This Report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this Report are indicated by words such as "anticipates," "expects," "believes," "intends," "plans," "estimates," "projects" and similar expressions. These statements represent our expectations based on current information and assumptions and are inherently subject to risks and uncertainties. Our actual results could differ materially from those which are anticipated or projected as a result of certain risks and uncertainties, including, but not limited to, our substantial leverage; economic and market conditions (including access to credit and financial markets); the performance of the aftermarket sector; changes in business relationships with our major customers and in the timing, size and continuation of our customers' programs; changes in the product mix and distribution channel mix; the ability of our customers to achieve their projected sales; competitive product and pricing pressures; increases in production or material costs that cannot be recouped in product pricing; successful integration of acquired businesses; our ability to achieve cost savings from our restructuring initiatives; product liability and environmental matters (including, without limitation, those related to asbestos-related contingent liabilities and remediation costs at certain properties); as well as other risks and uncertainties, such as those described under Quantitative and Qualitative Disclosures About Market Risk and those detailed herein and from time to time in the filings of the Company with the SEC. Forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. In addition, historical information should not be considered as an indicator of future performance. The following discussion should be read in conjunction with the unaudited consolidated financial statements, including the notes thereto, included elsewhere in this Report.

Business Overview

We are a leading independent manufacturer, distributor and marketer of replacement parts for motor vehicles in the automotive aftermarket industry, with an increasing focus on the original equipment and original equipment service markets. We are organized into two major operating segments, each of which focuses on a specific line of replacement parts. Our Engine Management Segment manufactures ignition and emission parts, ignition wires, battery cables and fuel system parts. Our Temperature Control Segment manufactures and remanufactures air conditioning compressors, air conditioning and heating parts, engine cooling system parts, power window accessories, and windshield washer system parts. We also sell our products in Europe through our European Segment.

We place significant emphasis on improving our financial performance by achieving operating efficiencies and improving asset utilization. We intend to continue to improve our operating efficiency, customer satisfaction and cost position by focusing on company-wide overhead and operating expense cost reduction programs, such as closing excess facilities and consolidating redundant functions.

Seasonality. Historically, our operating results have fluctuated by quarter, with the greatest sales occurring in the second and third quarters of the year and revenues generally being recognized at the time of shipment. It is in these quarters that demand for our products is typically the highest, specifically in the Temperature Control Segment of our business. In addition to this seasonality, the demand for our Temperature Control products during the second and third quarters of the year may vary significantly with the summer weather and customer inventories. For example, a cool summer may lessen the demand for our Temperature Control products, while a hot summer may increase such demand. As a result of this seasonality and variability in demand of our Temperature Control products, our working capital requirements typically peak near the end of the second quarter, as the inventory build-up of air conditioning products is converted to sales and payments on the receivables associated with such sales have yet to be received. During this period, our working capital requirements are typically funded by borrowing from our revolving credit facility.

Inventory Management. We face inventory management issues as a result of warranty and overstock returns. Many of our products carry a warranty ranging from a 90-day limited warranty to a lifetime limited warranty, which generally covers defects in materials or workmanship and failure to meet industry published specifications. In addition to warranty returns, we also permit our customers to return products to us within customer-specific limits (which are generally limited to a specified percentage of their annual purchases from us) in the event that they have overstocked their inventories. We accrue for overstock returns as a percentage of sales, after giving consideration to recent returns history.

In order to better control warranty and overstock return levels, we tightened the rules for authorized warranty returns, placed further restrictions on the amounts customers can return and instituted a program so that our management can better estimate potential future product returns. In addition, with respect to our air conditioning compressors, which are our most significant customer product warranty returns, we established procedures whereby a warranty will be voided if a customer does not provide acceptable proof that complete air conditioning system repair was performed.

Discounts, Allowances and Incentives. In connection with our sales activities, we offer a variety of usual customer discounts, allowances and incentives. First, we offer cash discounts for paying invoices in accordance with the specified discount terms of the invoice. Second, we offer pricing discounts based on volume and different product lines purchased from us. These discounts are principally in the form of "off-invoice" discounts and are immediately deducted from sales at the time of sale. For those customers that choose to receive a payment on a quarterly basis instead of "off-invoice," we accrue for such payments as the related sales are made and reduce sales accordingly. Finally, rebates and discounts are provided to customers as advertising and sales force allowances, and allowances for warranty and overstock returns are also provided. Management analyzes historical returns, current economic trends, and changes in customer demand when evaluating the adequacy of the sales returns and other allowances. Significant management judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. We account for these discounts and allowances as a reduction to revenues, and record them when sales are recorded.

Interim Results of Operations:

Comparison of Three Months Ended September 30, 2009 to Three Months Ended September 30, 2008

Sales. Consolidated net sales for the three months ended September 30, 2009 were $205.6 million, an increase of $2.7 million, or 1.3%, compared to $202.9 million in the same period of 2008. The increase in consolidated net sales resulted from an increase in net sales of $5.8 million, or 10.8%, in our Temperature Control Segment, partially offset by a $3.6 million, or 31.2%, decline in our European Segment. Net sales in our Engine Management Segment were essentially flat. Temperature Control sales benefitted from incremental new customer sales volumes and increased customer demand within our retail channel. The reduction in sales in our European Segment is the result of a decrease in original equipment sales volumes and an unfavorable change in foreign currency exchange rates.

Gross margins. Gross margins, as a percentage of consolidated net sales, increased slightly to 24.2% in the third quarter of 2009, compared to 24% in the third quarter of 2008. Temperature Control and Engine Management margins increased 2.2 percentage points and 0.3 percentage points, respectively, while margins in our European Segment decreased 2.4 percentage points. The increase in the Engine Management margins was primarily due to a reduction in our fixed overhead costs as a result of our cost reduction programs. The Temperature Control Segment's increase in margins resulted from favorable manufacturing variances compared to the same period in the prior year due to increased sales and production volumes. The European Segment's decrease resulted from lower sales volumes and higher manufacturing costs due to reduced production volumes.

Selling, general and administrative expenses. Selling, general and administrative expenses (SG&A) decreased by $4.3 million to $36.8 million, or 17.9%, of consolidated net sales, in the third quarter of 2009, as compared to $41.1 million, or 20.3% of consolidated net sales in the third quarter of 2008. The decrease in SG&A expenses is due primarily to lower selling, marketing and distribution expenses, and the benefit recognized from the postretirement benefit plan amendment announced in May 2008.

Restructuring and integration expenses. Restructuring and integration expenses increased to $3.3 million in the third quarter of 2009, compared to $1.9 million in the third quarter of 2008. During the third quarter of 2009, restructuring and integration expenses related primarily to exit costs incurred in connection with the closure of our Wilson, North Carolina manufacturing facility as part of our overhead cost reduction program and a workforce reduction charge related to our acquisition of a wire and cable business. The 2008 expenses related primarily to charges incurred in connection with the closure of our Puerto Rico manufacturing operations, the integration of operations to Mexico and for severance in connection with the consolidation of our Reno distribution operations and shutdown of our Edwardsville, Kansas manufacturing operations.

Components of our restructuring and integration accruals, by segment, were as follows (in thousands):

                                     Engine         Temperature
                                   Management         Control         European        Other         Total
Exit activity liability at June
30, 2009                          $      9,133     $         662     $       17     $   2,624     $  12,436
Restructuring and integration
costs:
Amounts provided for during
2009                                     3,037               117            150             -         3,304
Non-cash usage, including asset
write-downs                             (1,223 )               -            (66 )           -        (1,289 )
Cash payments                           (1,078 )            (187 )          (89 )        (589 )      (1,943 )
Exit activity liability at
September 30, 2009                $      9,869     $         592     $       12     $   2,035     $  12,508

Operating income. Operating income was $9.7 million in the third quarter of 2009, compared to $5.8 million in the third quarter of 2008. The increase of $3.9 million was due primarily to the higher sales volumes, the positive impact of an increase in gross margins in our Temperature Control Segment and lower SG&A expenses reflecting the impact of our postretirement benefit amendment and cost reduction programs, offset by an increase in restructuring and integration expenses related to our closure of the Wilson, North Carolina manufacturing plant and a workforce reduction charge resulting from our wire and cable business acquisition during the quarter.

Other income, net. Other income, net of $0.8 million in the third quarter of 2009 was $0.5 million lower than other income, net of $1.3 million in the same period of 2008. Other income, net in the third quarter of 2009 included the recognition of deferred gain of $0.3 million on the sale of our Long Island City, New York property, income from our joint ventures of $0.2 million and foreign exchange translation gains of $0.2 million. Other income, net in the third quarter of 2008 included a $1.6 million gain on the repurchase of $20.6 million principal amount of our 6.75% convertible subordinate debentures and the recognition of the deferred gain of $0.3 million on the sale of our Long Island City, New York property offset by losses from our joint ventures of $0.3 million and foreign exchange translation losses of $0.2 million.

Interest expense. Interest expense decreased by $0.9 million to $2.4 million in the third quarter of 2009 compared to $3.3 million in the same period in 2008 due to a reduction in average borrowing costs as a result of our debt reduction efforts which produced lower outstanding borrowings.

Income tax provision. The income tax provision in both the third quarter of 2009 and 2008 was $3.4 million. The effective tax rate in the third quarter of 2009 was 41.6%. The income tax provision in the third quarter of 2008 reflects the impact of an increase in the estimated annual effective tax rate from 42.6% projected in the second quarter of 2008 to 49.5% projected in the third quarter of 2008.

Loss from discontinued operation. Loss from discontinued operations, net of income tax, reflects adjustments made to our indemnity liability in line with information contained in actuarial studies obtained in August 2009 and 2008 and other information available and considered by us, and legal expenses incurred associated with our asbestos-related liability. During the third quarters of 2009 and 2008, we recorded a loss of $1.6 million from discontinued operations. The loss from discontinued operations for the third quarter of 2009 and 2008 reflects a $2.2 million and $2.1 million pre-tax adjustment, respectively, to increase our indemnity liability in line with the August 2009 and 2008 actuarial studies, as well as legal fees incurred in litigation. As discussed more fully in Note 13 in the notes to our consolidated financial statements, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.

Comparison of Nine Months Ended September 30, 2009 to Nine Months Ended September 30, 2008

Sales. Consolidated net sales for the nine months ended September 30, 2009 were $575.3 million, a decrease of $51.1 million, or 8.2%, compared to $626.4 million in the same period of 2008. The decrease in consolidated net sales resulted from declines in Engine Management net sales of $36.8 million, or 8.8%, European Segment net sales of $12 million, or 33.9%, and $3 million of net sales in our Other Operating Segment, which consists primarily of our Canadian operations. Temperature Control Segment net sales increased $0.7 million. The Engine Management decrease in net sales compared to the first nine months of 2008 is the result of lower sales volumes in our traditional markets as a single large customer changed brands to a competitor and as customers have reduced and maintained lower inventory levels in response to the economic environment. The reduction in sales in our European Segment resulted from a decrease in OE/OES sales volumes and an unfavorable change in foreign currency exchange rates.

Gross margins. Gross margins, as a percentage of consolidated net sales, has held relatively consistent at 23.8% for the nine months ended September 30, 2009 compared to 23.7% in the same period of 2008, as a 1.1 percentage point increase in Engine Management margins was offset by a 2.3 percentage point decrease in margins in our European Segment. The increase in the Engine Management margins was primarily due to a reduction in our fixed overhead costs as a result of our cost reduction programs and the negative impact on prior year margins of unabsorbed overhead during our closure of two manufacturing facilities and start up and training costs at our new Mexico facility. The European Segment's decrease resulted from lower sales volumes due to lower OE/OES sales in response to economic conditions. Temperature Control's gross margins held consistent at 18.6%.

Selling, general and administrative expenses. Selling, general and administrative expenses (SG&A) decreased by $17.9 million to $109.6 million or 19% of consolidated net sales in the nine months ended September 30, 2009, as compared to $127.5 million or 20.3% of consolidated net sales for the nine months ended September 30, 2008. The decrease in SG&A expenses is due primarily to lower selling, marketing and distribution expenses, and the benefit recognized from the postretirement benefit plan amendment announced in May 2008, partially offset by an increase in discount fees of $1.3 million related to our customer accounts receivable factoring program.

Restructuring and integration expenses. Restructuring and integration expenses decreased to $5.7 million for the nine months ended September 30, 2009, compared to $6.1 million in the same period of 2008. The 2009 expense related primarily to severance and other exit costs incurred in connection with the closure of our Edwardsville, Kansas and Wilson, North Carolina manufacturing operations, building demolition costs incurred at our European properties held for sale, and charges related to severance and other relocation costs incurred in connection with our wire and cable business acquisition. The 2008 expenses related primarily to charges incurred in connection with the shutdown of our Long Island City, New York manufacturing operations, the closure of our Puerto Rico manufacturing operations, the integration of operations to Mexico and for severance in connection with the consolidation of our Reno distribution operations and shutdown of our Edwardsville, Kansas manufacturing operations.

Operating income. Operating income was $21.8 million in the nine months ended September 30, 2009, compared to $15 million in 2008. The increase of $6.8 million was due primarily to lower SG&A expenses which more than offset the gross margin impact from a decline in net sales.

Other income, net. Other income, net decreased to $4.3 million for the nine months ended September 30, 2009, compared to $21.7 million in the same period of 2008. During 2009, we redeemed our investment in the preferred stock of a third party issuer resulting in a pretax gain of $2.3 million and recognized $0.8 million of deferred gain related to the sale-leaseback of our Long Island City, New York property. During 2008, we recognized a gain of $21.6 million on the sale of our Long Island City property, offset partially by a $1.4 million charge related to the defeasance of our mortgage on the property. In addition, other income, net during 2008 included a $1.6 million gain related to the repurchase of $20.6 million principal amount of our 6.75% convertible subordinate debentures.

Interest expense. Interest expense decreased by $3.8 million to $7.2 million in the nine months ended September 30, 2009, compared to $11 million in the same period in 2008. The decline is due primarily to our debt reduction efforts which resulted in lower outstanding borrowings. Lower borrowings more than offset the increase in the interest rate on our revolving credit facility as a result of amendments made to the credit agreement. Our accounts receivable factoring programs initiated during the second quarter of 2008 with some of our larger customers in order to accelerate collection of accounts receivable balances and improved working capital management contributed to the lower year over year borrowings for the nine months ended September 30, 2009.

Income tax provision. The income tax provision in the nine months ended September 30, 2009 was $7.8 million at an effective tax rate of 41%, compared to $12.7 million and an effective tax rate of 49.5% for the same period in 2008. The 2008 rate was higher primarily due to the differences in the mix of domestic and foreign earnings as a result of the gain on the sale of the Long Island City, New York property, the tax impact of the non-deductibility of a portion of the $5 million distribution to a participant in the unfunded supplemental executive retirement plan, and a tollgate tax on our operations in Puerto Rico.

Loss from discontinued operation. Loss from discontinued operations, net of income tax, reflects adjustments made to our indemnity liability in line with information contained in actuarial studies obtained in August 2009 and 2008 and other information available and considered by us, and legal expenses incurred associated with our asbestos-related liability. During nine months ended September 30, 2009 and 2008, we recorded a loss of $2.2 million from discontinued operations. The loss from discontinued operations for the nine months ended 2009 and 2008 reflects a $2.2 million and $2.1 million pre-tax adjustment, respectively, to increase our indemnity liability in line with the August 2009 and 2008 actuarial studies, as well as legal fees incurred in litigation. As discussed more fully in Note 13 in the notes to our consolidated financial statements, we are responsible for certain future liabilities relating to alleged exposure to asbestos containing products.

Restructuring and Integration Costs

The aggregated liabilities relating to the restructuring and integration
activities as of December 31, 2008 and September 30, 2009, and activity for the
nine months ended September 30, 2009 consisted of the following (in thousands):

                                                 Workforce       Other Exit
                                                 Reduction         Costs          Total
Exit activity liability at December 31, 2008    $    12,751     $      2,956     $ 15,707
Restructuring and integration costs:
Amounts provided for during 2009                      2,816            2,861        5,677
Non-cash usage, including asset write-downs               -           (2,697 )     (2,697 )
Cash payments                                        (5,317 )           (862 )     (6,179 )
Exit activity liability at September 30, 2009   $    10,250     $      2,258     $ 12,508

Restructuring Costs

Voluntary Separation Program

During 2008 as part of an initiative to improve the effectiveness and efficiency of operations, and to reduce costs in light of economic conditions, we implemented certain organizational changes and offered eligible employees a voluntary separation package. The restructuring accrual relates to severance and other retiree benefit enhancements to be paid through 2015. Of the original restructuring charge of $8 million, we have $4.5 million remaining as of September 30, 2009 that is expected to be paid in the amount of $1.3 million in 2009, $1.6 million in 2010, $0.6 million in 2011, and $1 million for the period 2012-2015.

Activity for the nine months ended September 30, 2009 related to this program, by segment, consisted of the following (in thousands):

                                                   Engine         Temperature
                                                 Management         Control          Other         Total
Exit activity liability at December 31, 2008    $      3,736     $       1,000     $   3,295     $   8,031
Restructuring costs:
Amounts provided for during 2009                           -               327             -           327
Change in estimated expenses                             113                 -          (113 )           -
Cash payments                                         (1,702 )            (766 )      (1,346 )      (3,814 )
Exit activity liability at September 30, 2009   $      2,147     $         561     $   1,836     $   4,544

Integration Expenses

Overhead Cost Reduction Program

Beginning in 2007 in connection with our efforts to improve our operating efficiency and reduce costs, we announced our intention to focus on company-wide overhead and operating expense cost reduction activities, such as closing excess facilities and reducing redundancies. Integration expenses under this program to date relate primarily to the integration of operations to our facilities in Mexico, the closure and consolidation of our distribution operations in Reno, Nevada, the closure of our production operations in Edwardsville, Kansas and Wilson, North Carolina and consolidation of certain facilities in Europe. We expect that all payments related to the current liability will be made within twelve months. We are still evaluating further activities under this program.

Activity for the nine months ended September 30, 2009 related to this program consisted of the following (in thousands):

                                                      Workforce       Other Exit
                                                      Reduction         Costs           Total
Exit activity liability at December 31, 2008         $     1,117     $        727     $   1,844
Integration costs:
   Amounts provided for during 2009                        1,522            2,346         3,868
   Non-cash usage, including asset write-downs                 -           (2,697 )      (2,697 )
Cash payments                                               (979 )           (348 )      (1,327 )
Exit activity liability at September 30, 2009        $     1,660     $         28     $   1,688

Wire and Cable Relocation

As a result of our acquisition of a wire and cable business and the relocation of certain machinery and equipment to our Reynosa, Mexico manufacturing facility, we incurred employee severance costs of $0.8 million and equipment relocation costs of $0.1 million during the third quarter of 2009. As of September 30, 2009 the reserve balance of $0.8 million relating to workforce reductions is expected to be fully paid during the current year.

                                                   Workforce      Other Exit
                                                   Reduction         Costs        Total
  Exit activity liability at December 31, 2008    $         -     $         -     $    -
  Integration costs:
     Amounts provided for during 2009                     816             112        928
     Change in estimated expenses                           -               -          -
  Cash payments                                             -            (112 )     (112 )
  Exit activity liability at September 30, 2009   $       816     $         -     $  816

Reynosa Integration Program

During 2006 and 2007, we announced plans for the closure of our Long Island City, New York and Puerto Rico manufacturing facilities and integration of operations in Reynosa, Mexico. In connection with the shutdown of the manufacturing operations at Long Island City that was completed in March of 2008, we incurred severance costs and costs associated with equipment removal, capital expenditures, and environmental clean-up. As of September 30, 2009, the reserve balance related to environmental clean-up at Long Island City of $2.1 million is included in other exit costs.

In connection with the shutdown of the manufacturing operations at Long Island City, we entered into an agreement with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and its Local 365 ("UAW"). As part of the agreement, we incurred a withdrawal liability . . .