875	%
2018	101.938	%
2019 and thereafter	100.000	%



~~4.3~~		~~Credit Agreement, dated April 25, 2013, among Parent, the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.~~

~~10.1~~10.48#*		Letter Agreement with ~~Terry R. McCormack,~~Steven Klueg, dated ~~May 31, 2013.~~October 11, 2013

~~31.1~~31.1*		Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities and Exchange Act, as amended.

~~31.2~~31.2*		Certification of Senior Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities and Exchange Act, as amended.

~~32.1~~32.1*		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350(b)

~~101~~101*		The following financial information from our Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of Operations, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (iii) Unaudited Condensed Consolidated Balance Sheets, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.


AFFINIA GROUP INTERMEDIATE HOLDINGS INC.

By:		/s/ Terry R. McCormack
		Terry R. McCormack
		Chief Executive Officer, President, and Director (Principal Executive Officer)

By:		/s/ ~~Thomas H. Madden~~Steven P. Klueg
		~~Thomas H. Madden~~Steven P. Klueg
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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