UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~June~~September 30, 2015.

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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)

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

1 Wix Way, Gastonia, North Carolina		28054
(Address of Principal Executive Offices)		(Zip Code)

(704) 869-3300

(Registrant’s Telephone Number, Including Area Code)

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.

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨

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~~November 1012, 2015 (all of which are privately owned and not traded on a public market).

Index

Affinia Group Intermediate Holdings Inc.

Part I FINANCIAL INFORMATION		4
Item 1. Financial Statements (unaudited)		4
Condensed_Consolidated_Statements_of_Operations—Three and Six Months Ended June 30, 2015 and 2014		4
Condensed_Consolidated_Statements_of_Operations—Three and Nine Months Ended September 30, 2015 and 2014		4
Condensed Consolidated Statements of Comprehensive Income (Loss)—Three and Six Months Ended June 30, 2015 and 2014		5
Condensed Consolidated Statements of Comprehensive Income (Loss)—Three and Nine Months Ended September 30, 2015 and 2014		5
Condensed Consolidated Balance Sheets—June 30, 2015 and December 31, 2014		6
Condensed Consolidated Balance Sheets—September 30, 2015 and December 31, 2014		6
Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2015 and 2014		7
Condensed Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2015 and 2014		7
Notes to Unaudited Condensed Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2829
Item 3. Quantitative and Qualitative Disclosures About Market Risk		4443
Item 4. Controls and Procedures		45
Part II OTHER INFORMATION		4645
Item 1. Legal Proceedings		4645
Item 1A. Risk Factors		4645
Item 6. Exhibits		4746
Signatures		4847

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 include statements 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 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 the Company’s current expectations and various assumptions. The Company’s expectations, beliefs and projections are expressed in good faith and the Company believes 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, 2014. With respect to all forward-looking statements, the Company claims 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 the Company’s 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; the Company’s dependence on its 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 the Company’s non-U.S. operations; risks related to the Company’s receivables factoring arrangements; product liability and warranty and recall claims brought against the Company; reduced inventory levels by the Company’s distributors resulting from consolidation and increased efficiency; environmental and automotive safety regulations; the availability of raw materials, manufactured components or equipment from the Company’s suppliers; challenges to the Company’s intellectual property portfolio; the Company’s ability to develop improved products; the introduction of improved products and services that extend replacement cycles or otherwise reduce demand for the Company’s products; the Company’s ability to achieve cost savings from its restructuring plans; the Company’s ability to successfully effect dispositions of existing lines of business; the Company’s ability to successfully combine its operations with any businesses it has acquired or may acquire; risk of impairment charges to the Company’s 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 the Company’s expansion into new markets; the impact on the Company’s tax rate resulting from the mix of its profits and losses in various jurisdictions; reductions in the value of the Company’s deferred tax assets; difficulties in developing, maintaining or upgrading information technology systems; risks associated with doing business in corrupting environments; and the Company’s leverage and limitations on flexibility in operating its business contained in the debt agreements. Additionally, there may be other factors that could cause the Company’s actual results to differ materially from the forward-looking statements. The Company’s forward-looking statements apply only as of the date of this report or as of the date they were made. The Company undertakes 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

FINANCIAL INFORMATION

Item 1.

Financial Statements

Affinia Group Intermediate Holdings Inc.

Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions)	2015			2014			2015			2014
Net sales	$	~~242~~238		$	~~266~~248		$	~~465~~682		$	~~509~~741
Cost of sales		(~~182~~176	)		(~~191~~181	)		(~~352~~513	)		(~~375~~545	)
Gross profit		6062			7567			~~113~~169			~~134~~196
Selling, general and administrative expenses		(3736	)		(3934	)		(70103	)		(79110	)
Operating profit		2326			3633			4366			5586
Other income and expense, net		(14	)		(2—	)		(15	)		(109	)
Interest expense		(1314	)		(15	)		(2640	)		(3045	)
Income from continuing operations before, income tax provision, and noncontrolling interest		98			1918			1621			1532
Income tax provision		(54	)		(108	)		(913	)		(1220	)
Net income from continuing operations		4			910			78			312
(Loss) income from discontinued operations, net of tax		(437	)		2613			(236	)		3145
Net income		—			35			5			34
Net (loss) income	$	(33	)	$	23		$	(28	)	$	57
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			—
Net income attributable to the Company	$	—		$	35		$	5		$	34

See accompanying notes to the condensed consolidated financial statements.

Affinia Group Intermediate Holdings Inc.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions)	2015			2014			2015			2014
Net income		—		$	35		$	5		$	34
Net (loss) income	$	(33	)	$	23		$	(28	)	$	57
Other comprehensive income (loss), net of tax:
Change in fair value of interest rate swap		1(4	)		(31	)		(26	)		(54	)
Reclassification into earnings from interest rate swap		—1			—			12			—
Change in fair value of derivatives		1—			—			1			—
Reclassification into earnings from derivatives		(1—	)		—			(1	)		—
Change in foreign currency translation adjustments		4			5			(24	)		7
Foreign currency translation adjustments		9			(20	)		(15	)		(13	)
Total other comprehensive income (loss)		56			2(19	)		(2519	)		2(17	)
Total comprehensive income (loss)		5			37			(20	)		36
Total comprehensive (loss) income	$	(27	)	$	4		$	(47	)	$	40
Less: comprehensive income attributable to noncontrolling interest, net of tax		—			—			—			—
Comprehensive income (loss) attributable to the Company	$	5		$	37		$	(20	)	$	36

See accompanying notes to the condensed consolidated financial statements.

Affinia Group Intermediate Holdings Inc.

Condensed Consolidated Balance Sheets (Unaudited)

	June 30,			December 31,
	September 30,			December 31,
(Dollars in millions)	2015			2014
Assets
Current assets:
Cash and cash equivalents	$	59114		$	2826
Restricted cash		106			4
Trade accounts receivable, less allowances of $4 million at June 30, 2015 and $4 million at December 31, 2014		96			94
Trade accounts receivable, less allowances of $4 million at September 30, 2015 and $4 million at December 31, 2014		88			89
Inventories, net		~~178~~166			~~154~~145
Current deferred taxes		1220			20
Prepaid taxes		1413			2218
Other current assets		1416			43
Current assets of discontinued operations		~~157~~53			~~176~~199
Total current assets		~~540~~476			~~541~~544
Property, plant, and equipment, net		109			~~111~~109
Goodwill		3			3
Other intangible assets, net		4947			54
Deferred financing costs		1211			14
Deferred income taxes		~~103~~105			9795
Investments and other assets		65			12
Total assets	$	~~822~~756		$	821
Liabilities and shareholder's deficit
Current liabilities:
Accounts payable	$	~~107~~97		$	~~102~~99
Notes payable		~~206~~204			19
Other accrued expenses		5563			4743
Accrued payroll and employee benefits		1516			1716
Current liabilities of discontinued operations		4623			5058
Total current liabilities		~~429~~403			235
Long-term debt		616			792
Deferred employee benefits and other noncurrent liabilities		1416			13
Total liabilities		1,~~059~~035			1,040
Contingencies and commitments
Shareholder's deficit:
Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding		—			—
Additional paid-in capital		~~456~~458			455
Accumulated deficit		(~~616~~665	)		(622	)
Accumulated other comprehensive loss		(7872	)		(53	)
Total shareholder's deficit of the Company		(~~238~~279	)		(220	)
Noncontrolling interest in consolidated subsidiaries		1—			1
Total shareholder's deficit		(~~237~~279	)		(219	)
Total liabilities and shareholder's deficit	$	~~822~~756		$	821

See accompanying notes to the condensed consolidated financial statements.

Affinia Group Intermediate Holdings Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30, 2015
	Nine Months Ended September 30, 2015
(Dollars in millions)	2015			2014
Operating activities
Net income	$	5		$	34
Net (loss) income	$	(28	)	$	57
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1115			1015
Currency devaluation		—			7
Gain on sale of Chassis Group		—			(21	)
Loss (gain) on sale of businesses		45			(32	)
Stock-based compensation		2			—
Non-cash reserves		6			—
Stock-based compensation		3			—
Write-off of unamortized deferred financing costs		—			1
Provision for deferred income taxes		(710	)		(2129	)
Change in trade accounts receivable		(94	)		(2958	)
Change in inventories		(3531	)		(2119	)
Change in other current operating assets		4228			193
Change in other current operating liabilities		1728			3354
Change in other		3(4	)		(65	)
Net cash provided by operating activities		2948			64
Investing activities
Proceeds from the sale of the Chassis group		—			140
Proceeds from the sale of businesses, net of cash transferred		56			149
Proceeds from the sale of an equity method investment		—			4
Change in restricted cash		(62	)		—
Additions to property, plant and equipment		(1117	)		(1118	)
Net cash (used in) provided by investing activities		(17	)		133
Net cash provided by investing activities		37			135
Financing activities
Proceeds from other debt		1424			—
Repayments of other debt		(115	)		(910	)
Repayment of term loans		—			(78109	)
Distribution to our shareholders		—			(45	)
Proceeds from stock options exercised		1			—
Distribution to shareholders		(15	)		(57	)
Other financing activities		(1	)		—
Net cash provided by (used in) financing activities		12			(132	)
Net cash used in financing activities		(6	)		(176	)
Effect of exchange rates on cash		(49	)		(46	)
Increase in cash and cash equivalents		20			3
Increase (decrease) in cash and cash equivalents		70			(43	)
Cash and cash equivalents at beginning of the period		45			101
Cash and cash equivalents at end of the period	$	65115		$	~~104~~58

See accompanying notes to the condensed consolidated financial statements.

Affinia Group Intermediate Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1. DESCRIPTION OF BUSINESS

Affinia Group Intermediate Holdings Inc. (“Affinia” or the “Company”), headquartered in Gastonia, North Carolina, is an innovative global leader in the design, manufacture, distribution and marketing of industrial grade filtration products and services and replacement products in South America. The Company’s broad range of filtration and other products are sold in North America, Europe, South America, Asia and Africa. The Company’s brands include WIX^®, Filtron^®, Nakata^® and ecoLAST^®. Additionally, the Company provides private label products for certain customers, including NAPA^®.

~~The~~MANN+HUMMEL ~~Company is wholly-owned by Affinia Group Holdings Inc. (“Holdings”), a company controlled by affiliates of The Cypress Group, L.L.C. (“Cypress”).~~ Merger

AsThe ~~discussed~~Company ~~further~~is inwholly-owned ~~Note~~by 5Affinia toGroup ~~the~~Holdings ~~Condensed~~Inc. ~~Consolidated~~(“Holdings”), ~~Financial~~a ~~Statements~~company controlled by affiliates of The Cypress Group, L.L.C. (“~~Discontinued~~Cypress”). ~~Operation~~On August 13, 2015, Holdings, a Delaware corporation, entered into an agreement and plan of merger (the “Merger Agreement”) with MANN+HUMMEL Holding GmbH, ina German limited liability company (“MANN+HUMMEL”). Subject to the ~~second~~terms ~~quarter~~and ofconditions ~~2015~~set forth in the Merger Agreement, ~~management~~the ~~committed~~aggregate merger consideration payable to Affinia Canada ULC and Affinia Southern Holdings LLC (collectively, “Sellers”), is $513.1 million (i) minus adjustments reflecting transaction expenses, a ~~plan~~$10 million escrow to ~~sell~~cover limited indemnities and an amount reserved for the payment of expenses incurred by the sellers’ representative and (ii) plus adjustments reflecting adjusted net proceeds from the sale of the Company’s Brazilian operations previously announced and the sale of the ~~Affinia~~Company’s ~~South~~Argentinian ~~America~~and Uruguayan operations (collectively, the “ASA Transactions”) ~~segment~~and a daily interest factor applied to the purchase price. ~~Accordingly~~At the effective time of the Merger, each outstanding share of Holdings will be converted into the ~~results~~right to receive a proportionate share of ~~these~~the ~~businesses~~aggregate ~~have~~consideration, ~~been~~plus ~~included~~a ascontingent right to receive a ~~component~~portion of ~~discontinued~~the ~~operations~~escrow amount and the amount reserved for expenses of the sellers’ representative, in each case at the ~~Condensed~~time ~~Consolidated~~and ~~Statements~~upon satisfaction of ~~Operations~~the ~~for~~conditions ~~all~~specified ~~periods~~in ~~presented~~the Merger Agreement.

The Merger Agreement has been approved by the Board of Directors of Holdings as well as all required governing bodies of MANN+HUMMEL (including its Supervisory Board) and the Board of Directors and stockholder of merger sub. Consummation of the Merger is subject to certain customary conditions, including, among others, adoption of the Merger Agreement by the holders of a majority of the issued and outstanding shares of Holdings common stock, holders of no more than five percent of the common stock of Holdings exercising dissenters’ rights, receipt of any required regulatory approvals and expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the absence of any order, judgment, injunction, decree, stipulation or determination prohibiting the Merger, and completion of the Affinia South America (“ASA”) Transactions. It is currently anticipated that this transaction will close by the first quarter of 2016 or earlier depending on timing of regulatory approvals and satisfaction of other closing conditions.

The Merger Agreement contains representations and warranties customary for transactions of this type. Holdings has agreed to various covenants and agreements, including, among others, agreements to (i) conduct its business in the ordinary course consistent with past practice during the period between the execution of the Merger Agreement and the closing thereunder and (ii) not engage in certain kinds of transactions during this period, including transactions involving leakage to the Sellers.

The Merger Agreement also contains certain termination provisions for Holdings and MANN+HUMMEL, including, among others, termination rights for Holdings and MANN+HUMMEL in the event the Merger has not closed within eight months after the date of the Merger Agreement, extended up to sixty days if necessary for Holdings to complete the ASA Transactions (the “Outside Date”) or in the event there is a breach of a representation, warranty, covenant or agreement by the other party which cannot be cured by the Outside Date.

Affinia South America (“ASA”) Disposal

In the second quarter of 2015, management committed to a plan to sell Pellegrino Distribuidora de Autopecas Ltda. (“Pellegrino”) and Affinia Automotiva Ltda. (“Automotiva”), collectively referred to as “ASA Brazil.”. The Company completed the sale of Pellegrino in September 2015 and the sale of Automotiva in October 2015. Additionally, in the third quarter of 2015 the Company executed definitive purchase and sale agreements for the remaining ASA operations in Argentina and Uruguay and completed the disposition of these businesses through sale in September 2015. Accordingly, the results of operations of the former ASA segment have been included as a component of discontinued operations in the Condensed Consolidated Statements of Operations for all periods presented. With the completion of these transactions in 2015, all of the businesses that comprised the ASA segment have been disposed of through sale. See Note 5 to the Condensed Consolidated Financial Statements, “Discontinued Operations”, for additional information.

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 term the “Company,” refers to Affinia Group Intermediate Holdings Inc. and its direct and indirect subsidiaries on a consolidated basis.

2. BASIS OF PRESENTATION

These Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) for interim financial information and with 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 Form 10-K for the year ended December 31, 2014.

These Condensed Consolidated Financial Statements reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present the financial position and results of operations. Amounts reported in the interim Condensed Consolidated Statement of Operations and the interim Condensed Consolidated Statements of Comprehensive Income (Loss) are not necessarily indicative of amounts expected for the respective annual periods.

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 ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Issued But Not Yet Adopted

In ~~April~~July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-0311 “Simplifying the ~~Presentation~~Measurement of ~~Debt Issuance Costs~~Inventory.” ASU 2015-0311 ~~changes~~simplifies the ~~presentation~~subsequent measurement of ~~the~~inventory ~~debt~~by ~~issuance~~changing ~~costs~~the invaluation ~~the~~method ~~financial~~from ~~statements~~lower byof ~~presenting~~cost ~~the~~or ~~costs~~market asto alower ~~direct~~of ~~deduction~~cost ~~from~~or ~~the~~net ~~related~~realizable ~~debt~~value, ~~liability~~with ~~rather~~net ~~than~~realizable value defined as anestimated ~~asset. Amortization~~selling ofprices in the ~~costs~~ordinary ~~will~~course beof ~~reported~~business asless ~~interest~~reasonably ~~expense~~predictable costs of completion, disposal and transportation. This ASU is effective for reporting periods beginning after December 15, ~~2015~~2016. Early adoption is permitted. The ~~impact~~Company ofdoes not expect the ~~new~~updated ~~ASU~~guidance ~~would~~to behave a ~~reclassification~~material ~~from~~impact ~~deferred~~on ~~financing costs to long-term debt in~~ the ~~period~~consolidated offinancial ~~adoption~~position, ~~applied~~results ~~retrospectively. As~~ of ~~June~~operations ~~30,~~or ~~2015~~cash ~~the deferred financing costs balance was $12 million~~flows.

In ~~May~~April ~~2014~~2015, the ~~Financial Accounting Standards Board (~~“FASB”) issued ~~Accounting Standards Update (~~“ASU”) ~~2014~~2015-~~09,~~03 “~~Revenue~~Simplifying ~~from~~the ~~Contracts~~Presentation ~~with~~of ~~Customers~~Debt Issuance Costs.” ASU ~~2014~~2015-0903 ~~outlines~~changes athe ~~single~~presentation ~~comprehensive~~of ~~model~~the ~~for~~debt ~~entities~~issuance tocosts ~~use~~ in ~~accounting~~the ~~for~~financial ~~revenue~~statements ~~arising~~by presenting the costs as a direct deduction from ~~contracts~~the ~~with~~related ~~customers~~debt ~~and~~liability ~~supersedes~~rather ~~most~~than ~~current~~as ~~revenue~~an ~~recognition~~asset. Upon ~~guidance~~adoption, ~~including~~amortization ~~industry-specific~~of ~~guidance.~~the costs will be reported as interest expense. This ASU is effective for reporting periods beginning after December 15, ~~2017~~2015. Early adoption is ~~not~~ permitted. The ~~Company~~impact isof ~~currently~~the ~~assessing~~new ASU would be a reclassification from deferred financing costs to long-term debt in the ~~impact~~period ~~that~~of ~~this~~adoption, ~~new~~applied ~~ASU~~retrospectively. As of September 30, 2015 the deferred financing costs balance was $11 million. Additionally, approximately $3 million of amortization of deferred financing costs will ~~have~~be onreported ~~its~~as ~~revenue~~interest ~~recognition~~expense ~~upon~~in the year of adoption.

8In May 2014, the “FASB” issued “ASU” 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This ASU is effective for reporting periods beginning after December 15, 2017. Early adoption is not permitted. The Company is currently assessing the impact that this new ASU will have on its revenue recognition upon adoption.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern.” ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. This ASU is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the updated guidance to have a material impact on the consolidated financial position, results of operations or cash flows.

Adopted Accounting Pronouncements

In April 2014, the FASB issued 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”) 205-20 and requires 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 to provide more decision-useful information and to make it more difficult for a disposal transaction to qualify as a discontinued operation. In addition, the ASU requires entities to reclassify assets and liabilities of a discontinued operation for all comparative periods in the statement of financial position, as well as significant changes to the presentation requirements within the statement of cash flows. This ASU is effective for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014. Early adoption is permitted. See Note 5 to the Consolidated Financial Statements, “Discontinued Operations” for the impact of this accounting pronouncement.

that do not meet the discontinued operations criteria. The FASB issued the ASU to provide more decision-useful information and to make it more difficult for a disposal transaction to qualify as a discontinued operation. In addition, the ASU requires entities to reclassify assets and liabilities of a discontinued operation for all comparative periods in the statement of financial position, as well as significant changes to the presentation requirements within the statement of cash flows. This ASU is effective for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014. Early adoption is permitted. See Note 5 to the Consolidated Financial Statements, “Discontinued Operations” for the impact of this accounting pronouncement.

4. SEGMENT INFORMATION

The Company has ~~two~~one operating ~~segments~~segment, Filtration ~~and Affinia South America (“ASA”)~~, which ~~are~~is considered a reportable ~~segments~~segment 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 the Company’s businesses. Management evaluates the performance of its operating segments based primarily on revenue growth and operating profit and management’s evaluation is on a continuing operations basis only. Although not considered an operating segment, corporate, eliminations and other includes corporate costs, interest expense and other amounts not allocated to the operating segments. In the first quarter of 2015, the Company’s management changed the calculation of segment earnings whereby certain corporate costs that were previously allocated to the operating segments were no longer allocated. Accordingly, all of these previously allocated costs remained in corporate, eliminations and other. Prior period segment results were recast to conform to current period presentation.

Filtration’s 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. 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^®.

~~ASA~~Prior ~~focuses~~to onthe ~~distributing~~third ~~and~~quarter ~~manufacturing~~of ~~brake~~2015, ~~suspension,~~the ~~driveshaft~~Company ~~and~~presented ~~U-joint~~ASA ~~components,~~as ~~water~~a ~~and~~separate ~~fuel~~reportable ~~pumps,~~segment. As ~~filters~~discussed further in Note 5 to the Consolidated Financial Statements, ~~engine~~“Discontinued ~~products~~Operations”, ~~motorcycle~~in ~~products~~the second quarter of 2015, ~~accessories~~management ~~and~~committed ~~other~~to ~~critical~~a ~~aftermarket~~plan ~~components~~to ~~through~~sell ~~its~~ASA ~~operations~~Brazil. At inthat ~~Argentina~~time, ASA Brazil, ~~Uruguay~~met ~~and~~the ~~historical~~criteria ~~operations~~of inassets ~~Venezuela,~~held ~~which~~for ~~was~~sale ~~closed~~under inASC ~~the~~Topic ~~second~~205, ~~quarter~~“Presentation of ~~2014.~~Financial ~~During~~Statements,” (“ASC 205”) and, accordingly, the ~~second~~results ~~quarter~~of that disposal group were reflected as discontinued operations for all periods presented. The sale of Pellegrino was completed in September 2015, ~~management~~and ~~committed~~the tosale aof ~~plan~~Automotiva towas ~~sell~~completed in October 2015. Additionally, in the ~~Brazilian~~third ~~operations~~quarter ~~within~~of ~~ASA~~2015, ~~which~~management iscompleted ~~comprised~~the sale of ~~Automotiva~~ASA’s ~~and~~remaining ~~Pellegrino~~operations ~~(“ASA~~in ~~Brazil”)~~Argentina and Uruguay and, accordingly, the results of ~~that~~those ~~disposal~~businesses ~~group~~ have been ~~included~~reflected as a component of discontinued operations. ~~and~~As ~~excluded~~a ~~from~~result of the ~~tables~~aforementioned ~~below. See~~transactions, ~~Note~~at 5September to30, ~~the~~2015, ~~Consolidated~~all ~~Financial~~of ~~Statements,~~the ~~“Discontinued~~ASA ~~Operation”~~businesses ~~for~~have ~~further~~either ~~information~~been ~~regarding~~disposed ~~ASA~~of ~~Brazil.~~via ~~Since~~sale ~~ASA~~or ~~Brazil~~met ~~meets~~ the criteria of assets held -for -sale ~~under~~as ~~ASC Topic 205, “Presentation~~ of ~~Financial~~that ~~Statements~~date. Accordingly,” ~~(“ASC 205”),~~ the results of operations ~~have~~of the ASA segment haves been ~~reflected~~included aswithin discontinued operations in the Consolidated Statements of Operations for all periods presented. ~~Currently,~~ Since the ~~ASA~~Company’s ~~segment~~operating ~~consists~~segments ofare determined on continuing operations inbasis, ~~Argentina~~the ~~and~~ASA ~~Uruguay,~~business asis ~~well~~no aslonger ~~the~~considered ~~results~~a ofseparate ~~the~~reportable ~~Venezuela~~segment ~~operations~~since ~~prior~~it todoes ~~shut~~not ~~down~~have inany ~~the~~continuing ~~second~~operations ~~quarter~~as of ~~2014~~the end of the third quarter.

9The following table presents financial information for our Filtration segment, as well as for corporate, eliminations and other, and on a consolidated basis:

The following table presents financial information for each of our reportable segments, as well as for corporate, eliminations and other, and on a consolidated basis:

	Three Months Ended September 30, 2015							Three Months Ended September 30, 2014
(Dollars in millions)	Filtration		Corporate, Eliminations & Other			Consolidated		Filtration		Corporate, Eliminations & Other			Consolidated
Net Sales	$	238	$	—		$	238	$	248	$	—		$	248
Operating Profit		41		(15	)		26		46		(13	)		33

	Nine Months Ended September 30, 2015							Nine Months Ended September 30, 2014
(Dollars in millions)	Filtration		Corporate, Eliminations & Other			Consolidated		Filtration		Corporate, Eliminations & Other (a)			Consolidated
Net Sales	$	682	$	—		$	682	$	732	$	9		$	741
Operating Profit		103		(37	)		66		125		(39	)		86

	Three Months Ended June 30, 2015									Three Months Ended June 30, 2014
(Dollars in millions)	Filtration		ASA		Corporate, Eliminations & Other			Consolidated		Filtration		ASA		Corporate, Eliminations & Other			Consolidated
Net Sales	$	230	$	12	$	—		$	242	$	251	$	15	$	—		$	266
Operating Profit		35		2		(14	)		23		47		3		(14	)		36
	Six Months Ended June 30, 2015									Six Months Ended June 30, 2014
(Dollars in millions)	Filtration		ASA		Corporate, Eliminations & Other			Consolidated		Filtration		ASA		Corporate, Eliminations & Other			Consolidated
Net Sales	$	444	$	21	$	—		$	465	$	484	$	25	$	—		$	509
Operating Profit		63		4		(24	)		43		79		6		(30	)		55

(a)

The nine months ended September 30, 2014 includes $9 million of net sales and operating profit of $3 million associated with ASA’s Venezuelan operations, which were shut down in June 2014. As these operations did not meet the criteria as held-for-sale, they are reported as a component of continuing operations. However, due to the insignificance of the amounts associated with Venezuela, management has presented them within corporate, eliminations and other since the remainder of the ASA segment is included in discontinued operations.

5. DISCONTINUED OPERATIONS

As described further below in the second quarter of 2015, management committed to a plan to sell its Brazilian operations within ASA. In accordance with ASC 205 this portion of the ASA segment met the definition of a disposal group at the time management committed to a plan to sell and, accordingly, the results of operations have been classified as a component of discontinued operations for all periods presented as this disposal represents a strategic shift that will have a significant effect on the Company’s operations and financial results.

On June 12, 2015, Affinia Canada ULC and Affinia Southern Holdings LLC (collectively, “Sellers”), wholly-owned indirect subsidiaries of Affinia Group Intermediate Holdings Inc. (the “Company”), entered into two separate purchase and sale agreements (the “Purchase Agreements”) to sell their equity interests in each of Pellegrino Distribuidora de Autopecas Ltda. (“Pellegrino”) and Affinia Automotiva Ltda. (“Automotiva”). The purchasers under the Pellegrino Purchase Agreement are Distribuidora Automotiva S.A. and Car Central De Autopecas e Rolamentos Ltda. (the “Pellegrino Purchasers”) and the purchasers under the Automotiva Purchase Agreement are Auto Norte Distribuidora de Pecas Ltda., Cobra Rolamentos e Autopecas Ltda., Distribuidora Automotiva S.A., Jorge C. Schertel, Pedro Molina Quaresma and Sedim-Administracao e Participacoes Ltda. (the “Automotiva Purchasers”) The closing of each sale is contingent on the simultaneous closing of the other sale, unless waived by the Sellers, and the closing of each sale is contingent on customary closing conditions, including antitrust clearance under Brazilian law.

The purchase price to Sellers for the sale of each of Pellegrino and Automotiva will be paid in Brazilian Reals. The Pellegrino purchase price is 215,000,000 Brazilian Reals and the purchase price for the sale of Automotiva is 146,285,000 Brazilian Reals (in each case, the “Base Purchase Price”), and, in each case, plus or minus an adjustment reflecting (i) an estimate of interim profits or losses, as applicable, of the Sellers related to the Pellegrino or Automotiva business, respectively, each calculated in accordance with a process established in the respective Purchase Agreement, and (ii) minus a percentage of certain claims that may arise after signing and before closing. After closing, the parties will determine a final purchase price reflecting the actual interim profits and losses and such claims, as well as other adjustments, calculated in accordance with a process established in the respective Purchase Agreement.

This transaction is expected to close in the third quarter of 2015. The gain on sale of ASA Brazil will be dependent on the exchange rate in effect at the date of closing, as well as the impact of the adjustments at closing described above. The proceeds from sale are required to be used to pay down the Company’s outstanding debt. The Consolidated Statements of Cash Flows were not adjusted to reflect this operation as a discontinued operation for any period presented.

The following table shows the net sales, cost of sales, gross profit, selling general and administrative expenses, operating profit, 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 Statement of Operations associated with the ASA Brazil disposal group:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2015			2014			2015			2014
Net sales	$	79		$	100		$	159		$	188
Cost of sales	$	(66	)	$	(80	)	$	(131	)	$	(151	)
Gross profit		13			20			28			37
Selling, general and administrative expenses	$	(9	)	$	(14	)	$	(19	)	$	(25	)
Operating profit	$	4		$	6		$	9		$	12
Income from continuing operations before, income tax provision, and noncontrolling interest		4			6			9			12
Income tax provision(1)		8			1			11			3
Net (loss) income	$	(4	)	$	5		$	(2	)	$	9

5. DISCONTINUED OPERATIONS

~~(1)~~As ~~The~~described ~~amount~~further ~~includes~~below, $7in ~~million~~the second quarter of ~~additional~~2015, ~~tax~~management ~~expense~~committed ~~recorded~~to a plan to sell ASA Brazil. In accordance with ASC 205, this portion of the ASA segment met the definition of a disposal group at the time management committed to a plan to sell and, accordingly, the results of operations have been classified as a component of discontinued operations for all periods presented. While the Company was actively marketing the remaining ASA operations in Argentina and Uruguay at the same time as ASA’s Brazilian operations, these businesses did not meet the held-for-sale criteria under ASC 205 during the second quarter of 2015. In the third quarter of 2015, the Company closed on the sale of Pellegrino, as awell ~~result~~as reached definitive agreement and closed on the disposition of ~~capital~~ASA’s ~~gains~~remaining ~~tax~~operations ~~associated~~in ~~with~~Argentina and Uruguay. In October 2015, the ~~pending~~sale of Automotiva was completed. Since ASA was one of the Company’s reportable segments, management has determined that, despite the sale of disposal groups to multiple acquirers the ultimate sale of all of the businesses that comprised the ASA ~~Brazil~~segment represents a strategic shift that will have a major effect on the Company’s operations and financial results. For the year ended December 31, 2014, the ASA segment accounted for 31% of consolidated net sales. Accordingly, the results of operations of the former ASA segment have been classified as a component of discontinued operations for all periods presented. The Consolidated Statements of Cash Flows were not adjusted to reflect this operation as a discontinued operation for any period presented.

~~The~~On ~~following~~June ~~tables~~12, ~~shows~~2015, the ~~ASA~~Sellers, ~~Brazil~~a ~~disposal~~wholly-owned ~~group’s~~indirect ~~asset~~subsidiaries of the Company, entered into two separate purchase and ~~liabilities~~sale ~~that~~agreements ~~are~~(the ~~included~~“Purchase Agreements”) to sell their equity interests in ~~assets~~each of ~~discontinued~~Pellegrino ~~operations~~and Automotiva. The purchasers under the Pellegrino Purchase Agreement are Distribuidora Automotiva S.A. and ~~liabilities~~Car ofCentral ~~discontinued~~De ~~operations~~Autopecas one Rolamentos Ltda. (the ~~Condensed~~“Pellegrino ~~Consolidated~~Purchasers”) ~~Balance~~and ~~Sheets:~~the purchasers under the Automotiva Purchase Agreement are Auto Norte Distribuidora de Pecas Ltda., Cobra Rolamentos e Autopecas Ltda., Distribuidora Automotiva S.A., Jorge C. Schertel, Pedro Molina Quaresma and Sedim-Administracao e Participacoes Ltda. (the “Automotiva Purchasers”).

	June 30,		December 31,
(Dollars in millions)	2015		2014
Cash and cash equivalents	$	5	$	17
Trade accounts receivable		49		52
Inventories, net		60		60
Other current assets		18		20
Property, plant, and equipment, net		10		12
Other assets		15		15
Current assets of discontinued operations	$	157	$	176
Accounts payable		34		36
Other accrued expenses		12		14
Current liabilities of discontinued operations	$	46	$	50

The purchase price to Sellers for the sale of each of Pellegrino and Automotiva was paid in Brazilian Reals. The Pellegrino purchase price was 215,000,000 Brazilian Reals and the purchase price for the sale of Automotiva was 146,285,000 Brazilian Reals (in each case, the “Base Purchase Price”), and, in each case, plus or minus an adjustment reflecting (i) an estimate of interim profits or losses, as applicable, of the Sellers related to the Pellegrino or Automotiva business, respectively, each calculated in accordance with a process established in the respective Purchase Agreement, and (ii) minus a percentage of certain claims that may arise after signing and before closing. After closing, the parties determined a final purchase price reflecting the actual interim profits and losses and such claims, as well as other adjustments, calculated in accordance with a process established in the respective Purchase Agreement.

~~The~~As ~~following~~discussed ~~table~~above, ~~shows~~the sale of Pellegrino was completed in September 2015. Based on the ~~depreciation,~~exchange ~~amortization~~rate ~~and~~in ~~capital~~effect ~~expenditures~~on ~~that~~the ~~are~~date ~~included~~of ~~within~~closing, the ~~consolidated~~Company ~~statement~~received proceeds of ~~cash~~$58 ~~flow~~million associated with the ~~ASA~~sale ~~Brazil~~of ~~disposal~~Pellegrino ~~group~~and recognized a pre-tax loss of $25 million on sale. This loss was predominately driven by the release of currency translation adjustments that had been previously deferred as a component of accumulated other comprehensive income. A portion of the proceeds from the sale will be used to pay down the Company’s outstanding debt. The tax implications for the sale of Pellegrino were insignificant.

	Six Months Ended June 30,
(Dollars in millions)	2015		2014
Depreciation and amortization	$	1	$	1
Capital Expenditures	$	1	$	1

Additionally, as discussed above, the sale of the operations in Argentina and Uruguay was completed in September 2015. At closing, the Company received proceeds of $5 million and recognized a pre-tax loss of $20 million on sale. For tax purposes, the sale resulted in a pre-tax loss of $9 million; however, the capital loss is offset by a valuation allowance and resulted in no tax benefit being recorded.

InThe ~~the~~president ~~fourth quarter~~ of ~~2013,~~the ~~management~~Company’s ~~committed~~ASA tosegment ais ~~plan~~party to ~~sell~~ the ~~Chassis~~Pellegrino ~~group~~transaction. In ~~Pursuant~~connection towith ~~ASC~~and ~~205,~~simultaneous ~~the~~with ~~Chassis group met~~ the ~~definition~~closing of ~~a disposal group at~~ the ~~time~~Pellegrino ~~management~~transaction ~~committed~~on toSeptember ~~a plan to sell the group and~~30, ~~accordingly~~2015, ~~the~~this ~~results~~individual ofpurchased ~~operations~~four ofproperties ~~the~~owned ~~Chassis~~by ~~group~~Pellegrino ~~have~~with ~~been~~a ~~classified~~net asbook avalue ~~component~~ of ~~discontinued~~less ~~operations.~~than On$1 ~~January 21,~~million. In ~~2014,~~order ~~Affinia~~to ~~entered~~fund ~~into~~the anpurchase ~~Asset~~of ~~Purchase~~the ~~Agreement~~properties, asat ~~amended~~closing, ~~with~~the ~~Federal-Mogul~~Company ~~Chassis~~redeemed ~~LLC~~all ~~(formerly~~outstanding ~~known~~equity asowned ~~VCS~~by ~~Quest~~the ~~Acquisition~~individual ~~LLC)~~and ~~(“FM~~received ~~Chassis”),~~net ancash ~~affiliate~~proceeds of ~~Federal-Mogul~~less ~~Corporation,~~than ~~pursuant~~$1 tomillion ~~which~~for FMthe ~~Chassis agreed to~~ purchase of the ~~Chassis~~real ~~group~~estate. This ~~transaction~~amount ~~closed~~is onincluded ~~May 1,~~in ~~2014.~~the ~~The~~purchase ~~Consolidated~~price ~~Statements~~consideration ofdiscussed ~~Cash~~above. Additionally, ~~Flows~~the ~~were~~same ~~not~~individual ~~adjusted~~is toalso ~~reflect~~part ~~this~~of the buying group asthat aacquired ~~discontinued~~Automotiva ~~operation~~which ~~for~~is ~~any~~further ~~period~~discussed ~~presented~~below.

~~Upon~~On October 30, 2015, the ~~closing~~Company completed the previously announced sale of ~~this~~Automotiva. ~~transaction~~Upon closing, ~~Affinia~~the Company received ~~cash~~a ~~proceeds~~purchase price of ~~$140~~148,982,541 ~~million~~in Brazilian Reals, ~~which~~or ~~represented~~US $38,596,513 based on the ~~agreed~~Real/Dollar ~~upon~~exchange ~~selling~~rate ~~price~~as of ~~$150~~October ~~million~~30, ~~less~~2015, reflecting a ~~holdback~~base ofpurchase ~~consideration~~price of 146,285,000 Brazilian Reals (or $1037,897,668 ~~million~~based ~~until~~on ~~completion~~the Real/Dollar exchange rate as of ~~certain~~October ~~post-closing~~30, ~~performance~~2015), ~~obligations~~as adjusted pursuant to the terms of the Agreement to reflect the actual interim profits and losses of the Automotiva business. At ~~The~~closing, the Company ~~released~~received $19,657,726 after deduction of certain expenses and taxes and the placement of 71,000,000 Brazilian Reals in an ~~$18~~escrow ~~million~~account ~~capital~~with ~~loss~~a ~~valuation~~Brazilian ~~allowance~~bank. asSuch escrow covers any amounts that may be owed by Automotiva relating to a ~~result~~Brazilian ofantitrust ~~the~~investigation ~~sale~~commenced on September 25, 2015, and is the ~~tax~~sole ~~benefit~~source of ~~which~~funds ~~offset~~that the ~~tax~~Buyers ~~expense~~may ~~incurred~~recover from the Sellers as to any amounts that may be owed by Automotiva relating to such investigation. In connection with this investigation, the ~~gain~~Company onrecorded a reserve in the ~~sale~~third quarter of 2015 that represents management’s best estimate of the most likely outcome of this matter. This ~~resulted~~expense inis aincluded ~~tax~~as ~~expense~~a component of ~~less~~(Loss) ~~than~~income $1from ~~million~~discontinued operations, net of tax, on the ~~sale~~Condensed ~~transaction~~Consolidated Statements of Operations.

The sale of the Chassis group resulted in a pre-tax gain of $21 million, excluding the $10 million holdback, which is reflected in the Condensed Consolidated Statements of Operations within Income from discontinued operations, net of tax.

The following table shows the net sales, cost of sales, gross profit, selling general and administrative expenses, operating profit, income before tax provision, income tax provision and net income that are included within (Loss) income from discontinued operations, net of tax on the Condensed Consolidated Statement of Operations associated with the ASA segment:

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions)	2015			2014			2015			2014
Net sales	$	85		$	116		$	265		$	319
Cost of sales	$	(69	)	$	(93	)	$	(214	)	$	(255	)
Gross profit		16			23			51			64
Selling, general and administrative expenses	$	(16	)	$	(14	)	$	(38	)	$	(40	)
Operating profit	$	—		$	9		$	13		$	24
Income from continuing operations before, income tax provision, and noncontrolling interest		—			9			14			24
Income tax provision		—			(2	)		(5	)		(7	)
Net income	$	—		$	7		$	9		$	17

The following tables shows Automotiva’s asset and liabilities that are included in assets of discontinued operations and liabilities of discontinued operations on the Condensed Consolidated Balance Sheets:

	September 30,		December 31,
(Dollars in millions)	2015		2014
Cash and cash equivalents	$	1	$	19
Trade accounts receivable		11		56
Inventories, net		22		70
Other current assets		5		24
Property, plant, and equipment, net		4		14
Other assets		10		16
Current assets of discontinued operations	$	53	$	199
Accounts payable		13		39
Other accrued expenses		10		19
Current liabilities of discontinued operations	$	23	$	58

The following table shows the depreciation, amortization and capital expenditures that are included within the consolidated statement of cash flow associated with the ASA segment.

	Nine Months Ended September 30,
(Dollars in millions)	2015		2014
Depreciation and amortization	$	2	$	2
Capital expenditures	$	1	$	1

In the fourth quarter of 2013, management committed to a plan to sell the Chassis group. Pursuant to ASC 205, the Chassis group met the definition of a disposal group at the time management committed to a plan to sell the group and, accordingly, the results of operations of the Chassis group have been classified as a component of discontinued operations. 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 Federal-Mogul Corporation, pursuant to which FM Chassis agreed to purchase the Chassis group. This transaction closed on May 1, 2014. The Consolidated Statements of Cash Flows were not adjusted to reflect this group as a discontinued operation for any period presented.

Upon 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 the Company received $9 million of cash proceeds with the remaining $1 million allocated to a post-closing purchase price adjustment. 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 the sale. This resulted in a tax expense of less than $1 million on the sale transaction.

The sale of the Chassis group resulted in a pre-tax gain of $32 million, of which $21 million was recorded in the second quarter of 2014 and $11 million was recorded in the third quarter of 2014. These amounts are reflected in the Condensed Consolidated Statements of Operations within (Loss) 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 the sale. This resulted in a tax expense of less than $1 million on the sale transaction.

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 associated with the Chassis disposal group:

	Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2015		2014		2015		2014
Net sales	$	—	$	17—	$	—	$	64
Income from continuing operations before, income tax provision, and noncontrolling interest		—		3—		—		5
Income tax provision		—		1—		—		2
Net income	$	—	$	2—	$	—	$	3

In addition to the amounts reflected in the tables above associated with the ~~ASA~~results ~~Brazil~~of operations of ASA and the Chassis Group, (Loss) income from discontinued operations on the Condensed Consolidated Statement of Operations ~~includes additional amounts of $19 million~~ for ~~both~~ the ~~three~~periods ~~and~~presented ~~six~~includes ~~months ended June 30, 2014. These additional amounts include~~ the ~~pre-tax gain on the sale of the Chassis group discussed above.~~following:

For the three months and nine months ended September 30, 2015, a pre-tax loss of $45 million associated with the sale of the ASA businesses discussed above

For the three months ended September 30, 2015, a tax benefit of $8 million related to the ASA sale, which represents the reversal of a capital gains tax recorded in the second quarter of 2015

For the three and nine months ended September 30, 2014, a pre-tax gain on the sale of the Chassis group of $11 million and $32 million, respectively, as discussed above

For the three and nine months ended September 30, 2014, a loss of $5 million and $7 million, respectively, associated with other activity related to the Chassis sale

6. DERIVATIVES AND HEDGING

The Company uses foreign currency forward contracts and interest rate swaps to manage foreign exchange and interest rate risks, respectively. The primary use of the foreign currency forward contracts is to hedge the risks associated with changes in foreign exchange rates. Interest rate swaps are used to manage interest rate risk associated with borrowings. The Company executes derivative contracts for risk management purposes and does not engage in any speculative or trading activity.

All derivative instruments are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Fair value is determined using observable market data provided by recognized independent third-party financial information providers and is based upon Level 2 inputs under the fair value hierarchy within ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). There are no cash collateral requirements related to any of the Company’s open derivative instruments.

Changes in the fair value of derivative instruments that qualify for and for which the Company has elected hedge accounting in accordance with ASC 815 “Derivatives and Hedging” (“ASC 815”) are reflected as a component of Accumulated Other Comprehensive Income (Loss) (“AOCI”) until the hedged transaction impacts earnings. Changes in the fair value of derivative agreements that either do not qualify for hedge accounting, have not been designated as hedges or for which the hedge has been de-designated are reflected in current earnings.

Currency Forward Contract Derivatives

The Company operates globally and is exposed to foreign currency exchange rate fluctuations in the normal course of business. The Company’s foreign currency exposure relates primarily to certain non-functional currency denominated assets and liabilities, primarily accounts receivable, accounts payable and intercompany balances. To minimize the risk associated with changes in foreign currency exchange rates, the Company has established a program that utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures. Gains or losses on the Company’s foreign currency exposure are intended to be mitigated by gains or losses on the foreign currency forward contracts. These foreign currency forward contracts generally have terms of six months or less and are entered into at the prevailing market exchange rate at the end of each month.

currency exchange rates, the Company has established a program that utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures. Gains or losses on the Company’s foreign currency exposure are intended to be mitigated by gains or losses on the foreign currency forward contracts. These foreign currency forward contracts generally have terms of six months or less and are entered into at the prevailing market exchange rate at the end of each month.

Prior to the third quarter of 2014, the Company did not formally designate foreign currency forward contracts as hedges for accounting purposes and, accordingly, changes in the fair value of these contracts were recognized in current period earnings. Beginning in the third quarter of 2014, the Company entered into foreign currency forward contracts for anticipated future transactions and these contracts are designated as cash flow hedges. In accordance with ASC 815, the effective portion of these cash flow hedges are included as a component of AOCI until the underlying transaction impacts earnings. At the time the underlying transaction impacts earnings, the Company will de-designate the hedging instrument and reflect the change in fair value in current earnings to offset the remeasurement impact of the gross receivable or payable balance until the underlying transaction is settled.

The Company’s currency forward contracts are valued using then-current spot and forward market data as provided by external financial institutions. The Company enters into 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.

Interest Rate Risk Management

The Company is exposed to changes in interest rates as a result of the issuance of variable-rate and fixed-rate debt. Interest rate risk is managed by limiting variable-rate exposure and monitoring changes in interest rates. To manage risks associated with changes in interest rates, the Company enters into interest rate swaps to effectively fix the interest rate on variable-rate debt. The Company designates its interest rate swaps as cash flow hedges and, accordingly, changes in the fair value of interest rate swaps designated as cash flow hedges are recorded as a component of AOCI to the extent such cash flow hedges are effective. Amounts are reclassified from AOCI 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.

Notional Amounts

The table below shows notional amounts associated with currency forward contracts and interest rate swaps as ~~June~~September 30, 2015 and December 31, 2014:

(Dollars in millions)	~~June~~September 30, 2015		December 31, 2014
Foreign Currency Forward Contracts	$	7551	$	70
Interest Rate Contracts		300		300

The following table shows the fair value of interest rate derivatives and the line items in the Condensed Consolidated Balance Sheets where they are reported. The fair value of foreign currency forward contracts were insignificant at both ~~June~~September 30, 2015 and December 31, 2014.

	June 30, 2015				December 31, 2014
	September 30, 2015				December 31, 2014
(Dollars in millions)	Asset		Liability		Asset		Liability
Derivative Designated as Hedging Instruments
Interest Rate Contracts
Other current assets	$	—	$	—	$	2	$	—
Other accrued expenses		—	$	—4		—	$	—
Total Derivatives Designated as Hedging Instruments	$	—	$	—4	$	2	$	—

The following table shows the gains and losses recognized on de-designated derivatives and the line items on the Condensed Consolidated Statements of Operations where the pretax gains and losses were reported.

	Three Months Ended June 30,					Six Months Ended June 30,
	Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in millions)	2015		2014			2015		2014
Location of Pretax (Losses) Recognized in Earnings
Location of Pretax Gains (Losses) Recognized in Earnings
Foreign Currency Forward Contracts
Other income and expense, net	$	—2	$	(2—	)	$	13	$	(1	)
Total Pretax (Losses) Recognized in Earnings	$	—	$	(2	)	$	1	$	(1	)
Total Pretax Gains (Losses) Recognized in Earnings	$	2	$	—		$	3	$	(1	)

The following table shows the gains and losses recognized on cash flow hedges and the line items on the Condensed Consolidated Statements of Operations where such gains and losses are included when reclassified from AOCI. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Amounts for foreign currency forward contracts are reclassified to earnings within other income and expense, net as the underlying transactions impact earnings. Amounts associated with foreign currency forward contracts were insignificant during the three months ended June 30, 2015 and 2014.14

13The following table shows the gains and losses recognized on cash flow hedges and the line items on the Condensed Consolidated Statements of Operations where such gains and losses are included when reclassified from AOCI. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Amounts for foreign currency forward contracts are reclassified to earnings within other income and expense, net as the underlying transactions impact earnings. Amounts associated with foreign currency forward contracts were insignificant during the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Pretax Gains (Losses) Recorded in AOCI
Interest Rate Contracts	$	2(4	)	$	(41	)	$	(26	)	$	(76	)
Total Pretax Gains (Losses) Recorded in AOCI	$	2(4	)	$	(41	)	$	(26	)	$	(76	)
Location of Pretax (Losses) Reclassified from AOCI into Earnings
Interest Rate Contracts
Interest Expense	$	1		$	—1		$	12		$	—2
Total Pretax (Losses) Recognized in Earnings	$	1		$	—1		$	12		$	—2

7. DEBT

Affinia’s 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 the Company’s 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 ~~June~~September 30, 2015

(Dollars in millions)	Book Value of Debt		Fair Value Factor			Fair Value of Debt
Senior notes, due May 2021(1)	$	250		~~103~~104.1388	%	$	~~258~~262
Term Loan B-1, due April 2016(1)		175		99.3875	%		~~174~~175
Term Loan B-2, due April 2020(1)		366		~~100~~99.0025	%		~~366~~364
ABL Revolver, due April 2018(2)		—		100.00	%		—
Other debt(2)		3129		100.00	%		3129
Total fair value of debt at June 30, 2015						$	829
Total fair value of debt at September 30, 2015						$	830

Fair Value of Debt at December 31, 2014

	Book Value		Fair Value			Fair Value
(Dollars in millions)	of Debt		Factor			of Debt
Senior notes, due May 2021⁽¹⁾	$	250		102.50	%	$	256
Term Loan B-1, due April 2016⁽¹⁾		175		97.88	%		171
Term Loan B-2, due April 2020⁽¹⁾		367		97.00	%		356
ABL revolver, due April 2018⁽²⁾		—		100.00	%		—
Other debt⁽²⁾		19		100.00	%		19
Total fair value of debt at December 31, 2014						$	802

(1)	The fair value assigned to the Company’s long-term debt reflects financial model estimates generated from a third-party provider based on observable inputs related to market prices of comparable debt instruments and represents a Level 2 approximation within the fair value categorization framework.

(2)

The carrying value of fixed rate short-term debt approximates fair value because of the short term nature of these instruments. The carrying value of the Company’s current floating rate debt instruments approximates fair value because of the variable interest rates pertaining to those instruments. The fair value of debt is categorized within Level 2 of the hierarchy.

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, the Company 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 June 30, 2015, 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 the Company’s ability to pursue certain operational or financial transactions (e.g. asset dispositions, dividends and acquisitions).

1415

September 30, 2015, 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 the Company’s ability to pursue certain operational or financial transactions (e.g. asset dispositions, dividends and acquisitions).

8. INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined on the first in first out basis for all domestic inventories and at the Company’s Poland operations or average cost basis for other 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 and excludes amounts included in Current assets of discontinued operations:

(Dollars in millions)	At ~~June~~September 30, 2015		At December 31, 2014
Raw materials	$	6664	$	5856
Work-in-process		1316		1617
Finished goods		9986		8072
	$	~~178~~166	$	~~154~~145

9. COMMITMENTS AND CONTINGENCIES

A reconciliation of the changes in the Company’s return reserves, which is included in Other accrued expenses in the Condensed Consolidated Balance Sheets, is presented in the following table.

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
(Dollars in millions)	2015			2014
Beginning balance	$	4		$	6
Amounts charged to revenue		5			4
Returns processed		(45	)		(56	)
Ending balance	$	54		$	54

As previously disclosed, the Company ~~has~~ conducted a review of certain allegations arising in connection with business operations involving its subsidiaries in Poland and Ukraine. The allegations ~~raise~~raised issues involving potential improper payments in connection with governmental approvals, permits, or other regulatory areas and possible conflicts of interest. The Company’s review, ~~which~~was ~~the Company considers to be complete, has been~~ supervised by the Audit Committee of Affinia’s Board of Directors and ~~has been~~ conducted with the assistance of outside professionals. Affinia voluntarily self-reported on these matters to the U.S. Department of Justice and the U.S. Securities and Exchange Commission and ~~has~~ cooperated fully with the U.S. government. The NoU.S. ~~determination~~Department ~~may~~of ~~yet~~Justice behas ~~made~~advised asthat toit ~~whether,~~has indecided ~~connection~~to ~~with~~decline ~~the~~to ~~circumstances~~prosecute ~~surrounding~~ the ~~review,~~Company ~~Affinia 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~~this ~~with those circumstances~~matter.

10. INCOME TAXES

The total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $1 million as of both ~~June~~September 30, 2015 and December 31, 2014. 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, 2015, 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 Affinia transacts significant business, tax years ended December 31, 2004 and later remain subject to examination by tax authorities. The Company does not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

The effective tax rate was 5650% for the three months ended ~~June~~September 30, 2015, compared to 5344% for the three months ended ~~June~~September 30, 2014. . The primary reason for the increase over 2014 is ~~attributable~~due to anhigher ~~increase~~deemed individends ~~income~~from ~~earned~~foreign insubsidiaries, ~~jurisdictions~~resulting ~~with~~in higher ~~income~~U.S. ~~tax~~permanent ~~rates~~differences over last year. The effective tax rate was 5662% for the ~~six~~nine months ended ~~June~~September 30, 2015 compared to 8063% for the ~~six~~nine months ended ~~June~~September 30, 2014. The decrease inis ~~the effective tax rate was~~ attributable to a ~~decrease in income earned in jurisdictions with lower income tax rates. Additionally, in the first quarter of 2014, the Company recorded a~~ currency devaluation of $75 million ~~for~~associated with the ~~Venezuelan~~Filtration operations. ~~This~~of ~~was~~Venezuela that is a non-deductible item for income tax purposes in the first quarter of 2014.

1516

11. LEGAL PROCEEDINGS

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

The Company has various accruals for civil liability, including product liability, and other costs. If there is a range of equally probable outcomes, Affinia accrues at the lower end of the range. The Company had $2 million accrued as of both ~~June~~September 30, 2015 and December 31, 2014. These amounts are reflected in Other accrued expenses within the Condensed Consolidated Balance Sheets.

In addition, the continuing operations of Affinia have various other claims that are reasonably possible of occurrence for which the aggregate maximum exposure to loss is estimated at less than $1 million. There are currently no reserves associated with these claims.

The Company owns property in Litchfield, Illinois on which various historic environmental contaminants have been discovered. These contaminants are self-contained on the property and, with the exception of a small area with polychlorinated biphenyl (PCB) impact, are not required by law to be remediated. The Company entered the site into the Illinois Environmental Protection Agency’s (“IEPA”) ~~voluntary~~Voluntary Site Remediation Program and has received IEPA approval of a previously filed Remedial Action Plan (“RAP”) for one portion of the site that is associated with the voluntary clean-up actions. The remediation for that portion of the site commenced in June 2015 and iswas ~~expected to be~~ completed in September of 2015. A RAP for the other portion of the site, including where PCBs are located, is being prepared and will be submitted to IEPA, the Army Corps of Engineers and the U.S. Environmental Protection Agency. It is currently anticipated that such RAP will be submitted in the ~~Fall~~fourth quarter of 2015. The Company’s objective is to obtain a combination of comprehensive and focused No Further Remediation (NFR) letters for the Site. The current cost estimate to complete all of the voluntary work included in the approved RAP and expected to be included in the second RAP, including costs already incurred, is approximately $4 million. Since soil sampling and testing is not yet complete and a full site remediation study has not been issued on the area associated with the legally required PCB clean-up, the Company cannot currently reasonably estimate the cost of the PCB clean-up. It is not expected that the cost associated with this clean-up will have a material impact on the Company’s results of operations, financial position or cash flows. There are currently no reserves associated with these cost estimates.

12. ACCOUNTS RECEIVABLE FACTORING

Affinia has 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. Dollar-denominated or Canadian Dollar-denominated receivables, which are purchased at the face value amount of the receivable discounted at the annual 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.

	Six Months Ended June 30,
	Nine Months Ended September 30,
(Dollars in millions)	2015		2014
Gross accounts receivable factored	$	~~193~~276	$	~~257~~353
Expenses associated with factoring of receivables		12		23

Accounts receivable factored by Affinia are accounted for as a sale and removed from the balance sheet at the time of factoring, with the cost associated with the factoring program presented in Other income and expense, net in the Condensed Consolidated Statement of Operations.

13. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) (AOCI) by component, net of tax, for the three and six months ended June 30, 2015:

			Foreign
			currency			Interest
	Pension		translation			Rate						Total
(Dollars in millions)	adjustments		adjustment			Swap			Derivative			AOCI
Balance at April 1, 2015	$	—	$	(82	)	$	(1	)	$	—		$	(83	)
Other comprehensive income before reclassifications, net of tax		—		4			1			1			6
Amounts reclassified from accumulated other comprehensive income (loss)		—		—			—			(1	)		(1	)
Net current period other comprehensive income		—		4			1			—			5
At June 30, 2015	$	—	$	(78	)	$	—		$	—		$	(78	)
			Foreign
			currency			Interest
	Pension		translation			Rate						Total
(Dollars in millions)	adjustments		adjustment			Swap			Derivative			AOCI
Balance at January 1, 2015	$	—	$	(54	)	$	1		$	—		$	(53	)
Other comprehensive (loss) income before reclassifications, net of tax		—		(24	)		(2	)		1			(25	)
Amounts reclassified from accumulated other comprehensive income (loss)		—		—			1			(1	)		—
Net current period other comprehensive loss		—		(24	)		(1	)		—			(25	)
At June 30, 2015	$	—	$	(78	)	$	—		$	—		$	(78	)

Changes in AOCI income (loss) by component, net of tax, for the three and six and six months ended June 30, 2014:

				Foreign
				currency			Interest
	Pension			translation			Rate			Total
(Dollars in millions)	adjustments			adjustment			Swap			AOCI
Balance at April 1, 2014	$	(1	)	$	(24	)	$	5		$	(20	)
Other comprehensive income (loss) before reclassifications, net of tax		—			5			(3	)		2
Net current period other comprehensive income (loss)		—			5			(3	)		2
At June 30, 2014	$	(1	)	$	(19	)	$	2		$	(18	)
				Foreign
				currency			Interest
	Pension			translation			Rate			Total
(Dollars in millions)	adjustments			adjustment			Swap			AOCI
Balance at January 1, 2014	$	(1	)	$	(26	)	$	7		$	(20	)
Other comprehensive income (loss) before reclassifications, net of tax		—			7			(5	)		2
Net current period other comprehensive income (loss)		—			7			(5	)		2
At June 30, 2014	$	(1	)	$	(19	)	$	2		$	(18	)

13. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) (AOCI) by component, net of tax, for the three and nine months ended September 30, 2015:

			Foreign
			currency			Interest
	Pension		translation			Rate						Total
(Dollars in millions)	adjustments		adjustment			Swap			Derivative			AOCI
Balance at July 1, 2015	$	—	$	(78	)	$	—		$	—		$	(78	)
Other comprehensive income (loss) before reclassifications, net of tax		—		9			(4	)		—			5
Amounts reclassified from accumulated other comprehensive income (loss)		—		—			1			—			1
Net current period other comprehensive income (loss)		—		9			(3	)		—			6
At September 30, 2015	$	—	$	(69	)	$	(3	)	$	—		$	(72	)

			Foreign
			currency			Interest
	Pension		translation			Rate						Total
(Dollars in millions)	adjustments		adjustment			Swap			Derivative			AOCI
Balance at January 1, 2015	$	—	$	(54	)	$	1		$	—		$	(53	)
Other comprehensive income (loss) before reclassifications, net of tax		—		(15	)		(6	)		1			(20	)
Amounts reclassified from accumulated other comprehensive income (loss)		—		—			2			(1	)		1
Net current period other comprehensive income (loss)		—		(15	)		(4	)		—			(19	)
At September 30, 2015	$	—	$	(69	)	$	(3	)	$	—		$	(72	)

Changes in AOCI income (loss) by component, net of tax, for the three and nine months ended September 30, 2014:

				Foreign
				currency			Interest
	Pension			translation			Rate			Total
(Dollars in millions)	adjustments			adjustment			Swap			AOCI
Balance at July 1, 2014	$	(1	)	$	(19	)	$	2		$	(18	)
Other comprehensive income (loss) before reclassifications, net of tax		—			(20	)		—			(20	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			—			1			1
Net current period other comprehensive income (loss)		—			(20	)		1			(19	)
At September 30, 2014	$	(1	)	$	(39	)	$	3		$	(37	)

				Foreign
				currency			Interest
	Pension			translation			Rate			Total
(Dollars in millions)	adjustments			adjustment			Swap			AOCI
Balance at January 1, 2014	$	(1	)	$	(26	)	$	7		$	(20	)
Other comprehensive income (loss) before reclassifications, net of tax		—			(13	)		(5	)		(18	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			—			1			1
Net current period other comprehensive income (loss)		—			(13	)		(4	)		(17	)
At September 30, 2014	$	(1	)	$	(39	)	$	3		$	(37	)

14. VENEZUELAN OPERATIONS

In accordance with U.S. GAAP, effective January 1, 2010, the Company began accounting 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%. Accordingly, effective January 1, 2010, the Company’s Venezuelan subsidiary used the U.S. Dollar as its functional currency. The financial statements of the Venezuelan subsidiary is re-measured into the Company’s reporting currency (U.S. Dollar) and 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”).

In 2013, the Venezuelan government authorized certain companies that operate in designated industry sectors to exchange a limited volume of VEFs for U.S. Dollars at a bid rate established via weekly auctions under what is known as SICAD 1. SICAD 1 auctions began in October 2013. However, SICAD 1 auctions are not indicative of a free market exchange as only designated industries may bid into individual auctions and the highest bids are not always recognized by the Venezuelan government. In March 2014, another currency exchange mechanism (SICAD 2) became effective. SICAD 2 was intended to more closely resemble a market-driven exchange rate than the rates provided by Venezuela’s other regulated exchange mechanisms (i.e. the official rate and the SICAD 1 rate). Thus, as of March 31, 2014, entities were able to convert VEFs at one of three legal exchange rates: official rate of 6.3 VEF to 1 U.S. Dollar, SICAD 1 rate of 10.7 VEF to 1 U.S. Dollar based on closing rate at the then most recent auction, and SICAD 2 rate of 50.86 VEF to 1 U.S. Dollar based on closing rate on March 31, 2014.

As a result of the multiple exchange rates available to settle transactions, at March 31, 2014, management reevaluated the exchange rates previously used for remeasurement, which had been the official rate of 6.3 VEF to 1 U.S. Dollar. While substantially all of the Company’s import transactions for purchases of inventory had been pre-approved by the Venezuelan government at the official rate of 6.3 VEF to 1 U.S. Dollar, the Venezuelan government had not settled these transactions with vendors since November 2013. This, along with the introduction of the SICAD 1 and SICAD 2 market mechanisms, raised considerable doubts about the ability to ultimately settle transactions at the official rate in the future. Additionally, legislation enacted by the Venezuelan government in 2014 indicated that foreign investments are subject to the SICAD 1 rate rather than the official rate. While not the determinative factor, management viewed the passing of this legislation as a critical component in its assessment of the most representative rate to use for remeasurement purposes at March 31, 2014. Given the uncertainty of the exchange markets and the ultimate rate at which transactions may settle in the future, as well as consideration of the aforementioned legislation that was enacted earlier in 2014, the Company recorded a one-time devaluation of $7 million in the first quarter of 2014, which represented a move from the official rate to the SICAD 1 rate of 10.7 VEF to 1 U.S. Dollar. Of the $7 million devaluation charge, $5 million was recorded in the Filtration segment and $2 million was recorded in the ASA segment. For ~~This~~the Filtration segment and the ASA segment, respectively, this devaluation is reflected in Other income and expenses, net and (Loss) income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations.

In the fourth quarter of 2014, the Company recorded an immaterial devaluation to reflect the movement in the SICAD1 rate from 10.7 VEF to 12.0 VEF to 1 U.S. Dollar. During the first quarter of 2015, management continued to apply the rate of 12.0 VEF to 1 U.S. Dollar. However, in February 2015, the Marginal Currency System (“Simadi”) mechanism was introduced and implemented as part of law, resulting in the elimination of the SICAD 2 rate. The Simadi rate is a free market exchange where the rate is derived from daily private bidders and buyers exchanging offers through authorized agents and approved and published by the Venezuelan Central Bank. To date, the Company has had very limited participation in the Simadi markets as a result of successful participation in multiple SICAD1 auctions. At ~~June~~September 30, 2015, the Simadi rate was approximately 197 VEF to 1 U.S. Dollar. During the second quarter of 2015, the Company recorded an immaterial devaluation to reflect the movement in the SICAD 1 rate from 12.0 VEF to 12.8 VEF to 1 U.S. Dollar as a result of management’s successful participation in a SICAD 1 auction at a rate of 12.8 VEF to 1 U.S. Dollar, which was a 6.7% depreciation over the last auction held in the fourth quarter of 2014. During the third quarter of 2015, the Company recorded another immaterial devaluation to reflect the movement of the SICAD 1 rate from 12.8 VEF to 13.5 VEF to 1 U.S. Dollar as a result of the most recent SICAD 1 auction clearing rate. Management will continue to monitor the exchange rate mechanism in Venezuela, as well as the Company’s ability to continue to successfully access U.S. Dollar at a SICAD 1 rate to determine whether a different exchange rate should be used in future periods, which would result in further devaluation charges being recorded.

In the ~~second~~third quarter of 2015, the Company’s Venezuelan subsidiaries represented approximately 913% of the Company’s consolidated net sales. The Venezuelan subsidiaries have total assets and liabilities of less than 510% of the Company’s total consolidated assets and liabilities at ~~June~~September 30, 2015.

15. RESTRUCTURING OF OPERATIONS

Affinia’s restructuring activities, as described below, were undertaken to execute management’s strategy, streamline operations and to ultimately achieve net cost reductions. Costs related to these restructuring activities are reflected within Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. The restructuring charges consist of employee termination costs, other exit costs and impairment costs. Severance costs are being accounted for in accordance with ASC Topic 420, “Exit or Disposal Cost Obligations” and ASC Topic 712, “Compensation—Nonretirement Postemployment Benefits.” In October 2013, Affinia announced that it would relocate its Ann Arbor, Michigan corporate headquarters to Gastonia, North Carolina, which is the location of the Filtration segment. The Company recorded an accrual of $1 million as of December 31, 2014 related to the relocation. The transition to the new corporate headquarters was substantially completed by the end of the second quarter of 2014. On August 29, 2014, the Company and CQ Sourcing, Inc. (“CQ Sourcing”) agreed to end their current relationship effective as of December 31, 2014. CQ Sourcing is a subsidiary of General Parts International, Inc. that owns and operates stores under the CARQUEST brand and provides services to independently owned stores that operate under the CARQUEST brand. The Company recorded an accrual of $1 million as of December 31, 2014 related to the ending of this relationship. The following summarizes the restructuring charges and activity for the Company:

(Dollars in millions)	Total
Balance at December 31, 2014	$	3
Charges to expense:
Employee termination benefits		1
Reductions to liability:
Cash payments		(2	)
Balance at June 30, 2015	$	2

administrative expenses in the Condensed Consolidated Statements of Operations. The restructuring charges consist of employee termination costs. Severance costs are accounted for in accordance with ASC Topic 420, “Exit or Disposal Cost Obligations” and ASC Topic 712, “Compensation—Nonretirement Postemployment Benefits.” In October 2013, Affinia announced that it would relocate its Ann Arbor, Michigan corporate headquarters to Gastonia, North Carolina, which is the location of the Filtration segment. The transition to the new corporate headquarters was substantially completed by the end of the second quarter of 2014. As of December 31, 2014, the Company had a remaining accrual of less than $1 million related to the relocation. On August 29, 2014, the Company and CQ Sourcing, Inc. (“CQ Sourcing”) agreed to end their current relationship effective as of December 31, 2014. CQ Sourcing is a subsidiary of General Parts International, Inc. that owns and operates stores under the CARQUEST brand and provides services to independently owned stores that operate under the CARQUEST brand. The Company recorded an accrual of $1 million as of December 31, 2014 related to the ending of this relationship. The following summarizes the restructuring charges and activity for the Company:

(Dollars in millions)	Total
Balance at December 31, 2014	$	3
Charges to expense:
Employee termination benefits		—
Reductions to liability:
Cash payments		(2	)
Balance at September 30, 2015	$	1

16. STOCK INCENTIVE PLAN

Restricted Stock Units

During the ~~six~~nine months ended ~~June~~September 30, 2015, 19,639 time-based Restricted Stock Units (“RSU”) vested and, of these vested awards, 7,856 were cash settled by the Company. Pursuant to the terms of the RSUs awards, 7,856 new performance-based RSUs were subsequently issued to the holders. The performance-based RSUs granted carry the same vesting terms and conditions as previously issued performance-based RSU awards.

In the second ~~quarter~~and third quarters of 2015, the Company granted 5,000 and 1,000 restricted stock units, respectively, which carry the same terms of previously issued awards.

A rollforward of the outstanding RSU awards at ~~June~~September 30, 2015 is as follows:

Outstanding at December 31, 2014	184,305
Granted	1213,856
Vested	(19,639	)
Forfeited/expired	(4,237	)
Settled	(13,065	)
Outstanding at June 30, 2015	173,285
Forfeited/expired	(14,124	)
Outstanding at September 30, 2015	151,333

During the ~~six~~nine months ended ~~June~~September 30, 2015, $23 million of stock-based compensation expense was recognized associated with outstanding time-based RSUs. There was no stock-based compensation expense recognized during the ~~six~~nine months ended ~~June~~September 30, 2014.

19Stock Options

During the three and nine months ended September 30, 2015, 12,383 previously awarded and vested stock options were exercised at a per share price of $62.87. The Company received proceeds of $1 million associated with these stock option exercises.

17. FINANCIAL INFORMATION FOR GUARANTORS AND NON-GUARANTORS

Holdings (presented as Parent in the following schedules), through its 100% owned subsidiary, Affinia (presented as Issuer in the following schedules), issued $250 million of Senior Notes on April 25, 2013. As of ~~June~~September 30, 2015, 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 by the Company’s current and future domestic subsidiaries (the “Guarantors”). The Senior Notes are general obligations of the Issuer and guaranteed by the Parent and the Guarantors.

The following unaudited information presents Condensed Consolidating Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, Condensed Consolidating Statements of Comprehensive Income for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, Condensed Consolidating Balance Sheets as of ~~June~~September 30, 2015 and December 31, 2014 and Condensed Consolidating Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 of (i) the Parent, (ii) the Issuer, (iii) the Guarantors, (iv) the Non-Guarantors, and (v) eliminations to arrive at the information for the Company on a consolidated basis.

2021

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Statements of Operations

For the Three Months Ended ~~June~~September 30, 2015

										Non-						Consolidated
(Dollars in millions)	Parent			Issuer			Guarantor			Guarantor			Eliminations			Total
Net sales	$	—		$	—		$	157		$	~~127~~119		$	(4238	)	$	~~242~~238
Cost of sales		—			—			(~~126~~123	)		(9891	)		4238			(~~182~~176	)
Gross profit		—			—			3134			2928			—			6062
Selling, general and administrative expenses		—			(1213	)		(14	)		(119	)		—			(3736	)
Operating profit (loss)		—			(1213	)		1720			1819			—			2326
Other income and expense, net		—			(1—	)		(1	)		1(3	)		—			(14	)
Interest expense		—			(1213	)		—			(1	)		—			(1314	)
Income (loss) before income tax provision, equity in income, net of tax and noncontrolling interest		—			(2526	)		1619			1815			—			98
Income tax provision		—			(42	)		—			(12	)		—			(54	)
Equity in income, net of tax		—(33	)		29(5	)		13(24	)		—			~~(42~~62	)		—
Net income (loss) from continuing operations		—(33	)		—(33	)		29(5	)		1713			~~(42~~62	)		4
Income (loss) from discontinued operations, net of tax		—			—			—			(437	)		—			(437	)
Net income (loss)	$	—(33	)	$	—(33	)	$	29(5	)	$	13(24	)	$	~~(42~~62	)	$	—(33	)
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			—			—			—
Net income (loss) attributable to the Company		—			—			29			13			(42	)		—

Guarantor Condensed

Consolidating Statements of Comprehensive Income (Loss)

For the Three Months Ended ~~June~~September 30, 2015

													~~Non-~~	Non-							~~Consolidated~~	Consolidated
(Dollars in millions)	~~Parent~~	Parent			~~Issuer~~	Issuer			~~Guarantor~~	Guarantor			~~Guarantor~~	Guarantor			~~Eliminations~~	Eliminations			~~Total~~	Total
Net income (loss)	$	—$	(33	)	$	—$	(33	)	$	29$	(5	)	$	13$	(24	)	$	~~(42~~$	)62		$	—$	(33	)
Other comprehensive income (loss), net of tax:
Change in the fair value of interest rate swap		1	(4	)		1	(4	)		—	—			—	—			(1	)4			1	(4	)
Reclassification into earnings from interest rate swap		—	1			—	1			—	—			—	—			—	(1	)		—	1
Change in the fair value of derivatives		1	—			1	—			—	—			—	—			(1	)—			1	—
Reclassification into earnings for derivatives		(1	)—			(1	)—			—	—			—	—			1	—			(1	)—
Change in foreign currency translation adjustments		4	9			4	9			—	—			4	9			(8	)(18	)		4	9
Total other comprehensive income (loss)		5	6			5	6			—	—			4	9			(9	)(15	)		5	6
Total comprehensive income (loss)		5$	(27	)		5$	(27	)		29$	(5	)		17$	(15	)		~~(51~~$	)47			5$	(27	)
Less: comprehensive income attributable to noncontrolling interest, net of tax		—				—				—				—				—				—
Comprehensive income (loss) attributable to the Company	$	5			$	5			$	29			$	17			$	(51	)		$	5

2122

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Statements of Operations

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2015

													~~Non-~~	Non-							~~Consolidated~~	Consolidated
(Dollars in millions)	~~Parent~~	Parent			~~Issuer~~	Issuer			~~Guarantor~~	Guarantor			~~Guarantor~~	Guarantor			~~Eliminations~~	Eliminations			~~Total~~	Total
Net sales	$	—$	—		$	—$	—		$	~~314~~$	471		$	~~229~~$	328		$	~~(78~~$	)(117	)	$	~~465~~$	682
Cost of sales		—	—			—	—			~~(253~~	)(376	)		~~(177~~	)(254	)		78	117			~~(352~~	)(513	)
Gross profit		—	—			—	—			61	95			52	74			—	—			~~113~~	169
Selling, general and administrative expenses		—	—			~~(21~~	)(34	)		~~(29~~	)(43	)		~~(20~~	)(26	)		—	—			~~(70~~	)(103	)
Operating profit (loss)		—	—			~~(21~~	)(34	)		32	52			32	48			—	—			43	66
Other income and expense, net		—	—			(2	)(2	)		(1	)(2	)		2	(1	)		—	—			(1	)(5	)
Interest expense		—	—			~~(25~~	)(38	)		—	—			(1	)(2	)		—	—			~~(26~~	)(40	)
Income (loss) before income tax provision, equity in income, net of tax and noncontrolling interest		—	—			~~(48~~	)(74	)		31	50			33	45			—	—			16	21
Income tax provision		—	—			(4	)(6	)		—	—			(5	)(7	)		—	—			(9	)(13	)
Equity in income, net of tax		5	(28	)		57	52			26	2			—	—			~~(88~~	)(26	)		—	—
Net income (loss) from continuing operations		5	—			5	(80	)		57	50			28	38			~~(88~~	)—			7	8
Income (loss) from discontinued operations, net of tax		—	—			—	—			—	—			(2	)(36	)		—	—			(2	)(36	)
Net income (loss)		5$	(28	)		5$	(28	)		57$	52			26$	2			~~(88~~$	)(26	)		5$	(28	)
Less: net income attributable to noncontrolling interest, net of tax		—				—				—				—				—				—
Net income (loss) attributable to the Company	$	5			$	5			$	57			$	26			$	(88	)		$	5

Guarantor Condensed

Consolidating Statements of Comprehensive Income (Loss)

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2015

												~~Non-~~	Non-							~~Consolidated~~	Consolidated
(Dollars in millions)	~~Parent~~	Parent			~~Issuer~~	Issuer			~~Guarantor~~	Guarantor		~~Guarantor~~	Guarantor			~~Eliminations~~	Eliminations			~~Total~~	Total
Net income (loss)	$	5$	(28	)	$	5$	(28	)	$	57$	52	$	26$	2		$	~~(88~~$	)(26	)	$	5$	(28	)
Other comprehensive income (loss), net of tax:
Change in the fair value of interest rate swap		(2	)(6	)		(2	)(6	)		—	—		—	—			2	6			(2	)(6	)
Reclassification into earnings from interest rate swap		1	2			1	2			—	—		—	—			(1	)(2	)		1	2
Change in the fair value of derivatives		1	1			1	1			—	—		—	—			(1	)(1	)		1	1
Reclassification into earnings for derivatives		(1	)(1	)		(1	)(1	)		—	—		—	—			1	1			(1	)(1	)
Change in foreign currency translation adjustments		~~(24~~	)(15	)		~~(24~~	)(15	)		—	—		~~(24~~	)(15	)		48	30			~~(24~~	)(15	)
Total other comprehensive income (loss)		~~(25~~	)(19	)		~~(25~~	)(19	)		—	—		~~(24~~	)(15	)		49	34			~~(25~~	)(19	)
Total comprehensive income (loss)		~~(20~~$	)(47	)		~~(20~~$	)(47	)		57$	52		2$	(13	)		~~(39~~$	)8			~~(20~~$	)(47	)
Less: comprehensive income attributable to noncontrolling interest, net of tax		—				—				—			—				—				—
Comprehensive income (loss) attributable to the Company	$	(20	)		$	(20	)		$	57		$	2			$	(39	)		$	(20	)

2223

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Statements of Operations

For the Three Months Ended ~~June~~September 30, 2014

									Non-						Consolidated
(Dollars in millions)	Parent		Issuer			Guarantor			Guarantor			Eliminations			Total
Net sales	$	—	$	—		$	~~177~~171		$	~~130~~117		$	(4140	)	$	~~266~~248
Cost of sales		—		—			(~~138~~133	)		(9488	)		4140			(~~191~~181	)
Gross profit		—		—			3938			3629			—			7567
Selling, general and administrative expenses		—		(108	)		(1617	)		(139	)		—			(3934	)
Operating profit (loss)		—		(108	)		2321			2320			—			3633
Other income and expense, net		—		(1—	)		4—			(5—	)		—			(2—	)
Interest expense		—		(15	)		—			—			—			(15	)
Income (loss) before income tax provision, equity in income, net of tax and noncontrolling interest		—		(2623	)		2721			1820			—			1918
Income tax provision		—		(45	)		—			(63	)		—			(108	)
Equity in income, net of tax		3523		6551			1924			—			(~~119~~98	)		—
Net income (loss) from continuing operations		3523		3523			4645			1217			(~~119~~98	)		910
Income (loss) from discontinued operations, net of tax		—		—			196			7			—			2613
Net income (loss)	$	3523	$	3523		$	6551		$	1924		$	(~~119~~98	)	$	3523
Less: net income attributable to noncontrolling interest, net of tax		—		—			—			—			—			—
Net income (loss) attributable to the Company		35		35			65			19			(119	)		35

Guarantor Condensed

Consolidating Statements of Comprehensive Income (Loss)

For the Three Months Ended ~~June~~September 30, 2014

												~~Non-~~	Non-							~~Consolidated~~	Consolidated
(Dollars in millions)	~~Parent~~	Parent			~~Issuer~~	Issuer			~~Guarantor~~	Guarantor		~~Guarantor~~	Guarantor			~~Eliminations~~	Eliminations			~~Total~~	Total
Net income (loss)	$	35$	23		$	35$	23		$	65$	51	$	19$	24		$	~~(119~~$	)(98	)	$	35$	23
Other comprehensive income (loss), net of tax:
Change in the fair value of interest rate swap		(3	)1			(3	)1			—	—		—	—			3	(1	)		(3	)1
Change in foreign currency translation adjustments		5	(20	)		5	(20	)		—	—		5	(20	)		~~(10~~	)40			5	(20	)
Total other comprehensive (loss) income		2	(19	)		2	(19	)		—	—		5	(20	)		(7	)39			2	(19	)
Total comprehensive income (loss)		37$	4			37$	4			65$	51		24$	4			~~(126~~$	)(59	)		37$	4
Less: comprehensive income attributable to noncontrolling interest, net of tax		—				—				—			—				—				—
Comprehensive income (loss) attributable to the Company	$	37			$	37			$	65		$	24			$	(126	)		$	37

2324

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Statements of Operations

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2014

												~~Non-~~	Non-							~~Consolidated~~	Consolidated
(Dollars in millions)	~~Parent~~	Parent		~~Issuer~~	Issuer			~~Guarantor~~	Guarantor			~~Guarantor~~	Guarantor			~~Eliminations~~	Eliminations			~~Total~~	Total
Net sales	$	—$	—	$	—$	—		$	~~347~~$	518		$	~~243~~$	344		$	~~(81~~$	)(121	)	$	~~509~~$	741
Cost of sales		—	—		—	—			~~(274~~	)(407	)		~~(182~~	)(259	)		81	121			~~(375~~	)(545	)
Gross profit		—	—		—	—			73	111			61	85			—	—			~~134~~	196
Selling, general and administrative expenses		—	—		~~(22~~	)(30	)		~~(34~~	)(51	)		~~(23~~	)(29	)		—	—			~~(79~~	)(110	)
Operating profit (loss)		—	—		~~(22~~	)(30	)		39	60			38	56			—	—			55	86
Other income and expense, net		—	—		(2	)(2	)		(1	)(1	)		(7	)(6	)		—	—			~~(10~~	)(9	)
Interest expense		—	—		~~(29~~	)(44	)		—	—			(1	)(1	)		—	—			~~(30~~	)(45	)
Income (loss) before income tax provision, equity in income, net of tax and noncontrolling interest		—	—		~~(53~~	)(76	)		38	59			30	49			—	—			15	32
Income tax provision		—	—		(3	)(8	)		—	—			(9	)(12	)		—	—			~~(12~~	)(20	)
Equity in income, net of tax		34	57		90	141			33	57			—	—			~~(157~~	)(255	)		—	—
Net income (loss) from continuing operations		34	57		34	57			71	116			21	37			~~(157~~	)(255	)		3	12
Income (loss) from discontinued operations, net of tax		—	—		—	—			19	25			12	20			—	—			31	45
Net income (loss)		34$	57		34$	57			90$	141			33$	57			~~(157~~$	)(255	)		34$	57
Less: net income attributable to noncontrolling interest, net of tax		—			—				—				—				—				—
Net income (loss) attributable to the Company		34			34				90				33				(157	)			34

Guarantor Condensed

Consolidating Statements of Comprehensive Income (Loss)

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2014

												~~Non-~~	Non-							~~Consolidated~~	Consolidated
(Dollars in millions)	~~Parent~~	Parent			~~Issuer~~	Issuer			~~Guarantor~~	Guarantor		~~Guarantor~~	Guarantor			~~Eliminations~~	Eliminations			~~Total~~	Total
Net income (loss)	$	34$	57		$	34$	57		$	90$	141	$	33$	57		$	~~(157~~$	)(255	)	$	34$	57
Other comprehensive income (loss), net of tax:
Change in the fair value of interest rate swap		(5	)(4	)		(5	)(4	)		—	—		—	—			5	4			(5	)(4	)
Change in foreign currency translation adjustments		7	(13	)		7	(13	)		—	—		7	(13	)		~~(14~~	)26			7	(13	)
Total other comprehensive income (loss)		2	(17	)		2	(17	)		—	—		7	(13	)		(9	)30			2	(17	)
Total comprehensive income (loss)		36$	40			36$	40			90$	141		40$	44			~~(166~~$	)(225	)		36$	40
Less: comprehensive income attributable to noncontrolling interest, net of tax		—				—				—			—				—				—
Comprehensive income (loss) attributable to the Company	$	36			$	36			$	90		$	40			$	(166	)		$	36

2425

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Balance Sheets

~~June~~September 30, 2015

(Dollars in millions)	Parent			Issuer			Guarantor			Non- Guarantor		Eliminations			Consolidated Total
Assets
Current assets:
Cash and cash equivalents	$	—		$	2033		$	—		$	3981	$	—		$	59114
Restricted cash		—			—			—			106		—			106
Accounts receivable		—			—			38			5850		—			9688
Inventories, net		—			—			~~107~~100			7166		—			~~178~~166
Other current assets		—			1524			12			2423		—			4049
Current assets of discontinued operations		—			—			—			~~157~~53		—			~~157~~53
Total current assets		—			3557			~~146~~140			~~359~~279		—			~~540~~476
Property, plant and equipment, net		—			—2			5657			5350		—			109
Investments and other assets		—			123			37			1311		—			~~173~~171
Intercompany investments		(~~238~~279	)		~~433~~462			~~766~~775			—		(~~961~~958	)		—
Intercompany (payables) receivables		—			(982	)		(~~481~~461	)		~~490~~543		—			—
Total assets	$	(~~238~~279	)	$	~~582~~562		$	~~524~~548		$	~~915~~883	$	(~~961~~958	)	$	~~822~~756
Liabilities and shareholder's equity
Current liabilities:
Accounts payable	$	—		$	910		$	6864		$	3023	$	—		$	~~107~~97
Notes payable		—			~~175~~176			—			3128		—			~~206~~204
Other accrued expenses		—			1223			1716			2624		—			5563
Accrued payroll and employee benefits		—			12			6			8		—			1516
Current liabilities of discontinued operations		—			16			—			4517		—			4623
Total current liabilities		—			~~198~~217			9186			~~140~~100		—			~~429~~403
Long-term debt		—			616			—			—		—			616
Deferred employee benefits and noncurrent liabilities		—			58			—			98		—			1416
Total liabilities		—			~~819~~841			9186			~~149~~108		—			1,~~059~~035
Total shareholder's (deficit) equity		(~~238~~279	)		(~~237~~279	)		~~433~~462			~~766~~775		(~~961~~958	)		(~~237~~279	)
Total liabilities and shareholder's (deficit) equity	$	(~~238~~279	)	$	~~582~~562		$	~~524~~548		$	~~915~~883	$	(~~961~~958	)	$	~~822~~756

2526

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Balance Sheets

December 31, 2014

(Dollars in millions)	Parent			Issuer			Guarantor			Non- Guarantor		Eliminations			Consolidated Total
Assets
Current assets:
Cash and cash equivalents	$	—		$	10		$	—		$	1816	$	—		$	2826
Restricted cash		—			—			—			4		—			4
Accounts receivable		—			—			44			5045		—			9489
Inventories, net		—			—			98			5647		—			~~154~~145
Other current assets		—			44			1			4036		—			8581
Current assets of discontinued operations		—			—			—			~~176~~199		—			~~176~~199
Total current assets		—			54			143			~~344~~347		—			~~541~~544
Property, plant and equipment, net		—			1			57			5351		—			~~111~~109
Investments and other assets		—			121			36			1211		—			~~169~~168
Intercompany investments		(220	)		388			749			—		(917	)		—
Intercompany receivables (payables)		—			48			(508	)		460		—			—
Total assets	$	(220	)	$	612		$	477		$	869	$	(917	)	$	821
Liabilities and shareholder's equity
Current liabilities:
Accounts payable	$	—		$	10		$	70		$	2219	$	—		$	~~102~~99
Notes payable		—			—			—			19		—			19
Other accrued expenses		—			15			15			1713		—			4743
Accrued payroll and employee benefits		—			9			4			43		—			1716
Current liabilities of discontinued operations		—			—			—			5058		—			5058
Total current liabilities		—			34			89			112		—			235
Long-term debt		—			792			—			—		—			792
Deferred employee benefits and noncurrent liabilities		—			5			—			8		—			13
Total liabilities		—			831			89			120		—			1,040
Total shareholder's (deficit) equity		(220	)		(219	)		388			749		(917	)		(219	)
Total liabilities and shareholder's (deficit) equity	$	(220	)	$	612		$	477		$	869	$	(917	)	$	821

2627

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Statement of Cash Flows

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2015

(Dollars in millions)	Parent			Issuer			Guarantor			Non- Guarantor			Elimination			Consolidated Total
Operating activities
Net cash provided by operating activities	$	—		$	11		$	5		$	13		$	—		$	29
Net cash provided by (used in) operating activities	$	15		$	(17	)	$	7		$	58		$	(15	)	$	48
Investing activities
Change in restricted cash		—			—			—			(6	)		—			(6	)
Proceeds from the sale of the business, net of cash transferred		—			56			—			—			—			56
Additions to property, plant and equipment		—			—			(5	)		(6	)		—			(11	)
Change in restricted cash		—			—			—			(2	)		—			(2	)
Net cash used in investing activities		—			—			(5	)		(12	)		—			(17	)
Additions to property, plant and equipment		—			(1	)		(7	)		(9	)		—			(17	)
Net cash provided by (used in) investing activities		—			55			(7	)		(11	)		—			37
Financing activities
Proceeds of other debt		—			—			—			1424			—			1424
Repayments of debt		—(15	)		—			—			(115	)		—15			(115	)
Proceeds from stock options exercised		—			1			—			—			—			1
Distribution to our shareholders		—			(15	)		—			—			—			(15	)
Other financing activities		—			(1	)		—			—			—			(1	)
Net cash (used in) provided by financing activities		—(15	)		(115	)		—			139			—15			12(6	)
Effect of exchange rates on cash		—			—			—			(49	)		—			(49	)
Increase in cash and cash equivalents		—			1023			—			1047			—			2070
Cash and cash equivalents at beginning of the period		—			10			—			35			—			45
Cash and cash equivalents at end of the period	$	—		$	2033		$	—		$	4582		$	—		$	65115

Affinia Group Intermediate Holdings Inc.

Guarantor Condensed

Consolidating Statement of Cash Flows

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2014

(Dollars in millions)	Parent			Issuer			Guarantor			Non- Guarantor			Elimination			Consolidated Total
Operating activities
Net cash provided by (used in) operating activities	$	4557		$	(2030	)	$	610		$	2024		$	(4557	)	$	64
Investing activities
Proceeds from sale of Chassis group		—			~~140~~149			—			—			—		$	~~140~~149
Other investing activities		—			4			—			—			—		$	4
Additions to property, plant and equipment		—			—			(610	)		(58	)		—		$	(1118	)
Net cash provided by (used in) investing activities		—			~~144~~153			(610	)		(58	)		—			~~133~~135
Financing activities
Repayment of debt		(4557	)		—			—			(910	)		4557		$	(910	)
Repayment of term loans		—			(78109	)		—			—			—		$	(78109	)
Distribution to our shareholders		—			(4557	)		—			—			—		$	(4557	)
Net cash used in financing activities		(4557	)		(~~123~~166	)		—			(910	)		4557			(~~132~~176	)
Effect of exchange rates on cash		—			—			—			(46	)		—		$	(46	)
Increase in cash and cash equivalents		—			1			—			2			—		$	3
Decrease in cash and cash equivalents		—			(43	)		—			—			—		$	(43	)
Cash and cash equivalents at beginning of the period		—			68			—			33			—			101
Cash and cash equivalents at end of the period	$	—		$	6925		$	—		$	3533		$	—		$	~~104~~58

2728

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and Notes included in the Annual Report on Form 10-K for the year ended December 31, 2014.

Company Overview

Affinia Group Intermediate Holdings Inc. (the “Company”) is an innovative global leader in the design, manufacture, distribution and marketing of industrial grade filtration products and services and replacement products in South America. Management’s Discussion and Analysis includes financial information prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”), as well as certain non-GAAP financial measures discussed below. The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented herein may not be comparable to similarly titled measures used by other companies.

The Company ~~has~~is ~~two~~wholly-owned ~~operating~~by ~~segments~~Affinia Group Holdings Inc. (“Holdings”), ~~Filtration~~a ~~and~~company ~~Affinia~~controlled ~~South~~by ~~America~~affiliates of The Cypress Group, L.L.C. (“~~ASA~~Cypress”). ”). On August 13, 2015, Affinia’s ~~chief~~Group ~~operating~~Holdings ~~decision~~Inc. ~~maker~~(“Holdings”), ~~evaluates~~a ~~the~~Delaware ~~performance~~corporation ofand ~~its~~parent ~~operating~~company ~~segments~~of ~~based~~Affinia, ~~primarily~~entered oninto ~~revenue~~an ~~growth~~agreement and ~~operating~~plan ~~profit.~~of ~~Income~~merger ~~taxes~~(the ~~are~~“Merger ~~not~~Agreement”) ~~allocated~~with MANN+HUMMEL Holding GmbH, a German limited liability company (“MANN+HUMMEL”). Subject to the ~~operating~~terms ~~segments.~~and ~~Although~~conditions ~~not~~set ~~considered~~forth anin ~~operating~~the ~~segment,~~Merger ~~corporate~~Agreement, ~~eliminations~~the ~~and~~aggregate ~~other~~merger ~~includes~~consideration ~~corporate~~payable ~~costs~~to the Sellers is $513,100,000, ~~interest~~(i) minus ~~expense~~adjustments ~~and~~reflecting ~~other~~transaction ~~amounts~~expenses, ~~not~~a ~~allocated~~$10 million escrow to cover limited indemnities and an amount reserved for the ~~operating~~payment ~~segments. In~~of expenses incurred by the ~~first~~sellers’ ~~quarter~~representative ofand ~~2015,~~(ii) plus adjustments reflecting adjusted net proceeds from the sale of the Company’s ~~management~~Brazilian ~~changed~~operations previously announced and the ~~calculation~~sale of ~~segment~~the ~~earnings~~Company’s ~~whereby~~Argentinian ~~certain~~and ~~corporate~~Uruguayan ~~costs~~operations ~~that~~(collectively, ~~were~~the ~~previously~~“ASA ~~allocated~~Transactions”) and a daily interest factor applied to the ~~operating~~purchase ~~segments~~price. ~~were~~At nothe ~~longer~~effective ~~allocated. Accordingly~~time of the Merger, ~~all~~each outstanding share of ~~these~~Holdings ~~previously~~will ~~allocated~~be ~~costs~~converted ~~remained~~into inthe ~~corporate~~right to receive a proportionate share of the aggregate consideration, ~~eliminations~~plus a contingent right to receive a portion of the escrow amount and ~~other. Prior~~the ~~period~~amount ~~segment~~reserved ~~results~~for ~~were~~expenses ~~recast~~of tothe ~~conform~~sellers’ torepresentative, ~~current~~in ~~period~~each ~~presentation~~case at the time and upon satisfaction of the conditions specified in the Merger Agreement.

In the second quarter of 2015, management committed to a plan to sell Pellegrino Distribuidora de Autopecas Ltda. (“Pellegrino”) and Affinia Automotiva Ltda. (“Automotiva”). Pellegrino and Automotiva comprise the Brazilian operations of the ASA segment and are collectively referred to as “ASA Brazil”. The Company completed the sale of Pellegrino in September 2015 and the sale of Automotiva in October 2015. Additionally, in the third quarter of 2015, the Company executed definitive purchase agreements for the remaining Affinia South America (“ASA”) operation in Argentina and Uruguay and completed the disposition of these businesses through sale in September 2015. Accordingly, the results of operations of the former ASA segment have been included as a component of discontinued operations in the Condensed Consolidated Statements of Operations for all periods presented. With the completion of these transactions in 2015, all of the businesses that comprised the ASA segment have been disposed of through sale. See Note 5 to the Condensed Consolidated Financial Statements, “Discontinued Operations”, for additional information.

The Company has one operating segment, which is Filtration. Affinia’s chief operating decision maker evaluates the performance of its operating segment based primarily on revenue growth and operating profit. Income taxes are not allocated to the operating segment. Although not considered an operating segment, corporate, eliminations and other includes corporate costs, interest expense and other amounts not allocated to the operating segment. Additionally, the results of operations of ASA’s Venezuela business, which was shut down in June 2014, is included in corporate, eliminations and other for the nine months ended September 30, 2014 since it did not qualify for discontinued operations treatment and is insignificant. In the first quarter of 2015, the Company’s management changed the calculation of segment earnings whereby certain corporate costs that were previously allocated to the operating segment were no longer allocated. Accordingly, all of these previously allocated costs remained in corporate, eliminations and other. Prior period segment results were recast to conform to current period presentation.

Filtration is the Company’s largest business unit. Filtration’s 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. 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^®.

In the second quarter of 2015, management committed to a plan to sell its Brazilian operations within ASA, which is comprised of Affinia Automotiva and Pellegrino (collectively “ASA Brazil”). These operations represented approximately 90% of the ASA segment net sales. Accordingly, the results of ASA Brazil have been classified as a component of discontinued operations in the Condensed Consolidated Statements of Operations for the periods presented. Currently, the continuing operations of ASA include Argentina and Uruguay, as well as the operations of Venezuela prior to its shutdown in the second quarter of 2014.

In the fourth quarter of 2013, management committed to a plan to sell its global chassis business (the “Chassis group”) to an affiliate of Federal-Mogul Corporation. Accordingly, the results of the Chassis group have been classified as a component of discontinued operations in the Condensed Consolidated Statements of Operations for the periods presented prior to the sale, which closed on May 1, 2014.

Results of Operations

In this section, the Company provides analysis and discussion of earnings and factors affecting earnings on both a GAAP and non-GAAP basis. Management uses these non-GAAP financial measures for planning and forecasting, and for reporting results to the Board of Directors, employees and investors concerning the Company’s financial performance. EBITDA is a non-GAAP financial measure. EBITDA is earnings before interest, taxes, depreciation and amortization. Affinia’s EBITDA is calculated by adding back depreciation and amortization and interest expense to income from continuing operations before income tax provision.

28The following table summarizes the Company’s consolidated results for the three months ended September 30, 2015 and 2014:

The following table summarizes the Company’s consolidated results for the three months ended June 30, 2015 and 2014:

	Three Months Ended September 30,									Currency			Variance Excluding Currency
(Dollars in millions)	2015			2014			Variance			Effect ⁽¹⁾			Effect
Net sales	$	238		$	248		$	(10	)	$	(24	)	$	14
Cost of sales		(176	)		(181	)		5			17			(12	)
Gross profit		62			67			(5	)		(7	)		2
Gross margin %		26	%		27	%
Selling, general and administrative expenses		(36	)		(34	)		(2	)		(2	)		—
Selling, general and administrative expenses as a percent of net sales		15	%		14	%
Operating profit		26			33			(7	)		(9	)		2
Operating margin %		11	%		13	%
Other income and expense, net		(4	)		—			(4	)		1			(5	)
Interest expense		(14	)		(15	)		1			—			1
Income from continuing operations before income tax provision, and noncontrolling interest		8			18			(10	)		(8	)		(2	)
Income tax provision		(4	)		(8	)		4			(1	)		5
Net income from continuing operations		4			10			(6	)		(9	)		3
(Loss) income from discontinued operations, net of tax		(37	)		13			(50	)		(8	)		(42	)
Net (loss) income	$	(33	)	$	23		$	(56	)	$	(17	)	$	(39	)

	Three Months Ended June 30, 2015									Currency			Variance Excluding Currency
(Dollars in millions)	2015			2014			Variance			Effect (1)			Effect
Net sales	$	242		$	266		$	(24	)	$	(20	)	$	(4	)
Cost of sales		(182	)		(191	)		9			14			(5	)
Gross profit		60			75			(15	)		(6	)		(9	)
Gross margin %		25	%		28	%
Selling, general and administrative expenses		(37	)		(39	)		2			(2	)		4
Selling, general and administrative expenses as a percent of net sales		15	%		15	%
Operating profit		23			36			(13	)		(8	)		(5	)
Operating margin %		10	%		14	%
Other income and expense, net		(1	)		(2	)		1			—			1
Interest expense		(13	)		(15	)		2			—			2
Income from continuing operations before income tax provision, and noncontrolling interest		9			19			(10	)		(8	)		(2	)
Income tax provision		(5	)		(10	)		5			1			4
Net income from continuing operations		4			9			(5	)		(7	)		2
(Loss) income from discontinued operations, net of tax		(4	)		26			(30	)		(3	)		(27	)
Net income		—			35			(35	)		(10	)		(25	)
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			—			—
Net income attributable to the Company	$	—		$	35		$	(35	)	$	(10	)	$	(25	)

(1)

The currency effect was calculated by comparing the local currency balances for all international locations for both periods, each at the prior year exchange rate, to determine the impact of the currency between periods. These currency effects provide a clearer understanding of the operating results of the Company’s foreign entities because they exclude the varying effects that changes in foreign currency exchange rates may have on those results.

Net sales. Consolidated net sales decreased by $24 million in the second quarter of 2015 in comparison to the second quarter of 2014 due to lower sales in both the Filtration segment and ASA segment. Excluding currency effects, consolidated net sales decreased by $4 million compared to the second quarter of 2014, with sales in the Filtration and ASA segments down 1% and 13%, respectively. Excluding the impacts of the shutdown of ASA’s Venezuela operations in the second quarter of 2014, currency adjusted net sales were $1 million higher than the second quarter of 2014

Gross profit/gross margin. Gross profit decreased by $15 million during the second quarter of 2015 in comparison to the second quarter of 2014, with gross margin decreasing to 25% in the second quarter of 2015 from 28% in the second quarter of 2014. Excluding currency effects, gross profit decrease by $9 million compared to the second quarter of 2014. The decrease in gross margin was mainly due to the impacts of lower volumes on the absorption of fixed costs in North America.

Selling, general and administrative (SG&A) expenses. SG&A expenses decreased by $2 million during the second quarter of 2015 in comparison to the second quarter of 2014 lower promotional and advertising costs, as well as lower overall direct selling expenses as a result of the decline in sales.

Operating profit/operating margin. Operating profit decreased by $13 million in the second quarter of 2015 in comparison to the second quarter of 2014 due primarily to the decrease in gross profit, with operating margin decreasing to 10% in 2015 compared to 14% in 2014. Excluding currency effects, operating profit decreased by $5 million compared to the second quarter of 2014.

Interest expense. Interest expense decreased by $2 million in the second quarter of 2015 compared to the same period in the prior year as a result of repayment of debt balances in the second and third quarters of 2014.

Income tax provision. Income tax provision decreased by $5 million in the second quarter of 2015 in comparison to the second quarter of 2014 due primarily to lower pre-tax income, partially offset by a higher effective tax rate.

Income from discontinued operations, net of tax. Income from discontinued operations, net of tax, is comprised of the results of ASA Brazil, as well as the Chassis group for the period prior to sale in the second quarter of 2014. The loss in the second quarter of 2015 is driven primarily by the recognition of additional tax expense as a result of a $7 million capital gains tax in Brazil associated with the pending sale of ASA Brazil, compared to a gain in the second quarter of 2014 as a result of recognizing a pre-tax gain of $21 million on the sale of the Chassis group.

Net income. Net income was zero in the second quarter of 2015 in comparison to a net income of $35 million in the second quarter of 2014 as a result less favorable results in the Filtration segment, as well as a loss in discontinued operations in the second quarter of 2015 compared to recognition of a gain on the sale of the Chassis group in the second quarter of 2014.

The following table summarizes the Company’s consolidated results for the six months ended June 30, 2015 and 2014

	Six Months Ended June 30,									Currency			Variance Excluding Currency
(Dollars in millions)	2015			2014			Variance			Effect (1)			Effect
Net sales	$	465		$	509		$	(44	)	$	(50	)	$	6
Cost of sales		(352	)		(375	)		23			36			(13	)
Gross profit		113			134			(21	)		(14	)		(7	)
Gross margin %		24	%		26	%
Selling, general and administrative expenses		(70	)		(79	)		9			5			4
Selling, general and administrative expenses as a percent of net sales		15	%		16	%
Operating profit		43			55			(12	)		(9	)		(3	)
Operating margin %		9	%		11	%
Other income and expense, net		(1	)		(10	)		9			—			9
Interest expense		(26	)		(30	)		4			1			3
Income from continuing operations before income tax provision, equity in income(loss), net of tax and noncontrolling interest		16			15			1			(8	)		9
Income tax provision		(9	)		(12	)		3			2			1
Net income from continuing operations		7			3			4			(6	)		10
(Loss) income from discontinued operations, net of tax		(2	)		31			(33	)		—			(33	)
Net income		5			34			(29	)		(6	)		(23	)
Less: net income attributable to noncontrolling interest, net of tax		—			—			—			—			—
Net income attributable to the Company	$	5		$	34		$	(29	)	$	(6	)	$	(23	)

(1) The currency effect was calculated by comparing the local currency balances for all international locations for both periods, each at the prior year exchange rate, to determine the impact of the currency between periods. These currency effects provide a clearer understanding of the operating results of the Company’s foreign entities because they exclude the varying effects that changes in foreign currency exchange rates may have on those results.

Net sales. Consolidated net sales decreased by $44 million in the six months ended June 30, 2015 in comparison to the same period in 2014 due to decreased sales both the Filtration segment and ASA segment. Excluding currency effects, consolidated net sales increased $6 million with sales in the Filtration segments up 2% and sales in the ASA segments down 8%. Sales in the ASA segment were down compared to the same period in the prior year as a result of the shutdown of the Venezuela operations in the second quarter of 2014.

Gross profit/gross margin. Gross Profit decreased by $21 million during the six months ended June 30, 2015 in comparison to the same period in 2014, with gross margin decreasing to 24% in 2015 from 26% in 2014. Excluding currency effects, gross profit decreased by $7 million compared to 2014 Gross profit decreased due primarily to lower the impacts of lower volumes on fixed cost absorption in North America.

~~Selling,~~Net ~~general and administrative (SG&A) expense~~sales. ~~SGA&A~~Consolidated ~~expenses~~net sales decreased by $910 million ~~during~~in the ~~six~~third ~~months~~quarter ~~ended~~of ~~June 30,~~ 2015 in comparison to the ~~same~~third ~~period~~quarter inof 2014~~. Excluding~~ due to lower sales in the ~~impacts~~Filtration ofsegment. Excluding currency effects, ~~SG&A~~consolidated ~~expenses~~net sales increased by $414 million compared to the ~~same~~third ~~period~~quarter of 2014, with sales in the ~~prior~~Filtration ~~year~~segment up to 6%.

~~Operating~~Gross profit/~~operating~~gross margin. ~~Operating~~Gross profit decreased by $125 million induring the ~~six~~third ~~months~~quarter ~~ended~~of ~~June 30,~~ 2015 in comparison to the ~~same~~third ~~period~~quarter inof 2014, ~~while~~with ~~operating~~gross margin ~~decreased~~decreasing to 926% in ~~2015~~the ~~compared~~third toquarter 11of 2015 from 27% in the third quarter of 2014. Excluding currency effects, ~~operating~~gross profit ~~decreased~~increased by $32 million compared to the ~~same~~third ~~period~~quarter inof ~~the prior year~~2014.

~~Other~~Selling, ~~income~~general and ~~expense,~~administrative ~~net~~(SG&A) expenses. ~~The~~ ~~decrease~~SG&A in expenses inincreased ~~2015 in comparison to the 2014 was driven primarily~~ by a $72 million ~~charge~~during ~~associated~~the ~~with~~third ~~currency~~quarter ~~devaluation~~of 2015 in ~~Venezuela~~comparison into the ~~first~~third quarter of 2014. Excluding ~~for~~the ~~which~~impact ~~there~~of ~~was~~currency, noSG&A ~~comparable~~was ~~charge~~flat ~~in 2015. See Note 14~~ to the ~~Condensed~~prior ~~Consolidated Financial Statements, “Venezuela Operations” for further information~~year.

~~Interest~~Operating ~~expense~~profit/operating margin. ~~Interest~~Operating ~~expense~~profit decreased by $47 million in the ~~six~~third ~~months~~quarter ~~ended~~of ~~June~~2015. Excluding 30currency effects, ~~2015~~operating ~~compared~~margin toimproved ~~the~~by ~~same~~$2 ~~period~~million incompared to the ~~prior~~third ~~year~~quarter asof a2014 ~~result~~due ofprimarily ~~repayment~~to ofthe ~~debt~~increase ~~balances~~ in ~~the~~gross ~~second~~profit and ~~third~~lower ~~quarter~~SG&A ~~of 2014~~expenses.

~~Income~~Interest ~~tax provision~~ expense.~~The~~ ~~income~~Interest ~~tax~~expense ~~provision~~ decreased by $31 million in the ~~six~~third ~~months~~quarter ~~ended~~of ~~June~~2015 ~~30,~~compared ~~2015compared~~ to the same period in the prior year. ~~The~~as ~~effective Tax rate was 56% in the six months ended June 30, 2015 in comparison to 80% in the same period in 2014. The decrease in the effective tax rate was attributable to~~ a ~~decrease~~result inof ~~income~~repayment ~~earned~~of indebt ~~jurisdictions~~balances ~~with lower income tax rates. Additionally,~~ in the ~~first~~second ~~quarter~~and ofthird ~~2014,~~quarters ~~a currency devaluation~~ of ~~$7 million was recorded~~2014.

Income ~~from discontinued operations, net of~~ tax provision. Income ~~from discontinued operations, net of~~ tax, isprovision ~~comprised~~decreased ofby ~~the~~$4 ~~results~~million ~~of ASA Brazil, as well as the Chassis group for the period prior to sale~~ in the ~~second~~third quarter of ~~2014. The loss in~~ 2015 ~~is driven primarily by the recognition of additional tax expense as a result of capital gains tax~~ in ~~Brazil~~comparison ~~associated with the pending sale of ASA Brazil, compared~~ to ~~a gain in~~ the ~~second~~third quarter of 2014 asdue aprimarily ~~result~~to oflower ~~recognizing a~~ pre-tax ~~gain~~income. ~~of $21 million on the sale of the Chassis group~~

~~Net~~(Loss) income. ~~The~~from discontinued operations, net of tax. (Loss) income from discontinued operations, net of tax, for the third quarter of 2015 is comprised of the $545 million inof inloss ~~the~~on ~~six~~sale ~~months~~associated ~~ended~~with ~~June~~the 30disposition of the Pellegrino, ~~2015~~Argentina ~~compared~~and toUruguay, ~~net~~which ~~income~~were part of ~~$34~~the ~~million~~ASA insegment, ~~the~~as ~~same~~well ~~period~~as inthe ~~2014~~results isof ~~primarily~~operations ~~driven~~of bythe ~~lower~~ASA ~~earnings~~segment. Amounts inassociated with the ~~Filtration~~third ~~segment~~quarter ~~and~~of 2014 relate to the recognition of the remaining $11 million pre-tax gain on the sale of the Chassis group, ~~that~~as ~~was~~well ~~recorded~~as in the ~~second~~results ~~quarter~~of operations of ~~2014~~the businesses that comprised the ASA segment.

Net (loss) income. Net income decreased by $56 in the third quarter of 2015 in comparison to the third quarter of 2014 primarily as a result of the loss on sale of certain ASA businesses, as well as the recognition of the remaining gain on the sale of the Chassis group in the third quarter of 2014.

~~Segment~~The ~~Results~~following table summarizes the Company’s consolidated results for the nine months ended September 30, 2015 and 2014:

Consolidated EBITDA, which includes the results for the Filtration and ASA segments as well as corporate, eliminations and other, for the three months ended June 30, 2015 and 2014 were as follows:

	Nine Months Ended September 30,									Currency			Variance Excluding Currency
(Dollars in millions)	2015			2014			Variance			Effect ⁽¹⁾			Effect
Net sales	$	682		$	741		$	(59	)	$	(72	)	$	13
Cost of sales		(513	)		(545	)		32			52			(20	)
Gross profit		169			196			(27	)		(20	)		(7	)
Gross margin %		25	%		26	%
Selling, general and administrative expenses		(103	)		(110	)		7			6			1
Selling, general and administrative expenses as a percent of net sales		15	%		15	%
Operating profit		66			86			(20	)		(14	)		(6	)
Operating margin %		10	%		12	%
Other income and expense, net		(5	)		(9	)		4			—			4
Interest expense		(40	)		(45	)		5			—			5
Income from continuing operations before income tax provision, equity in income(loss), net of tax and noncontrolling interest		21			32			(11	)		(14	)		3
Income tax provision		(13	)		(20	)		7			—			7
Net income from continuing operations		8			12			(4	)		(14	)		10
(Loss) income from discontinued operations, net of tax		(36	)		45			(81	)		(8	)		(73	)
Net (loss) income	$	(28	)	$	57		$	(85	)	$	(22	)	$	(63	)

	Three Months Ended June 30, 2015
(Dollars in millions)	Filtration			ASA			Corporate, Eliminations and Other			Consolidated
Net Sales	$	230		$	12		$	—		$	242
Cost of Sales		(173	)		(8	)		(1	)		(182	)
Gross Profit		57			4			(1	)		60
Selling, General and Administrative Expenses		(22	)		(2	)		(13	)		(37	)
Operating Profit		35			2			(14	)		23
Other Income and Expense, net		(1	)		—			—			(1	)
Interest Expense		—			—			(13	)		(13	)
Add Back:
Depreciation and Amortization		5			—			1			6
Interest Expense		—			—			13			13
Consolidated EBITDA	$	39		$	2		$	(13	)	$	28
EBITDA %		17	%		17	%
	Three Months Ended June 30, 2014
(Dollars in millions)	Filtration			ASA			Corporate, Eliminations and Other			Consolidated
Net Sales	$	251		$	15		$	—		$	266
Cost of Sales		(179	)		(10	)		(2	)		(191	)
Gross Profit		72			5			(2	)		75
Selling, General and Administrative Expenses		(25	)		(2	)		(12	)		(39	)
Operating Profit		47			3			(14	)		36
Other Income and Expense, net		(2	)		(1	)		1			(2	)
Interest Expense		—			—			(15	)		(15	)
Add Back:
Depreciation and Amortization		4			—			1			5
Interest Expense		—			—			15			15
Consolidated EBITDA	$	49		$	2		$	(12	)	$	39
EBITDA %		20	%		13	%

(1)

~~The~~Net ~~decrease~~sales. inConsolidated ~~consolidated~~net ~~EBITDA~~sales ~~for~~decreased by $59 million in the ~~second~~nine ~~quarter~~months ended September 30, 2015 ~~compared~~in comparison to the same period in ~~the~~2014 ~~prior~~due ~~year~~to ~~was~~decreased ~~primarily~~sales ~~driven by lower EBITDA~~ in the Filtration segment. asExcluding ~~the~~currency ~~result~~effects, ofconsolidated ~~the~~net ~~loss~~sales ofincreased a$13 ~~significant~~million ~~customer,~~with assales ~~well as an overall softness~~ in the ~~North~~Filtration ~~American~~segment ~~aftermarket,~~up ~~which resulted in lower sales to customers~~3%.

~~Excluding~~Gross ~~currency~~profit/gross ~~impacts,~~margin. ~~consolidated~~Gross ~~EBITDA~~profit ~~would~~decreased ~~have~~by ~~been~~ $4327 million during the nine months ended September 30, 2015 in comparison to the ~~second~~same ~~quarter~~period ofin 2014, with gross margin decreasing to 25% in 2015 from 26% in 2014. Excluding currency effects, ~~which~~gross isprofit decreased by $47 million ~~lower~~compared ~~than~~to ~~the~~2014. ~~second~~Gross ~~quarter~~profit decreased due primarily to the impacts of ~~2014~~lower volumes on fixed cost absorption in North America.

Selling, general and administrative (SG&A) expense. SG&A expenses decreased by $7 million during the nine months ended September 30, 2015 in comparison to the same period in 2014. Excluding the impacts of currency, SG&A expenses decreased by $1 million compared to the same period in the prior year due primarily to lower selling expenses in North America as a result of the decrease in sales.

Operating profit/operating margin. Operating profit decreased by $20 million in the nine months ended September 30, 2015 in comparison to the same period in 2014, while operating margin decreasing to 10% in 2015 compared to 12% in 2014. Excluding currency effects, operating profit decreased $6 million compared to the same period in the prior year. Drivers of lower operating profit are discussed above.

Other income and expense, net. The decrease in expenses in 2015 in comparison to the 2014 was driven primarily by a $5 million charge associated with currency devaluation in Venezuela in the first quarter of 2014 for which there were less significant charges in 2015. See Note 14 to the Condensed Consolidated Financial Statements, “Venezuela Operations” for further information.

Interest expense. Interest expense decreased by $5 million in the nine months ended September 30, 2015 compared to the same period in the prior year as a result of repayment of debt balances in the second and third quarter of 2014.

Income tax provision. The income tax provision decreased $7 million in the nine months ended September 30, 2015 compared to the same period in the prior year. The effective tax rate was 62% in the nine months ended September 30, 2015 in comparison to

~~Consolidated~~63% ~~EBITDA,~~in ~~which includes~~ the ~~results~~same ~~for~~period ~~the~~in ~~Filtration~~2014. ~~and~~The ~~ASA~~decrease ~~segments~~is asattributable ~~well~~to asa ~~corporate,~~currency ~~eliminations~~devaluation ~~and~~of ~~other,~~$5 million for the ~~six~~Venezuelan ~~months~~operations ~~ended~~that ~~June~~is ~~30,~~a ~~2015and~~non-deductible ~~2014~~item ~~were~~for asincome ~~follows:~~tax purposes in the first quarter of 2014.

	Six Months Ended June 30, 2015
(Dollars in millions)	Filtration			ASA			Corporate, Eliminations and Other			Consolidated
Net Sales	$	444		$	21			—		$	465
Cost of Sales		(336	)		(14	)		(2	)		(352	)
Gross Profit		108			7			(2	)		113
Selling, General and Administrative Expenses		(45	)		(3	)		(22	)		(70	)
Operating Profit		63			4			(24	)		43
Other Income and Expense, net		(1	)		—			—			(1	)
Interest Expense		—			—			(26	)		(26	)
Add Back:
Depreciation and Amortization		9			—			2			11
Interest Expense		—			—			26			26
Consolidated EBITDA	$	71		$	4		$	(22	)	$	53
EBITDA %		16	%		19	%
	Six Months Ended June 30, 2014
(Dollars in millions)	Filtration			ASA			Corporate, Eliminations and Other			Consolidated
Net Sales	$	484		$	25		$	—		$	509
Cost of Sales		(354	)		(17	)		(4	)		(375	)
Gross Profit		130			8			(4	)		134
Selling, General and Administrative Expenses		(51	)		(2	)		(26	)		(79	)
Operating Profit		79			6			(30	)		55
Other Income and Expense, net		(8	)		(3	)		1			(10	)
Interest Expense		—			—			(30	)		(30	)
Add Back:
Depreciation and Amortization		8			—			—			8
Interest Expense		—			—			30			30
Consolidated EBITDA	$	79		$	3		$	(29	)	$	53
EBITDA %		16	%		12	%

(Loss) income from discontinued operations, net of tax. (Loss) income from discontinued operations, net of tax, is comprised of the results of the ASA segment, as well as the Chassis group for the period prior to sale in the second quarter of 2014. The loss in 2015 is driven primarily by a $45 million loss on sale of certain businesses within the ASA segment compared to a gain in 2014 as a result of recognizing a pre-tax gain of $32 million on the sale of the Chassis group. Additionally, both the nine months ended September 30, 2015 and 2014 include the results of operations of the ASA segment prior to the sale of certain businesses in September 2015.

~~Consolidated~~Net ~~EBITDA~~income. ~~for~~The net loss of $28 million in in the ~~six~~nine months ended ~~June~~September 30, 2015 ~~was flat~~ compared to net income of $$57 million in the same period in 2014 is primarily driven by lower earnings in the ~~prior~~Filtration ~~year~~segment, the loss on the sale of Pellegrino, Argentina and Uruguay, as well as the gain on the sale of the Chassis group that was ~~primarily~~recorded ~~driven~~in ~~by:~~2014.

·Segment ~~Venezuela~~Results ~~devaluation charges of $7 million recorded in the first quarter of 2014;~~

·Consolidated ~~Restructuring~~EBITDA, ~~costs~~which ofincludes $4the ~~million~~results ~~recorded~~for inFiltration ~~the~~segment ~~first~~as ~~quarter~~well ofas ~~2014~~corporate, ~~for~~eliminations ~~which~~and ~~there~~other, ~~were~~for nothe ~~comparable~~three ~~charges~~months inended ~~the~~September ~~first~~30, ~~quarter~~2015 ofand ~~2015,~~2014 ~~partially~~were ~~offset~~as byfollows:

· Lower EBITDA in the Filtration segment due to the loss of a significant customer and overall softness in the North America markets.

	Three Months Ended September 30, 2015
(Dollars in millions)	Filtration			Corporate, Eliminations and Other			Consolidated
Net Sales	$	238		$	—		$	238
Cost of Sales		(176	)		—			(176	)
Gross Profit		62			—			62
Selling, General and Administrative Expenses		(21	)		(15	)		(36	)
Operating Profit		41			(15	)		26
Other Income and Expense, net		(4	)		—			(4	)
Interest Expense		(1	)		(13	)		(14	)
Add Back:
Depreciation and Amortization		4			—			4
Interest Expense		1			13			14
Consolidated EBITDA	$	41		$	(15	)	$	26
EBITDA %		17	%

	Three Months Ended September 30, 2014
(Dollars in millions)	Filtration			Corporate, Eliminations and Other			Consolidated
Net Sales	$	248		$	—		$	248
Cost of Sales		(178	)		(3	)		(181	)
Gross Profit		70			(3	)		67
Selling, General and Administrative Expenses		(24	)		(10	)		(34	)
Operating Profit		46			(13	)		33
Other Income and Expense, net		(1	)		1			—
Interest Expense		(1	)		(14	)		(15	)
Add Back:
Depreciation and Amortization		4			—			4
Interest Expense		1			14			15
Consolidated EBITDA	$	49		$	(12	)	$	37
EBITDA %		20	%

Excluding currency impacts, consolidated EBITDA would have been $63 million for the six months ended June 30, 2015 which is $10 million higher compared to the same period for of 2014.

The decrease in consolidated EBITDA for the third quarter 2015 compared to the same period in the prior year was primarily driven by lower EBITDA in the Filtration segment as the result of the loss of a significant customer, as well as an overall softness in the North American aftermarket, which resulted in lower sales to customers.

Excluding currency impacts, consolidated EBITDA would have been $32 million in the third quarter of 2015, which is $5 million lower than the third quarter of 2014.

Consolidated EBITDA, which includes the results for the Filtration segment as well as corporate, eliminations and other, for the nine months ended September 30, 2015 and 2014 were as follows:

	Nine Months Ended September 30, 2015
(Dollars in millions)	Filtration			Corporate, Eliminations and Other			Consolidated
Net Sales	$	682		$	—		$	682
Cost of Sales		(512	)		(1	)		(513	)
Gross Profit		170			(1	)		169
Selling, General and Administrative Expenses		(67	)		(36	)		(103	)
Operating Profit		103			(37	)		66
Other Income and Expense, net		(5	)		—			(5	)
Interest Expense		(2	)		(38	)		(40	)
Add Back:
Depreciation and Amortization		13			1			14
Interest Expense		2			38			40
Consolidated EBITDA	$	111		$	(36	)	$	75
EBITDA %		16	%

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