UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended September 30, 2013.2014.

For the Transition Period From                    to                    .

Commission File No. 333-128166-10

Affinia Group Intermediate Holdings Inc.

(Exact name of registrant as specified in its charter)

(734) 827-5400(704) 869-3300

(Registrant’s Telephone Number, Including Area Code)

N/A1101 Technology Drive,

Ann Arbor, Michigan 48108

(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 November 8, 201313, 2014 (all of which are privately owned and not traded on a public market).

Index

Affinia Group Intermediate Holdings Inc.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements may include commentsstatements 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.historical information. 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, 2012.2013. 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 or 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; and 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–lookingforward-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.

PART I

PART I

FINANCIAL INFORMATION

Affinia Group Intermediate Holdings Inc.

Unaudited Condensed Consolidated Statements of Operations (Unaudited)

TheSee accompanying notes are an integral partto the condensed consolidated financial statements.

Affinia Group Intermediate Holdings Inc.

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

See accompanying notes to the unaudited condensed consolidated financial statements.

Affinia Group Intermediate Holdings Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)Balance Sheets (Unaudited)

TheSee accompanying notes are an integral part ofto the unaudited condensed consolidated financial statements.

Affinia Group Intermediate Holdings Inc.

Unaudited Condensed Consolidated Balance Sheets

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

Affinia Group Intermediate Holdings Inc.

Unaudited Condensed Consolidated Statements of Cash Flows (Unaudited)

TheSee accompanying notes are an integral part ofto the unaudited condensed consolidated financial statements.

Affinia Group Intermediate Holdings, Inc.

Notes to Unauditedthe Condensed Consolidated Financial Statements (Unaudited)

Note 1. Description of BusinessDESCRIPTION OF BUSINESS

Affinia Group Intermediate Holdings Inc. (the “Company”), headquartered in Gastonia, North Carolina, is aan innovative global leader in the heavy dutydesign, manufacture, distribution and light vehicle replacementmarketing of industrial grade filtration products and services industry. We derive approximately 98% of our sales from this industry. Ourand replacement products in South America. The Company’s broad range of filtration chassis and other products are sold in North America, Europe, South America, Asia and Africa. OurThe Company’s brands include WIX^®, Raybestos^®, Filtron^TM, Nakata^®, McQuay-Norris^® and ecoLAST^®. Additionally, we providethe Company provides private label products for certain customers, including NAPA^®, CARQUEST^® and ACDelco^®. Affinia Group Inc.

The Company is 100% owned by Affinia Group Intermediate Holdings Inc., which, in turn, is 100% ownedwholly-owned by Affinia Group Holdings Inc. (“Holdings”), a company controlled by affiliates of The Cypress Group, L.L.CL.L.C. (“Cypress”).

Affinia Group Inc.As discussed further in Note 5 to the Condensed Consolidated Financial Statements, “Discontinued Operation—Chassis”, in the Company’s direct, 100% owned subsidiary andfourth quarter of 2013, management committed to a Delaware corporation formedplan to sell its global chassis business (the “Chassis group”) to F-M Chassis, an affiliate of Federal-Mogul Corporation. Accordingly, the results of the Chassis group have been included as a component of discontinued operations in the Condensed Consolidated Statements of Operations for all periods presented. The sale of the Chassis group was completed 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”).May 1, 2014.

The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. In these Notes to the Condensed Consolidated Financial Statements, the terms “the Company,” “Parent,the “Company,” “we,” “our” and “us” refer to Affinia Group Intermediate Holdings Inc. and its direct and indirect subsidiaries on a consolidated basis.

Note 2. Basis of PresentationBASIS OF PRESENTATION

The interim financial information isThese Condensed Consolidated Financial Statements have been prepared in conformityaccordance with generally accepted accounting principles generally accepted(“GAAP”) in the United States of America (“U.S. GAAP””) for interim financial information and such principles are appliedwith the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP in the U.S. for annual financial statements. Because the interim Condensed Consolidated Financial Statements and Notes do not include all information and notes required by GAAP in the U.S. for annual financial statements, the Condensed Consolidated Financial Statements and other information included in this quarterly report should be read in conjunction with the Consolidated Financial Statements and Notes in the Company’s Annual Report 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 included2013.

These Condensed Consolidated Financial Statements reflect all normal recurring adjustments that, 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, are necessary to fairly present the financial position and results of operations. Amounts reported in the interim financial information includes all adjustmentsCondensed Consolidated Statement of Operations and accruals, consisting onlythe interim Condensed Consolidated Statements of normal recurring adjustments, whichComprehensive Income (Loss) are necessary for a fair presentationnot necessarily indicative of resultsamounts expected for the respective interim period.annual periods.

Note In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

3. New NEW ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements

Issued But Not Yet Adopted Accounting Pronouncements

In February 2013,May 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02,2014-09, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,Revenue from Contracts with Customers.”which requires an entity ASU 2014-09 outlines a single comprehensive model for entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line itemsuse 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.accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This guidanceASU is effective for reporting periods beginning after December 15, 2012.2016. Early adoption is not permitted. The implementation ofCompany is currently assessing the impact that this new ASU 2013-02 resulted in financial statement disclosure changes only. Please refer to “Note 16. Changes in Accumulated Other Comprehensive Income (Loss)” for disclosure.will have on its revenue recognition upon adoption.

In July 2012,April 2014, the FASB amendedissued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 amends the definition of a discontinued operation in Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill205-20 and Other” withrequires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. The FASB issued the ASU 2012-02, “Intangibles – Goodwillto provide more decision-useful information and Other (Topic 350): Testing Indefinite-lived Intangible Assetsto make it more difficult for Impairment.” Undera disposal transaction to qualify as a discontinued operation. In addition, the revised guidance, an organization hasASU requires entities to reclassify assets and liabilities of a discontinued operation for all comparative periods in the optionstatement of financial position, as well as significant changes 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 calculatepresentation requirements within the fair valuestatement 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 guidancecash flows. This ASU is effective for impairment testsall disposals (except disposals classified as held for fiscal yearssale before the adoption date) or components initially classified as held for sale in periods beginning on or after SeptemberDecember 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. Adoption2014. Early adoption is permitted. The adoption of this guidance will notASU could have a significant impact ouron the financial condition or results of operations.statement presentation associated with any disposal transactions that could occur once this ASU becomes effective.

Adopted Accounting Pronouncements Not Yet Adopted

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.Rate (“LIBOR”). 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.statements because the Company currently has not entered into any new or redesignated hedging relationships that meet these requirements.

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 theadoption of this standard has not had any impact if any, on the condensed consolidated financial statements.presentation of unrecognized tax benefits in the Condensed Consolidated Balance Sheets.

Note 4. Refinancing

On April 25,In March 2013, we refinanced our existing notes and credit facilities and madethe FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830)—Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a distributionForeign Entity or of an Investment in a Foreign Entity.” ASU No. 2013-05 resolves the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to Holdings, our shareholder. The refinancing consistedthe release of the issuance of $250 million aggregate principal amount 7.75% Senior Notes due May 1, 2021 (the “Senior Notes”),cumulative translation adjustment into net income when a $200 million term loan due April 25, 2016 (“Term Loan B-1”),parent either sells 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.

The sources and uses of proceeds of the refinancing consisted of the following:

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’ operating expenses. Subsequently in the third quarter of 2013, we made an additional $1 million distribution related to our deferred compensation plan.

Note 5. Debt

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:

Fair Value of Debt at December 31, 2012

Fair Value of Debt at September 30, 2013

ABL Revolver

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 September 30, 2013, there were no outstanding borrowings under the ABL Revolver. We had an additional $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 September 30, 2013.

Maturity. The ABL Revolver is scheduled to mature on April 25, 2018.

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.

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 November 8, 2013, the Company remained in compliance with all debt covenants. The fixed charge coverage ratio was 2.17x as of 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).

Indenture

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 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 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.investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. ASU 2013-5 is effective prospectively for the first annual period beginning after December 15, 2013. The adoption of this standard did not have any current impact on the results of operations, cash flows or financial position.

Events of Default. 4. SEGMENT INFORMATION

The Indenture provides for customary events of default (subject in certain cases to customary graceCompany has two operating segments, Filtration and cure periods)Affinia South America (“ASA”), which include nonpayment, breachare considered reportable segments under ASC 280 “Segment Reporting.” Operating segments are determined based on information used by the chief operating decision maker (“CODM”) in deciding how to allocate resources and evaluate the performance of covenantsour businesses. Management evaluates the performance of its operating segments based primarily on revenue growth and operating profit. Although not considered an operating segment, corporate, eliminations and other includes corporate costs, interest expense and other amounts not allocated to the operating segments.

The Filtration segment is the Company’s largest business unit, having contributed approximately 70% of global revenues during the three and nine months ended September 30, 2014. Our Filtration products fit medium and heavy duty trucks, light vehicles, equipment in the Indenture, payment defaults or accelerationoff-highway market (i.e. residential and non-residential construction, mining, forestry and agricultural) and equipment for industrial and marine applications. The Filtration segment’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^®.

The ASA segment focuses on distributing and manufacturing brake, suspension, driveshaft and U-joint components, water and fuel pumps, filters, engine products, motorcycle products, accessories and other indebtedness, failure to pay certain judgmentscritical aftermarket components through its operations in Argentina, Brazil, Uruguay and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amountVenezuela. The majority of the then outstanding Notes may declare the principal, premium, if any, interestASA segment’s revenue is generated in Brazil. In Brazil, ASA’s operations are conducted through Affinia Automotiva, an aftermarket parts manufacturer and other monetary obligations on all the Notesmaster distributor, and Pellegrino, a warehouse distributor. Affinia Automotiva manufactures Nakata^® brand shock absorbers and distributes those and third party products to be due and payable immediately.

Term Loan Facility

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 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 $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.warehouse distributors, including Pellegrino.

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 September 30, 2013:presents financial information for each of our reportable segments, as well as for corporate, eliminations and other, and on a consolidated basis:

Note 6. Discontinued Operation – Brake5. DISCONTINUED OPERATION—CHASSIS

In the fourth quarter of 2011, we2013, management committed to a plan to sell the Brake North America and AsiaChassis group. In accordance withPursuant to ASC Topic 205,“Presentation of Financial Statements,” the Brake North AmericaChassis group met the definition of a disposal group at the time management committed to a plan to sell the group and, Asiaaccordingly, the results of operations of the Chassis group qualifiedhave been classified as a component of discontinued operation. The consolidated statementsoperations. On January 21, 2014, Affinia entered into an Asset Purchase Agreement, as amended, with Federal-Mogul Chassis LLC (formerly known as VCS Quest Acquisition LLC) (“FM Chassis”), an affiliate of operations for all periods presented have been adjustedFederal-Mogul Corporation, pursuant to reflect this group as a discontinued operation.which FM Chassis agreed to purchase the Chassis group. This transaction closed on May 1, 2014. The consolidated statements of cash flows for all periods presented were not adjusted to reflect this group as a discontinued operation.operation for any period presented.

On November 30, 2012, we distributed our Brake North AmericaUpon the closing of this transaction in May 2014, Affinia received cash proceeds of $140 million, which represented the agreed upon selling price of $150 million less a holdback of consideration of $10 million until completion of certain post-closing performance obligations. In September 2014, the post-closing performance obligations were completed 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 $9 million of cash proceeds with the remaining $1 million allocated to 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 obligationpost-closing purchase price adjustment. There are no additional material obligations of either party associated with this transaction.

The sale of the Company or anyChassis group resulted in a pre-tax gain of its subsidiaries. BPI held$32 million, of which $21 million was recorded in the second quarter of 2014 and $11 million in cash that was includedrecorded in the distributionthird quarter of 2014. These amounts are reflected in the Condensed Consolidated Statements of Operations within Income from discontinued operations, net of tax. The Company released an $18 million capital loss valuation allowance as a result of the sale, the tax benefit of which offset the tax expense incurred by the gain on November 30, 2012.the sale. This resulted in a tax expense of $6 million on the transaction.

In addition to the gain on the sale discussed above, the following table shows the Chassis group’s net sales, income before tax provision, income tax provision and net income that are included within Income from discontinued operations, net of tax on the Condensed Consolidated Statements of Operations:

Affinia and BPIFM Chassis entered into a transition services agreement (“TSA”) effective with the distributionsale on November 30, 2012.May 1, 2014. The TSA provides for certain administrative and other services and support to be provided by usAffinia to BPIFM Chassis and to be provided by BPIFM Chassis to us.Affinia. 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 2014.2014 or 2015. The TSAs and the distribution services wereTSA was established as arman arm’s length transactionstransaction and areis intended for the contracting parties to recover costs of the services. Onservices provided.

The following table shows the dateChassis group’s assets and liabilities that are included in assets of the distribution, we no longer had any influence over BPI. We evaluated all potential variable interests between Affiniadiscontinued operations and BPI and determined that we are not the primary beneficiaryliabilities of BPI. Consequently, we deconsolidated BPIdiscontinued operations 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.Condensed Consolidated Balance Sheets:

Note 7. Derivatives6. DERIVATIVES

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 ourits own creditworthiness, and of the creditworthiness of the counterparties to ourits derivative instruments, fair value measurements are not adjusted for nonperformance risk.

Currency Forward Contract Derivatives

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.

OurWe enter into short-term currency forward contracts which are intended to offset the currency exchange gain (loss) related to the re-measurement process and 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. ChangesTherefore, any changes in the fair value of these short-term currency forward contracts are recognized in incomeearnings each accounting period. At December 31, 2012, theThe aggregate notional amountamounts of ouroutstanding short-term currency forward contracts was $69were $43 million having a fair market valueand $86 million as of September 30, 2014 and December 31, 2013, respectively. During the three months and nine months ended September 30, 2014, we recorded losses of less than $1 million in assets and liabilities. At$1 million, respectively, associated with short-term currency forward contracts. During the three and nine months ended September 30, 2013, the aggregate notional amount of our currency forward contracts was $75 million having a fair market valuewe recorded gains of less than $1 million and losses of less than $1 million, respectively, associated with short-term currency forward contracts.

Additionally, beginning in assetsthe third quarter of 2014, we entered into currency forward contracts which are intended to offset against foreign exchange risk for certain forecasted gross receivable and liabilities.payable balances. These currency forward contracts are considered highly effective based on critical terms matching and the result ofde minimis testing. Therefore, the gains or losses of these hedges are deferred as a component of “Accumulated Other Comprehensive Income (Loss)” (“AOCI”) and reclassified into net income in the same period during which the hedged transaction affects net income. The aggregate notional amounts of outstanding currency forward contracts were $38 million as of September 30, 2014. There were no gains or losses recorded for these currency forward contracts in the three and nine months ended September 30, 2014.

The Company’s outstanding currency forward contracts are recorded in the Condensed Consolidated Balance Sheets as either “Other current assets” or “Other accrued expenses,” accordingly.depending on whether the contracts are in asset or liability positions at the end of each reporting period. Currency forward contract gains and losses are recognized in “Other income (loss),and expense, net” in the Condensed 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.

Currency forward contract gains and losses are recognized in “Other 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:

Interest Rate Derivatives

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”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 Condensed Consolidated Balance Sheets as “Other current assets” or “Other accrued expenses,” accordingly.depending on whether the contracts are in asset or liability positions at the end of each reporting period. In compliance with ASC 815, the Company formally assesses the effectiveness of its interest rate swaps at inception and on a quarterly basisat least every three months 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.treatment.

Changes in the fair value of derivatives designated as cash flow hedges are recorded toas a component of other comprehensive income (loss), to the extent such cash flow hedges are effective. Amounts are reclassified from other comprehensive income (loss) to earnings 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 less than $1 million and $2 million from other comprehensive income (loss) into interest expense induring the firstthree and nine months ofended September 30, 2014, respectively. There were no amounts reclassified from other comprehensive income (loss) into interest expense during the three or nine months ended September 30, 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 asduring the three and nine months ended September 30, 2014 or 2013.

As of September 30, 2013.

The2014 and December 31, 2013, the notional amount and fair value of outstanding interest rate swaps outstanding are and were as follows:

7. DEBT

Our debt consists of notes that are publicly traded, an asset-based revolving credit facility (“ABL Revolver”), term loan facilities consisting of Term Loan B-1 and Term Loan B-2 and other short-term borrowings. 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 and were as follows:

Fair Value of Debt at September 30, 2014

Fair Value of Debt at December 31, 2013

A financial covenant exists under the ABL Revolver that would be triggered if excess availability under the ABL Revolver is less than the greater of 10% of the total borrowing base and $10 million. If the covenant trigger were to occur, we would be required to satisfy and maintain a fixed charge coverage ratio of at least 1.00x, measured for the last twelve-month period. As of September 30, 2014, none of the covenant triggers had occurred. The impact of falling below the fixed charge coverage ratio would not be a default but would trigger the imposition of restrictions on our ability to pursue certain operational or financial transactions (e.g. asset dispositions, dividends and acquisitions).

As discussed further in Note 5 to the Condensed Consolidated Financial Statements, “Discontinued Operations—Chassis”, on May 1, 2014, Affinia closed the sale of the Chassis group. In conjunction with the closing of the sale, cash proceeds of $149 million were received. With the proceeds and cash from operations, the Company paid down $24 million of Term Loan B-1 and $85 million of Term Loan B-2. Additionally, the Company made a $57 million distribution to Holdings. Holdings used all of the distribution to partially repay the note issued by Holdings to Dana Corporation (“Dana”) as part of the financing in connection with our acquisition in 2004 of substantially all of the aftermarket business operations of Dana (the “Seller Note.”) As of September 30, 2014, the Seller Note balance was $28 million.

On April 25, 2013, we refinanced our existing notes and credit facilities and made a distribution to Holdings, our sole stockholder. The refinancing consisted of the issuance of $250 million aggregate principal amount 7.75% Senior Notes due May 1, 2021, a $200 million term loan due April 25, 2016, a $470 million term loan due April 25, 2020, the proceeds of which we used, together with $31 million of cash on hand, to redeem our 10.75% Senior Secured Notes due 2016, redeem our 9% Senior Subordinated Notes due 2014, 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 Seller Note and make a distribution of $133 million to Holdings’ stockholders.

The sources and uses of proceeds of the 2013 refinancing consisted of the following:

As the refinancing was treated as an extinguishment of debt under ASC 470, “Debt”, we recorded a $15 million loss in connection with the refinancing arrangement. Additionally, we recorded a write-off of $5 million for unamortized deferred financing costs associated with the redemption of our Secured Notes and Subordinated Notes, as well as a write-off of $3 million for the replacement of our existing ABL Revolver with a new ABL Revolver. These charges were recorded within Interest Expense in the Condensed Consolidated Statements of Operations.

In conjunction with the refinancing, we recorded $15 million in total deferred financing costs, of which $14 million related to the issuance of our Senior Notes and Term Loans and $1 million was associated with the ABL Revolver.

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’ operating expenses.

8. Inventories, netINVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined on the FIFOfirst in first out 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:

Note 9. Goodwill

Goodwill as of December 31, 2012 and 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, $2 million for a minor acquisition in 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.

Note 10. Commitments and ContingenciesCOMMITMENTS AND CONTINGENCIES

At September 30, 2013,2014, the Company had purchase commitments for property, plant and equipment of approximately $8$4 million.

A reconciliation of the changes in our return reserves, which is included in other“Other accrued expenses,expenses” in the Condensed Consolidated Balance Sheets, is as follows:presented in the following table. The table below excludes amounts associated with the Chassis group.

Note 11. Income TaxesThe Company is continuing a review of certain allegations that have arisen in connection with business operations involving our subsidiaries in Poland and Ukraine. The allegations raise issues involving potential improper payments in connection with governmental approvals, permits, or other regulatory areas and possible conflicts of interest. The review is being supervised by the Audit Committee of our Board of Directors and is being conducted with the assistance of outside professionals. The review is ongoing and no determination may yet be made as to whether, in connection with the circumstances surrounding the review, we may become subject to any fines, penalties and/or other charges imposed by any governmental authority, or any other damages or costs that may arise in connection with those circumstances. We voluntarily self-reported on these matters to the U.S. Department of Justice and the U.S. Securities and Exchange Commission and intend to fully cooperate with these agencies in their review.

10. INCOME TAXES

The total amount of unrecognized tax benefits as of December 31, 2012 and September 30, 2013 was $1 million, andthat, if recognized, would affect the Company’s effective tax rate.rate was $8 million as of both September 30, 2014 and December 31, 2013. The Company recognizes interest related to unrecognized tax benefits in interest expense and recognizes penalties as part of the income tax provision. As of September 30, 2013,2014, the Company’s accrual for interest and penalties was less than $1$2 million. The Company isWe are subject to taxation in the U.S. and various state and foreign jurisdictions. For jurisdictions in which the Company transactswe transact 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.

Note 12. Legal ProceedingsThe effective tax rate was 37% for the three months ended September 30, 2014 compared to 53% for the three months ended September 30, 2013. The decrease in the effective tax rate was attributable to a decrease in income earned in jurisdictions with higher income tax rates. The effective tax rate was 47% for the nine months ended September 30, 2014 compared to 57% for the nine months ended September 30, 2013. The decrease in the effective tax rate was attributable to a decrease in income earned in jurisdictions with higher income tax rates. Additionally, in the first quarter of 2014, the Company recorded a currency devaluation of $7 million for the Venezuelan operations. This was a non-deductible item for income tax purposes.

11. LEGAL PROCEEDINGS

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 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. 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 revised the presentation of the Neovia claim which was previously recorded in loss from discontinued operations, net of tax, for $3 million in the first quarter of 2013. 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$2 million and $11$13 million accrued as of September 30, 2014 and December 31, 2012 and September 30, 2013, respectively,respectively. These amounts are reflected in other“Other accrued expenses.expenses” within the Condensed Consolidated Balance Sheets. The increasedecrease in the accrual from December 31, 2012 to September 30, 2013 was mainlyamount accrued is due to a payment of $11 million made during the first quarter of 2014 in full settlement of the Neovia Logistics Services (U.K.) Limited claim. The Company had accrued $11 million during 2013 associated with this claim. There are no recoveries expected from third parties associated with outstanding or settled claims.

In addition, we have various other claims that are reasonably possible of occurrence that range from less than $1 millionfor which our aggregate maximum exposure to $11 million in the aggregate.loss is estimated at $14 million. There are currently no recoveries expected from third parties.

Note 13. Segment and Geographic Information

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: