<PAGE>

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTION 13 OR 15(d) OF THE
                            SECURITIES ACT OF 1934

 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934

                 For the Fiscal Year Ended December 31, 2001

                                    or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
    1934

          For the Transition Period from ________ to _________.

                         Commission File Number 1-13683

                         DELCO REMY INTERNATIONAL, INC.
              (Exact name of registrant as specified in its charter)

            Delaware                                            35-1909253
 (State or other jurisdiction of                             (I.R.S. Employer
  incorporation or organization)                            Identification No.)

      2902 Enterprise Drive
        Anderson, Indiana                                          46013
 (Address of principal executive offices)                        (Zip Code)

                              TITLE OF EACH SECURITY:

                          8 5/8% Senior Notes Due 2007
                   10 5/8% Senior Subordinated Notes Due 2006
                     11% Senior Subordinated Notes Due 2009

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (765) 778-6499
        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

     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 [X]                                  No [ ]

     INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]

     STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON EQUITY
HELD BY NON-AFFILIATES OF THE REGISTRANT. Not Applicable

     INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

                                                     Outstanding as of
                                                      March 15, 2002
                                                    -----------------
          Common Stock -- Class A                          1,000
          Common Stock -- Class B                      2,497,337.49
          Common Stock -- Class C                         16,687

DOCUMENTS INCORPORATED BY REFERENCE: None

                                        1
<PAGE>

                         DELCO REMY INTERNATIONAL, INC.
                                    FORM 10-K
                                DECEMBER 31, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
 PART I                                                                                                             Page
                                                                                                                    ----
------------------------------------------------------------------------------------------------------------------------
<S>           <C>                                                                                                   <C>
Item 1.        Business                                                                                               3
Item 2.        Properties                                                                                            12
Item 3.        Legal Proceedings                                                                                     14
Item 4.        Submission of Matters to a Vote of Security Holders                                                   14
------------------------------------------------------------------------------------------------------------------------
 PART II
------------------------------------------------------------------------------------------------------------------------
Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters                                 15
Item 6.        Selected Financial Data                                                                               15
Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations                 16
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk                                            23
Item 8.        Financial Statements and Supplementary Data                                                           24
Item 9.        Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                  63
------------------------------------------------------------------------------------------------------------------------
 PART III
------------------------------------------------------------------------------------------------------------------------
Item 10.       Directors and Executive Officers of the Registrant                                                    64
Item 11.       Executive Compensation                                                                                66
Item 12.       Security Ownership of Certain Beneficial Owners and Management                                        70
Item 13.       Certain Relationships and Related Transactions                                                        71
------------------------------------------------------------------------------------------------------------------------
 PART IV
------------------------------------------------------------------------------------------------------------------------
Item 14.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                      74

               SIGNATURES                                                                                            77
</TABLE>

                                        2
<PAGE>

--------------------------------------------------------------------------------
                                    PART I
--------------------------------------------------------------------------------

     From time to time, Delco Remy International, Inc. (the "Company") makes
oral and written statements that may constitute "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995 (the "Act") or
by the Securities and Exchange Commission ("SEC") in its rules, regulations and
releases. The Company desires to take advantage of the "safe harbor" provisions
in the Act for forward-looking statements made from time to time, including, but
not limited to, the forward-looking statements relating to the future
performance of the Company contained in this Form 10-K and in other filings with
the SEC.

     Any statements set forth below or otherwise made in writing or orally by
the Company with regard to its expectations as to financial results and other
aspects of its business may constitute forward-looking statements. These
statements relate to the Company's future plans, objectives, expectations and
intentions and may be identified by words like "believe," "expect," "may,"
"will," "should," "seek," or "anticipate," and similar expressions.

     The Company cautions readers that any such forward-looking statements are
based on assumptions that the Company believes are reasonable, but are subject
to a wide range of risks including, but not limited to, risks associated with
the uncertainty of future financial results, acquisitions, additional financing
requirements, development of new products and services, the effect of
competitive products or pricing, the effect of economic conditions and other
uncertainties. Due to these uncertainties, the Company cannot assure readers
that any forward-looking statements will prove to have been correct.

ITEM 1     BUSINESS

     The Company is a leading global manufacturer and remanufacturer of original
equipment and aftermarket electrical, powertrain/drivetrain and related
components for automobiles, light trucks, medium and heavy duty trucks and other
heavy duty vehicles. The Company's products are sold worldwide primarily under
the "Delco Remy" brand name, as well as other widely recognized private label
brands. The Company's products include starter motors ("starters"), alternators,
engines, transmissions, torque converters, traction control systems and fuel
systems which are principally sold or distributed to original equipment
manufacturers ("OEMs") for both original equipment manufacture and aftermarket
operations, as well as to warehouse distributors and retail automotive parts
chains. The Company sells its products principally in North America, Europe,
Latin America and Asia-Pacific.

     The Company believes that it is the largest producer in North America of
OEM starters for automobiles and light trucks and starters and alternators for
medium and heavy duty vehicles. The Company believes it is also the largest
producer in North America of remanufactured starters and alternators for the
aftermarket. The Company provides exchange services for cores for third party
aftermarket remanufacturers. The Company's largest customers include General
Motors ("GM"), International Truck and Engine Corporation ("Navistar"), Advance
Auto Parts, Caterpillar, Delphi, Autozone, Cummins, PACCAR, O'Reilly, Volvo
Trucks, Mack, Pep Boys and NAPA.

     Since the Company's separation from GM in 1994, the Company has
successfully acquired and integrated 17 strategic businesses and entered into
seven joint ventures. These acquisitions and joint ventures have enabled the
Company to broaden its product line, expand its manufacturing and
remanufacturing capability, extend its participation in international markets
and increase its penetration of the retail automotive parts channel. As a
result, sales to its customers other than GM have increased from 41% of the
Company's total sales in fiscal year 1995 to 75% in fiscal year 2001. The
Company has also increased sales outside of the Class 8 heavy duty truck market
from 87% of its total sales in fiscal year 1995 to 96% in fiscal year 2001.

     The Company changed its fiscal year to December 31, effective August 1,
2000. Prior to August 1, 2000, the fiscal year ended on July 31. References to
"fiscal year" other than fiscal year 2001 pertain to years ending on July 31
of such year.

                                        3
<PAGE>

GOING PRIVATE TRANSACTION

     On February 7, 2001, the Company agreed to a going private transaction with
its largest stockholder, Court Square Capital Limited ("Court Square"), pursuant
to which Court Square made a cash tender offer for all of the Company's common
stock not owned by Court Square. Following completion of the tender offer on
February 23, 2001, an affiliate of Court Square merged with the Company and the
merger eliminated the remaining common stock not owned by Court Square. The
aggregate consideration for the shares purchased in the tender offer and the
merger was about $104.2 million. The Company did not incur any indebtedness in
connection with the tender offer and merger. Following completion of the merger
on March 14, 2001, the New York Stock Exchange delisted the Company's common
stock, and the Company terminated the registration of its common stock under the
Exchange Act.

ACQUISITIONS

     On June 28, 2001, the Company acquired the North American remanufacturing
business of Mazda North American Operations for approximately $17.1 million,
including fees and expenses and excluding future contingent payments. The
business, located in Jacksonville, Florida, is responsible for the
remanufacturing of Mazda automatic transmissions, transaxles and rotary engines
for Mazda's service requirements in North America. The Company will continue to
remanufacture these components to support Mazda's service and replacement parts
needs in North America.

     On May 4, 2001, the Company completed the acquisition of 100% of the stock
of Auto Matic Transmission International A/S ("AMT") and its wholly-owned
subsidiary, Mr. Transmission ApS., for approximately $0.5 million. AMT is based
in Soborg, which is a suburb of Copenhagen, Denmark. AMT will expand the
Company's existing business of remanufacturing automatic transmissions for
passenger cars and commercial vehicles.

     On February 12, 2001, the Company expanded its aftermarket product line by
acquiring the business and assets of XL Component Distribution Limited ("XL")
for approximately $2.4 million. Since 1985, XL, with headquarters in Droitwich,
Worcestershire, England, has been involved in the remanufacturing, packaging and
distribution of steering racks, brake calipers, ignition distributors, ignition
leads, transmission components and rotating electrics. These products are
distributed under the XL brand, with the exception of rotating electrics, which
are branded under the Autostart name.

INDUSTRY OVERVIEW

     In general, the Company's business is influenced by the underlying trends
of the automotive industry. However, the Company believes that its focus on
expanding its remanufacturing capabilities heightens the importance of the
aftermarket and reduces its dependence on the cyclical OEM business.

Aftermarket

     The aftermarket consists of the production and sale of both new and
remanufactured parts used in the maintenance and repair of automobiles, trucks
and other vehicles. Remanufacturing is a process through which cores are
disassembled into their sub-components, cleaned, inspected, tested, combined
with new subcomponents and reassembled into finished products. A remanufactured
product can be produced at lower cost than a comparable individually repaired
unit due to effective salvage technology methods, high volume precision
manufacturing techniques and rigorous inspection and testing procedures. The
ability to procure cores is critical to the remanufacturing process.

     Aftermarket parts are supplied principally through three distribution
channels:

     . car and truck dealers that obtain parts either through an OEM parts
       organization (e.g., GM Service Parts Operations ("GM SPO"), Ford Parts &
       Service, Chrysler Mopar and Navistar) or directly from an OEM-authorized
       remanufacturer;

     . retail automotive parts chains and mass merchandisers; and

     . wholesale distributors and jobbers who supply independent service
       stations, specialty and general repair shops, farm equipment dealers, car
       dealers and small retailers.

                                        4
<PAGE>

     The Company believes that the aftermarket and the Company's opportunity in
the aftermarket have been, and will continue to be, impacted by the following
trends:

     . the increasing number and average age of vehicles in use and the number
       of miles driven annually;

     . the increasing demands of customers that their aftermarket suppliers meet
       high quality and service standards;

     . the increasing use of remanufactured parts for OEM warranty and extended
       service programs, especially on larger, more complex components such as
       engines, transmissions and fuel system components;

     . the growth and consolidation of large retail automotive parts chains and
       warehouse distributors requiring larger, nationally capable suppliers;

     . the increasing engine output and durability demands related to the high
       temperatures at which engines operate;

     . the increased high-technology content of replacement components which
       requires more factory manufacturing compared with in-vehicle repair; and

     . the increasing product lives of automotive parts.

     The use of remanufactured components for warranty and extended service
repairs has increased in recent years as OEMs have offered extended warranty and
extended service coverage and dealers have begun to provide extended service
plans and warranties on used vehicles. OEMs have sought to reduce warranty and
extended service costs by using remanufactured components, which generally offer
the same degree of quality and reliability as OEM products at a lower cost. This
trend has also resulted in independent aftermarket customers requiring higher
quality standards for remanufactured products.

     Recently, large retail automotive parts chains offering a broad range of
new and remanufactured products have experienced rapid growth at the expense of
small, independent retail and wholesale stores. The Company has significantly
grown its sales to these large retail channels and believes that further
increasing its sales to retail chains offers a significant opportunity for
growth. Retail chains generally prefer to deal with large, national suppliers
capable of meeting their cost, quality, volume and service requirements.

OEM Markets

     The OEM market consists of the production and sale of new component parts
for use in the manufacture of new vehicles. The OEM market includes two major
classes of customers:

     . automobile and light truck manufacturers and

     . medium and heavy duty truck and engine manufacturers and other heavy duty
       vehicle manufacturers.

     The OEM market has been impacted by recent fundamental changes in the OEMs'
sourcing strategies. OEMs are consolidating their supplier base, demanding that
their suppliers provide technologically advanced product lines, greater systems
engineering support and management capabilities, just-in-time sequenced delivery
and lower system costs. As a result, each OEM has selected its own preferred
suppliers. OEMs are increasingly requiring that their preferred suppliers
establish global production capabilities to meet their needs as they expand
internationally and increase platform standardization across multiple markets.
As OEM global alliances increase, global pricing for automotive components is
becoming the norm.

     OEMs continue to outsource component manufacturing of non-strategic parts.
Outsourcing has taken place in response to competitive pressures on OEMs to
improve quality and reduce capital outlays, production costs, overhead and
inventory levels. In addition, OEMs are increasingly purchasing integrated
systems from suppliers who provide the design, engineering, manufacturing and
project management support for a complete package of integrated products. By
purchasing complete systems, OEMs are able to shift design, engineering and
product management to fewer and more capable suppliers. Integrated systems
suppliers are generally able to design, manufacture and deliver components at a
lower cost than the OEMs due to

     . their lower labor costs and other manufacturing efficiencies;

     . their ability to spread research and development and engineering costs
       over products provided to multiple OEMs; and

     . other economies of scale inherent in high volume manufacturing such as
       the ability to automate and leverage global purchasing capabilities.

                                        5
<PAGE>

PRODUCTS

     The Company's product line includes a diverse range of manufactured and
remanufactured products for the aftermarket and OEM markets under the "Delco
Remy" brand name or under a private-label brand name specified by the OEM or the
aftermarket customer. The Company also provides core acquisition services for
third party aftermarket remanufacturers as well as its own subsidiaries. The
product line is classified into two product categories: Electrical Systems and
Powertrain/Drivetrain. Third-party sales for core acquisition services are
included in the "Other" category.

     The following table sets forth the approximate composition by product
category of the Company's revenues for the fiscal year ended December 31, 2001,
the five months ended December 31, 2000 and the two prior fiscal years ended
July 31, 2000 and 1999*:

<TABLE>
<CAPTION>
                                                        Five
                                      Year Ended    Months Ended        Year Ended July 31
                                      December 31    December 31     -----------------------
Product Categories                       2001           2000           2000          1999
                                     -------------------------------------------------------
<S>                                    <C>            <C>            <C>           <C>
Electrical systems                       70.4%          76.2%          78.7%         83.2%
Powertrain/drivetrain                    23.6           17.5           17.8          15.7
Other                                     6.0            6.3            3.5           1.1
                                     -------------------------------------------------------
Total                                   100.0%         100.0%         100.0%        100.0%
                                     =======================================================
</TABLE>

               * Reference is made to the consolidated financial statements and
                 the notes relating thereto for a more detailed presentation of
                 revenues from external customers, a breakdown of foreign
                 revenues, measure of profit (loss) and total assets.

     Products within the electrical systems category include manufactured and
remanufactured starters and alternators. The starters are used in all cars and
trucks manufactured by GM in North America (except for its Saturn and Geo
divisions). The Company manufactures a full line of heavy duty starters and
alternators for use primarily with large diesel engines. The Company's starters
and alternators are specified as part of the standard electrical system by most
North American heavy duty truck and engine manufacturers. The Company believes
that it is the largest manufacturer and remanufacturer in North America of (i)
starters for automobiles and light trucks (including sport-utility vehicles,
minivans and pickup trucks) and (ii) starters and alternators for medium and
heavy duty vehicles. With the Company's acquisition of M&M Knopf Auto Parts,
Inc. ("M&M Knopf") on March 10, 2000, the Company expanded its role as a
provider of core acquisition services.

     Products within the powertrain/drivetrain category include gas, diesel and
marine engines, fuel injectors, injection pumps and turbo chargers (fuel
systems), transmissions, torque converters, water pumps, rack and pinions, power
steering pumps, gears and clutches, and traction control systems. The Company
produces traction control systems for use in construction, industrial and
agricultural equipment and in medium duty trucks. The traction control systems
business combines valuable product engineering skills with strong machining and
fabrication capabilities to manufacture products with custom designed
applications.

CUSTOMERS

     The Company's principal customers include OEM automotive and heavy duty
manufacturers, OEM dealer networks, leading automotive parts retail chains and
warehouse distributors. The Company's major customers include GM, Navistar, GM
SPO, Advance Auto Parts, Caterpillar, Delphi, Autozone, Cummins, PACCAR,
O'Reilly, Volvo Trucks, Mack, Pep Boys and NAPA.

     The Company has long-term agreements, with terms typically ranging from
three to five years, to supply heavy duty starters and alternators to GM and
PACCAR. Total sales to GM and related affiliates accounted for approximately
24.5%, of which approximately 17.2% are OEM sales, and sales to Navistar
accounted for approximately 11.1% of the Company's sales in 2001. No other
customer accounted for more than 10% of consolidated net sales.

     In connection with the Company's separation from GM in July 1994, GM
entered into long-term contracts with the Company to purchase 100% of its North
American requirements for automotive starters (other than for Saturn and Geo)
and 100% of its U.S. and Canadian requirements for heavy duty starters and
alternators, at fixed prices which are scheduled to decline over the life of the
contracts. GM's obligations to purchase the Company's automotive starters and
heavy duty starters

                                        6
<PAGE>

and alternators under these agreements are subject to those products remaining
competitive as to price, technology and design. In fiscal year 1999, the Company
and GM extended the terms of these agreements for the Company to supply
automotive starters for existing and planned new engines introduced to support
GM North American Operations to August 31, 2008. The amendment also provides
that Delco Remy America and its international operations will be the supplier of
starting motors for the life of production of those engines. The contracts
relating to heavy duty products terminated on July 31, 2000.

     In 1994, GM also entered into a long-term contract with the Company to
distribute exclusively the Company's automotive aftermarket products. Prices to
GM under this agreement are driven by the market. This agreement terminates on
July 31, 2009.

     Until July 1998, the Company had a long-term contract with GM to distribute
exclusively the Company's heavy duty aftermarket products. The Company and GM
have entered into an amendment to that agreement which is continuously renewable
on an annual basis for non-exclusive distribution of heavy duty products to the
independent aftermarket. As part of this agreement, heavy duty replacement parts
will continue to be supplied to the independent aftermarket through existing AC
Delco distributors and newly appointed Delco Remy distributors. As a result of
this agreement, the Company is developing a distribution network of independent
warehouse distributors to expand the sales volume previously covered by the
expired agreement for heavy duty aftermarket product distribution. The Company
expects that it will be able to expand its market share through this more direct
channel of distribution. Although the Company expects that its automotive and
heavy duty products will remain competitive throughout the term of the
agreements with GM, it cannot be sure that GM will not develop alternative
sources for those components and purchase some or all of its requirements from
these sources prior to or following the expiration of the agreements.

     The Company employs its own direct sales force which develops and maintains
sales relationships with major North American truck fleet operators as well as
its OEM customers worldwide. These sales efforts are supplemented by a network
of field service engineers and product service engineers.

DISTRIBUTION

     The Company's products are distributed to its customers primarily by common
carrier.

COMPETITION

     The automotive parts market is highly competitive. Competition is based
primarily on quality of products, service, delivery, technical support and
price. Most OEM manufacturers and aftermarket distributors source parts from one
or two suppliers. The Company competes with a number of companies who supply
automobile manufacturers throughout the world. In the North American automotive
market, the Company's principal competitors include Denso, Valeo, Mitsubishi,
Bosch, Visteon, Rayloc, Units Parts and Motorcar Parts & Accessories.

BUSINESS STRATEGY

Exploit Leading Market Share in Fragmented Aftermarket

     The Company participates in a portion of the aftermarket that is large and
highly fragmented. Most participants are small, regional companies offering
relatively narrow product lines. A key element of the Company's growth strategy
is to capitalize on its position as a consolidator. The Company believes that it
is the largest manufacturer and remanufacturer of aftermarket starters and
alternators in North America and in Europe. Today, remanufacturing is less
prevalent in Europe than in the U.S. The Company believes it is well-positioned
to capitalize on the increasing trend towards remanufacturing from repair.
Consolidation of the aftermarket is occurring as many competitors are finding it
difficult to meet the increasing quality, cost and service demands of customers,
who, in turn, are seeking to reduce the number of their suppliers. With its OEM
capabilities, remanufacturing expertise, full product line, access to cores and
ability to capitalize on economies of scale, the Company is well positioned to
benefit from the consolidation of the aftermarket.

                                        7
<PAGE>

Strengthen Customer Relationships

     The Company intends to increase its sales to new and existing customers by
capitalizing on its balanced coverage of the key aftermarket distribution
channels and its competitive strengths as an OEM supplier. The Company plans to
strengthen its customer relationships by:

     . meeting the increasing demands of OEMs and their dealer networks for
       high-quality remanufactured units, which enable them to reduce warranty
       and extended service costs;

     . growing sales of existing and new product lines to OEM dealer networks as
       dealers continue to capture an increasing percentage of vehicle repairs
       primarily due to longer warranty and service programs and growing vehicle
       complexity;

     . continuing to expand its product offerings; and

     . capitalizing on the expansion of the national automotive retail parts
       chains and warehouse distributors that are its customers.

Increase Global Presence

     OEMs are increasingly requiring suppliers to provide components on a global
basis as vehicle platforms are standardized across geographic markets.
Additionally, the Western European market for automotive components is expected
to grow at a greater rate than the North American market over the next few years
due to higher levels of OEM outsourcing. The emerging markets also should
benefit from long-term growth as demand for automotive vehicles in these markets
is expected to increase at a compounded annual rate of almost 7% over the next
five years. Currently, the Company's manufacturing base includes a presence in
nine countries on four continents. It plans to seek out collaborative
opportunities in order to expand its OEM starter and alternator product lines
and its international marketing and distribution capability. The Company
believes that continued global expansion will enable it to continue to grow to
meet these demands.

Increase Focus on Technologically Advanced Products

     The Company continues to produce technologically advanced products by
regularly updating and enhancing its product line. These products help it to
compete successfully in the global marketplace. Since 1994, the Company has
completed the introduction of a new family of gear reduction starters that
replaced all straight drive starters in GM automobiles and light duty trucks by
the 1998 model year and introduced several longer-life heavy duty alternators.
It is also in various stages of development on a number of new products
including:

     . an integrated starter and alternator product scheduled for production in
       GM vehicles beginning in 2004;

     . a small gear reduction starter specifically designed for application on
       world automobile platforms; and

     . high-technology products in the distributed generation and hybrid
       electric vehicle markets.

PATENTS, TRADEMARKS AND LICENSES

     Pursuant to a Trademark Agreement between the Company and GM, GM has
granted the Company an exclusive license to use the "Delco Remy" trademark on
and in connection with automotive starters and heavy duty starters and
alternators until July 31, 2004, extendable indefinitely at the Company's option
upon payment of a fixed $100,000 annual licensing fee to GM. The Company has
also been granted a perpetual, royalty-free license to use the "Remy" trademark.
The "Delco Remy" and "Remy" trademarks are registered in the United States,
Canada and Mexico and in most major markets worldwide. GM has agreed with the
Company that, upon the Company's request, GM will register the trademarks in any
jurisdiction where they are not currently registered.

     The Company has also been granted an exclusive license to use the "Delco
Remy" name as a tradename and corporate name worldwide until July 31, 2004
pursuant to a Tradename License Agreement between the Company and GM. In
addition, GM has granted the Company a perpetual license to use the "Remy" name
as a tradename and corporate name worldwide.

                                        8
<PAGE>

     The Company owns and has obtained licenses to various domestic and foreign
patents and patent applications related to its products and processes. The
patents expire at various times over the next 14 years. While these patents and
patent applications in the aggregate are important to the Company's competitive
position, no single patent or patent application is material to the Company.

RAW MATERIALS

     Principal raw materials for the Company's business include bare copper
strap, insulated copper, aluminum castings, forgings, outer frames, nomex paper,
steel coils, steel bars, copper tube, copper wire, gray iron castings, ductile
iron castings, copper cross-section coils, magnets, steel shafts, steel cores,
steel wire and molding material. All materials are readily available from a
number of suppliers, and the Company does not foresee any difficulty in
obtaining adequate inventory supplies. The Company and GM have entered into a
long-term worldwide purchasing support agreement that allows the Company to
purchase copper wire and steel, which are used in the manufacture of starters
sold to GM, at prices that the Company believes generally to be lower than those
that would otherwise be obtainable by the Company. This agreement expires on
July 31, 2004, or earlier, upon termination of the automotive and heavy duty
supply OEM agreements between the Company and GM. The Company generally follows
the North American industry practice of passing on to its customers the costs or
benefits of fluctuation in copper and aluminum prices on an annual or
semi-annual basis.

EMPLOYEES

     As of December 31, 2001, the Company employed 7,422 people, 1,938 of whom
were salaried and administrative employees and 5,484 of whom were hourly
employees. Of the Company's hourly employees, 25% are represented by unions. In
the United States, 550 of the Company's hourly workers are represented by the
United Auto Workers Union (the "UAW") under an agreement between the Company and
the UAW, the applicable provisions of which were assumed by the Company in
connection with the separation from GM. The agreement between the UAW and the
Company, originally scheduled to expire on March 22, 2001, was extended an
additional two years. In addition, 42 of the Company's hourly employees are
represented by the International Brotherhood of Teamsters (the "Teamsters"). The
agreement between the Teamsters and the Company expires on August 31, 2003.

     As of December 31, 2001, 52 of the Company's 151 Canadian hourly employees
are represented by the Canadian Auto Workers Union and 8 are represented by the
United Steel Workers Union. The agreements with these unions expire in November
2002 and December 2002, respectively.

     As of December 31, 2001, approximately 170 of Delco Remy Hungary's 388
hourly employees are affiliated with the Hungarian Steel Industry Workers Union.
The agreement was signed July 17, 1996 and is perpetual, subject to termination
upon three months' notice from either party.

     As of December 31, 2001, approximately 542 of Elmot's 649 hourly workers
are affiliated with The Intercompany Trade Union or the Intercompany Union
Organization NSZZ. Agreements with these unions were signed on August 23, 2000
and are perpetual.

     The Company's other facilities are primarily non-union. The Company is
unaware of any current efforts to organize the employees in its other
facilities. There can be no assurance that there will not be any labor union
efforts to organize employees at facilities that are not currently unionized. At
the present time, the Company believes that its relations with its employees are
good.

                                        9
<PAGE>

RESEARCH AND DEVELOPMENT

     The Company's engineering staff works independently and with OEMs to design
new products, improve performance and technical features of existing products
and develop methods to lower manufacturing costs. In support of its engineering
efforts, the Company has formed technical alliances with a select number of
engineering and technology firms to identify long-term engineering advances and
opportunities. The Company has entered into a joint venture with Continental AG
for the joint industrialization of the Integrated Starter Alternator Damper
motor in Europe. This new technology combines the starter and alternator
functions in one compact, high performance unit integrated between the engine
and gearbox. The Company also is a participant in Electricore Incorporated, a
consortium for advanced transportation technologies. Through this participation,
the Company is working on developing the technical alliances to develop the next
generation motors and alternators. The Company has also entered into an alliance
with Lynx Motion Technologies to develop a family of electric drive motors which
will be integral components of the propulsion system, needed for advanced hybrid
gas-electric, diesel-electric and fuel cell vehicles.

     Consistent with its strategy to introduce technologically advanced and
improved products, the Company spent approximately $15.5 million in 2001,
approximately $7.2 million in the five month period ended December 31, 2000 and
approximately $16.3 million and $13.5 million in fiscal years 2000 and 1999,
respectively, on research and development activities. All expenditures were
Company funded.

FOREIGN OPERATIONS

     Information about the Company's foreign operations is set forth in tables
relating to geographic information in Note 14 to Consolidated Financial
Statements, "Business Segments and Geographic Area Information," which
statements are included under Item 8, Financial Statements and Supplementary
Data.

ENVIRONMENTAL REGULATION

     The Company's subsidiaries' facilities and operations are subject to a wide
variety of federal, state, local and foreign environmental laws, regulations,
ordinances and directives, including those related to air emissions, wastewater
discharges and chemical and hazardous waste management and disposal
("Environmental Laws"). The Company's subsidiaries' operations also are governed
by laws relating to workplace safety and worker health, primarily the
Occupational Safety and Health Act, and foreign counterparts to such laws
("Employee Safety Laws"). The Company believes that its and its subsidiaries'
operations are in compliance with current requirements under Environmental Laws
and Employee Safety Laws, except for non-compliance where the cost that might be
incurred to resolve the non-compliance would not have a material adverse effect
on the Company's results of operations, business or financial condition. The
nature of the Company's and its subsidiaries' operations, however, exposes it to
the risk of liabilities or claims with respect to environmental and worker
health and safety matters. There can be no assurance that such costs will not be
incurred in connection with such liabilities or claims.

     The Company has commenced a series of environmental, health and safety
reviews to enable the subsidiaries to confirm their compliance with
Environmental Laws and Employee Safety Laws. In connection with those reviews,
the Remy Reman facilities in Mississippi and the World Wide Automotive facility
in Virginia identified certain possible violations of Environmental Law of which
they have notified the Environmental Protection Agency ("EPA") and/or the
applicable state agencies under federal or state voluntary audit disclosure
rules, and the subsidiaries have taken or are taking steps to correct the
violations. The Company does not believe that the costs of the matters will have
a material adverse effect on the Company's results of operations, business or
financial condition.

                                       10
<PAGE>

     Based on the Company's experience to date, the Company believes that the
future costs of compliance with existing Environmental Laws (or liability for
known environmental claims) will not have a material adverse effect on the
Company's business, financial condition or results of operations. However,
future events, such as changes in existing Environmental Laws or their
interpretation, may give rise to additional compliance costs or liabilities for
the subsidiaries that could have a material adverse effect on the Company's
business, financial condition or results of operations. Compliance with more
stringent Environmental Laws, as well as more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing
Environmental Laws, may require additional expenditures by the Company or its
subsidiaries that may be material.

     Certain Environmental Laws hold current owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes, pollutants or
contaminants, including petroleum and petroleum products ("Hazardous
Substances"). Because of their operations, the long history of industrial uses
at some of its facilities, the operations of predecessor owners or operators of
certain of the businesses, and the use, production and release of Hazardous
Substances at these sites, the Company's subsidiaries are affected by such
liability provisions of Environmental Laws. Various of the Company's
subsidiaries' facilities have experienced in the past or are currently
undergoing some level of regulatory scrutiny and are, or may become, subject to
further regulatory inspections, future requests for investigation or liability
for past disposal practices.

     In September 2000, one of Franklin Power Product Inc.'s (a subsidiary of
the Company) Indiana facilities received a Finding of Violation and Order for
Compliance from the EPA requiring the facility to correct violations of its
wastewater discharge permits. Franklin Power Products, Inc. is in compliance
with the terms of the order and is implementing modifications to eliminate the
discharge.

     During the environmental due diligence performed in connection with the
separation from GM, GM and the Company identified certain on-site pre-closing
environmental conditions, including the presence of certain Hazardous Substances
in the soil at the Meridian, Mississippi facility and in the soil and
groundwater at the Anderson, Indiana facilities. At the time, GM reported the
presence of these substances in the groundwater to the EPA and the Indiana
Department of Environmental Management ("IDEM"), and we understand that GM
continues to be responsible for working with the EPA to resolve these issues.
The Company has vacated one of the former GM Anderson facilities and the
Meridian Mississippi facility and has ceased manufacturing at the other former
GM Anderson facility. Based on the Company's experience to date, the terms of
the indemnification in the GM acquisition agreement and GM's continuing
performance in responding to these conditions, the Company does not believe any
future costs of responding to these on-site environmental conditions would have
a material adverse effect on the Company's operations, business or financial
condition.

     In connection with its acquisition of facilities and businesses from GM,
Nabco, A&B Group, Autovill, Power Investments, World Wide Automotive,
Ballantrae, Lucas Varity, Electro Diesel Rebuild, Electro Rebuild Tunisia,
Atlantic Reman Limited, Williams Technologies, Elmot, Mazda, PAS and M&M Knopf,
the Company and/or its subsidiaries obtained various indemnities for certain
claims related to on-site and/or off-site environmental conditions and
violations of Environmental Laws which arose prior to such acquisitions. The
environmental indemnities are subject to certain deductibles, caps, cost sharing
and time limitations depending on the nature and timing of the environmental
claim.

     The Comprehensive Environmental Response, Compensation, and Liability Act,
as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), imposes joint and several liability for releases of certain
Hazardous Substances into the environment. The Company has received requests for
information or notifications of potential liability from the EPA under CERCLA
for certain off-site locations. The Company has not incurred any significant
costs relating to these matters, and based on the existence of certain
indemnification agreements from its predecessors and their assumption of
liabilities to date and other legal defenses, the Company believes that it will
not incur material costs in the future in responding to conditions at these
sites.

     The Resource Conservation and Recovery Act ("RCRA") and the regulations
thereunder and similar state counterparts to this law regulate hazardous wastes.
The Anderson, Indiana facilities that the Company originally leased from GM were
once part of a larger industrial complex owned and operated by GM (the "GM
Complex"). Since 1990 (when owned by GM), the GM Complex has been undergoing
investigation and corrective action under RCRA. Based on the indemnities from GM
and the lack of any claim to date by GM for any compensation by the Company, the
Company believes that any future costs associated with the RCRA corrective
action will not have a material adverse effect on the Company's results of
operations, business or financial condition.

                                       11
<PAGE>

     The Company's subsidiaries are in the process of terminating various leases
and/or shutting down operations at various redundant facilities. In connection
with this activity, the subsidiaries evaluate environmental conditions as
required under the applicable lease and intend to address any discovered
conditions for which they are responsible. The Company does not believe the
environmental obligations in connection with these terminations or closures will
result in costs that will have a material adverse effect on the Company's
results of operations, business or financial condition.

     Franklin Power Co., Inc. in Franklin, Indiana has been undergoing a RCRA
site investigation and clean-up of volatile organic compounds ("VOCs") in the
soil and groundwater pursuant to an EPA Administrative Order on Consent ("EPA
Order") issued to both Franklin Power Products, one of the subsidiaries of the
Company, and Amphenol Corporation, a prior owner of the property. Pursuant to
the EPA Order, Franklin Power Products and Amphenol Corporation are jointly
addressing this matter. Amphenol indemnified Franklin Power Products for certain
liabilities associated with the EPA Order and Amphenol has satisfied and
continues to satisfy the requirements of the EPA Order. Based on the experience
to date and the indemnities from Amphenol and the sellers of Franklin Power
Products to the Company, the Company believes that future costs associated with
this site will not have a material adverse effect on the Company's results of
operations, business or financial condition.

     Nabco Inc.'s (a subsidiary of the Company) Marion, Michigan facility was
listed on Michigan's state list of contaminated sites since 1993 because of
Hazardous Substances in the soils and groundwater at the facility. Based on
recent sampling results submitted to the Michigan environmental authority in
September 2001, Nabco believes that no further work will be required. Even if
the Michigan environmental authority was to require further investigation or
remedial action with respect to this matter, the Company does not believe that
costs in connection with this matter will have a material adverse effect on the
Company's results of operations, business or financial condition.

BACKLOG

     The majority of the Company's products are not on a backlog status. They
are produced from readily available materials and have a relatively short
manufacturing cycle. For products supplied by outside suppliers, the Company
generally purchases products from more than one source. The Company expects to
be capable of handling the anticipated sales volumes for the next fiscal year.

SEASONALITY

     The Company's business is seasonal, as its major OEM customers
historically have one or two week shutdowns of operations during July. In
response, the Company typically has shut down its own operations for one week
each July, depending on backlog, scheduled maintenance and inventory buffers,
as well as an additional week during the December holidays. Consequently, the
Company's results in the third and fourth quarters reflect the effects of these
shutdowns.

ITEM 2     PROPERTIES

      The world headquarters of the Company are located at 2902 Enterprise
Drive, Anderson, Indiana 46013. The Company leases its headquarters. The
following table sets forth certain information regarding manufacturing and
certain other facilities operated by the Company as of December 31, 2001.

<TABLE>
<CAPTION>
                                      Number
    Location                       Of Facilities                         Use                              Owned/Leased
------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                     <C>                                      <C>
Anderson, IN                             3                       Office                                      Leased
Anderson, IN                             7                       Manufacturing                               Leased
Anderson, IN                             1                       Testing                                     Leased
Anderson, IN                             1                       Warehouse                                   Leased
Atlanta, GA                              1                       Warehouse                                   Leased
Bay Springs, MS                          1                       Manufacturing                               Leased
Brooklyn, NY                             2                       Warehouse                                   Leased
Brusque, Brazil                          1                       Manufacturing                               Leased
Budapest, Hungary                        1                       Office                                      Leased
Budapest, Hungary                        1                       Warehouse                                   Owned
Buffalo, NY                              2                       Warehouse                                   Leased
Chantilly, VA                            1                       Manufacturing                               Leased
Cradler Health, United Kingdom           1                       Manufacturing                               Leased
Dallas, TX                               1                       Manufacturing/Office                        Leased
Droitwick, Worcestshire,
 United Kingdom                          1                       Warehouse/Office                            Leased
Edinburgh, IN                            1                       Manufacturing                               Leased
Edmonton, Canada                         2                       Manufacturing                               Leased
Findlay, OH                              1                       Manufacturing                               Leased
Flint, MI                                1                       Warehouse                                   Leased
</TABLE>

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                      Number
     Location                      Of Facilities                         Use                              Owned/Leased
-------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                     <C>                                      <C>
Fort Wayne, IN                           1                       Office                                      Leased
Fradley, West Midland, United Kingdom    1                       Manufacturing                               Leased
Franklin, IN                             3                       Manufacturing                               Owned
Hancock, MD                              1                       Warehouse                                   Leased
Haverlee, United Kingdom                 1                       Office                                      Leased
Heidelberg, MS                           2                       Manufacturing                               Leased
Heist Op Den Berg, Belgium               1                       Office                                      Leased
Holbrook, NY                             1                       Warehouse                                   Leased
Indaiatuba, Brazil                       1                       Manufacturing                               Leased
Indianapolis, IN                         3                       Manufacturing                               Leased
Jemmel, Tunisia                          1                       Manufacturing                               Leased
Kaleva, IN                               1                       Manufacturing                               Leased
Kearny, NJ                               1                       Manufacturing                               Leased
Kings Winford, Leicester,
 United Kingdom                          1                       Manufacturing                               Leased
Kyoungnam, South Korea                   2                       Manufacturing                               Leased
Laredo, TX                               1                       Warehouse                                   Leased
Lavant, West Sussex, United Kingdom      1                       Manufacturing                               Leased
Mansfield, TX                            1                       Manufacturing                               Leased
Marion, MI                               1                       Manufacturing                               Leased
Memphis, TN                              1                       Warehouse                                   Leased
Meridian, MS                             3                       Manufacturing/Warehouse                     Leased
Mezokovesd, Hungary                      1                       Manufacturing                               Owned
Miskolc, Hungary                         1                       Manufacturing                               Leased
Moncton, Canada                          1                       Manufacturing                               Leased
North Kansas City, MO                    2                       Manufacturing                               Leased
Peru, IN                                 2                       Manufacturing                               Leased
Philadelphia, PA                         2                       Warehouse                                   Leased
Piscataway, NJ                           1                       Office/Warehouse                            Leased
Plainfield, IN                           1                       Warehouse                                   Leased
Raleigh, MS                              3                       Manufacturing                            Leased/Owned
Reed City, MI                            3                       Manufacturing/Warehouse                     Leased
Ridgeville, SC                           1                       Manufacturing                               Leased
San Luis Potosi, Mexico                  4                       Manufacturing                               Leased
Saskatoon, Canada                        1                       Manufacturing                               Leased
Seoul, South Korea                       1                       Office                                      Leased
Sligo, Ireland                           1                       Manufacturing                               Leased
Spartanburg, SC                          1                       Warehouse                                   Leased
St. Laurent, Canada                      1                       Warehouse                                   Leased
Summerville, SC                          5                       Manufacturing/Warehouse                     Leased
Swidnica, Poland                         1                       Manufacturing                               Leased
Sylvarena, MS                            2                       Manufacturing                               Leased
Taylorsville, MS                         1                       Manufacturing                               Leased
Toledo, OH                               1                       Retail                                      Leased
Toronto, Canada                          1                       Manufacturing/Warehouse                     Leased
Troy, MI                                 1                       Office                                      Leased
Warren, MI                               1                       Manufacturing                                Owned
Winchester, VA                           1                       Office/Distribution                         Leased
Winnepeg, Canada                         2                       Manufacturing                            Leased/Owned
</TABLE>

     The Company believes all facilities are suitable for their intended
purpose, are being efficiently utilized and provide adequate capacity to meet
demand for the next several years.

                                       13
<PAGE>

ITEM 3     LEGAL PROCEEDINGS

     From time to time, the Company is party to various legal actions in the
normal course of its business.

  Remy Mexico Holdings, S. de R.L. de C.V. ("RMH"), an indirect subsidiary of
the Company, and GCID Autopartes ("GCID") are parties to a series of agreements,
including a partnership agreement.  The partnership agreement created Delco Remy
Mexico, S. de R.L. de C.V. ("DRM"), which operates certain manufacturing
facilities in Mexico.  GCID is the minority partner with a 24% ownership
interest.  RMH and GCID signed a letter of intent on or about May 3, 2000,
whereby GCID agreed to terminate certain of the agreements in exchange for a
$13,000,000 termination payment by RMH to GCID, but the transaction was never
finalized.  In June 2001, GCID declared RMH in default under certain of the
agreements alleging that RMH failed to conduct the business of the partnership
as contemplated therein.  In August 2001, GCID instituted an arbitration
proceeding before the American Arbitration Association seeking damages for the
alleged breaches of certain of the agreements between the parties.  RMH has
denied any such breaches.  RMH, GCID and affiliates of GCID continue to maintain
an ongoing relationship.

  On March 11, 2002, GCID filed an application to file a First Amended
Arbitration Demand adding additional claims and parties, including DRM, Remy
Componentes, S. de R.L. de C.V., an indirect subsidiary of the Company, and
Delco Remy America, Inc., a wholly owned subsidiary of the Company (together
with RMH, the "Named Parties").  The First Amended Arbitration Demand seeks
damages for breach of fiduciary duty, breaches of contracts between and among
the various parties, and tortious interference with contractual relations.  The
damages include a claim for the $13,000,000 termination payment and a claim for
$17,000,000 for alleged breach of a Services Agreement between DRM, Remy
Componentes and GCI Services, S.A. de C.V. ("Services"), an affiliate of GCID,
pursuant to which Services provides labor to the partnership.  The Company
disputes all the claims alleged in the First Amended Arbitration Demand and
denies any liability for damages to GCID or any of its affiliates.  Services
continues to provide services to DRM.  In addition, another affiliate of GCID,
Sistemas y Componentes Electricos, S.A. de C.V., continues to be the leaseholder
of the premises occupied by DRM.

  On March 26, 2002, the Company filed an Objection to the Application to File a
First Amended Arbitration Demand, wherein the Company maintained that the
arbitration panel lacks jurisdiction over certain of the claims asserted and
certain of the Named Parties and that GCID does not have standing to assert
certain of those claims.  On March 27, 2002, the arbitration panel set a
discovery schedule and scheduled the arbitration hearing for November 4, 2002
through November 8, 2002.  The Company believes that the Named Parties have
meritorious defenses to the action, but it is unable to predict whether the
proceedings will have a material adverse effect on the Company.

  Remy Reman and World Wide Automotive, subsidiaries of the Company, have
identified certain possible violations of Environmental Law regarding air
emissions at the Remy Reman facilities in Mississippi and the World Wide
Automotive facility in Virginia.  The subsidiaries have notified the EPA and/or
the applicable state agencies under federal or state voluntary audit disclosure
rules regarding these violations, and they have taken or are taking steps to
correct the violations.  Remy Reman has been informed that the state
environmental agency is contemplating a proceeding for the Mississipi facilities
(by issuing a notice of violation), and given the nature of the World Wide
Automotove violations in Virginia, a proceeding may be initiated at that
facility as well.  We are unable at this time to evaluate what penalties, if any
will be imposed or whether they will be less than $100,000.

ITEM 4     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to a vote of security holders during the
quarter ended December 31, 2001.

                                       14
<PAGE>

                                     PART II

ITEM 5     MARKET FOR REGISTRANT'S COMMON EQUITY AND
           RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

     Upon completion of the going private transaction with Court Square and the
subsequent merger that eliminated the remaining common stock not owned by Court
Square, the New York Stock Exchange delisted the Company's common stock, and
the Company terminated the registration of its common stock under the
Securities Exchange Act of 1934 (the "Exchange Act"). There is currently no
established public market for the outstanding common equity of the
Company.

HOLDERS

     The approximate number of record holders of each of the classes of the
Company's common stock as of March 15, 2002 were as follows:

               Class A Common Stock                              1
               Class B Common Stock                             15
               Class C Common Stock                              1

DIVIDENDS

     The ability of the Company to pay dividends is restricted by certain
covenants contained in the Company's Senior Credit Facility, as well as certain
restrictions contained in the Company's indentures relating to its senior notes
and its senior subordinated notes.

ITEM 6     SELECTED FINANCIAL DATA

     The following table presents selected consolidated financial data of the
Company for fiscal years ending July 31, 1997 through 2000, the five month
transition period ended December 31, 2000, and fiscal year ended December 31,
2001.

<TABLE>
<CAPTION>
                                                  Five Months Ended
                                 Year Ended          December 31                       Year Ended July 31
                                December 31    ------------------------------------------------------------------------
                                    2001       2000        1999        2000       1999       1998        1997
-----------------------------------------------------------------------------------------------------------------------
                                                        (Unaudited)       (In thousands except per share data)
<S>                             <C>          <C>        <C>        <C>          <C>        <C>        <C>
Net sales                       $1,053,452   $442,737   $446,806   $1,091,097   $953,706   $815,313   $689,787
Income (loss) from
 continuing operations(a)          (72,647)     9,699     11,246       12,418     28,346     (2,187)   (10,263)
Total assets                       947,405    924,470    816,757      889,240    782,663    684,997    570,569
Long-term obligations and
 redeemable preferred stock        593,656    519,284    447,475      484,270    434,931    393,806    379,332
Cash dividends declared per
 common share                           NA       --         --           --         --         --           NA
</TABLE>

(a) The results of acquired companies are included in operations from date of
    acquisition. Pro forma results of operations for acquisitions are presented
    in Note 1 to the consolidated financial statements. Results for the year
    ended December 31, 2001 and fiscal years ending July 31, 2000, 1998 and 1997
    include restructuring charges of $30,616, $22,190, $16,227 and $20,700,
    respectively, after income taxes. Results for the year ended December 31,
    2001 include special charges totaling $30,405 after income taxes. See Notes
    to Consolidated Financial Statements.

                                       15
<PAGE>

ITEM 7     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
and is qualified in its entirety by reference to the Company's consolidated
financial statements and accompanying notes. Except for historical information,
the discussions in this section contain forward-looking statements that involve
risks and uncertainties. Future results could differ materially from those
discussed below.

     The Company changed its fiscal year to December 31, effective August 1,
2000. Prior to August 1, 2000, the fiscal year ended on July 31. Accordingly,
the Company's audited financial statements include a balance sheet at December
31, 2000 and statements of operations, stockholders' equity and cash flows for
the five-month transition period ended December 31, 2000. Unaudited statements
of operations for the year and five months ended December 31, 2000 have been
provided for management's discussion and analysis of results of operations.

CRITICAL ACCOUNTING POLICIES

  It is important to understand the Company's significant accounting policies in
order to understand its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. These accounting principles require the Company to make
estimates and assumptions that affect amounts reported in the consolidated
financial statements and accompanying notes.  Actual results are likely to
differ from those estimates, but the Company does not believe such differences
will materially affect the Company's financial position or results of operations
for the periods presented in this report.  We believe the critical accounting
policies that are most important to the presentation of the Company's financial
statements and require the most difficult, subjective and complex judgments are
discussed in Note 2 to the consolidated financial statements.

GENERAL

     The Company manufactures and remanufactures electrical and
powertrain/drivetrain components for the aftermarket and OEM market and
provides core exchange services. The Company sells its products principally in
North America, Europe, Latin America and Asia-Pacific to OEMs, warehouse
distributors and retail automotive parts chains.

     The aftermarket is highly fragmented and competitive. The Company believes
that aftermarket suppliers are consolidating. The Company believes that this
consolidation is occurring, in part, because of higher quality standards for
remanufactured products, which may be more expensive or technically difficult
for smaller remanufacturers to meet. The Company plans to continue to increase
its penetration of the aftermarket through internal growth and strategic
acquisitions.

     The demand for components in the OEM market is cyclical. The Company
believes that opportunities for growth in the OEM market will continue to come
primarily through the introduction of new products and expansion of the
Company's global operations. The Company believes that its aftermarket and OEM
products are complementary and provide the Company with a competitive advantage
in meeting customer needs and maintaining the high levels of expertise
necessary to compete successfully in both markets. The Company believes that
the high capability and expertise required to meet the stringent technology and
quality requirements of OEM customers provides the Company with a competitive
advantage in the development and production of products for the aftermarket.

     The primary components of cost of goods sold in the Company's products
include component parts, material, labor costs, overhead and the cost of cores.
While the availability and cost of cores fluctuate based on supply and demand,
the Company's relationships with dealers and other customers have historically
provided it with sufficient access to cores at favorable prices. The Company
believes that the acquisition of M&M Knopf, one of the world's largest
automotive components recovery and exchange companies, will provide a key
competitive advantage in the area of core management.

     Approximately 14% of the Company's domestic hourly labor force is
represented by the UAW. In June 2000, the Company signed a new two-year
extension to the previous four-year master agreement with the UAW. Wage and
benefit increases under the agreement generally follow the same pattern as the
prior agreement and, as a result, the Company will experience higher wage and
benefit rates in future periods. Under provisions of the agreement, the UAW and
the Company developed special programs of incentives for hourly employees who
agree to leave the Company. The cost of these programs is included in the
restructuring charges in fiscal years 2001 and 2000. The Company has implemented
its strategy of shifting production to focus factories, which the Company
believes has reduced costs and will continue to reduce costs as these focus
factories continually improve and implement lean manufacturing concepts.

                                       16
<PAGE>

     Since 1994, the Company has completed seventeen strategic acquisitions and
entered into seven joint ventures. These acquisitions and joint ventures have
broadened the Company's product line, expanded its manufacturing and
remanufacturing capability, extended its participation in international markets
and increased its penetration of the retail automotive parts channel. As a
result, net sales to customers other than GM increased from 41% of total sales
in fiscal year 1995 to 75% in 2001. Sales outside of the Class 8 heavy duty
truck market have increased from 87% of total sales in fiscal year 1995 to 96%
in 2001.

     GM accounted for about 42% of the Company's total OEM sales in 2001. GM
SPO accounted for about 12% of total after-market sales in 2001. In connection
with the Company's separation from GM, GM entered into long-term contracts to
purchase from the Company 100% of GM's North American requirements for
automotive starters (other than for Saturn and Geo) and 100% of GM's U.S. and
Canadian requirements for heavy duty starters and alternators. GM's obligations
to purchase the Company's products in the future are subject to such products
remaining competitive as to price, technology and design. GM's obligation to
purchase automotive starters from the Company terminates on August 31, 2008.
GM's obligation to purchase heavy duty starters and alternators from the Company
terminated on July 31, 2000. The Company cannot be sure that GM will not develop
alternative sources for components currently produced by the Company and
purchase some or all of GM's requirements for starters and alternators from
alternative sources.

     In addition, GM SPO has been designated as an exclusive distributor of a
significant amount of the Company's automotive and as a distributor of the
Company's heavy duty aftermarket products. GM SPO has agreed to provide the
Company with purchasing support, which enables the Company to obtain raw
materials at competitive prices. The Company's exclusive distribution
arrangements with GM SPO for the Company's automotive aftermarket products
terminates on July 31, 2009. The Company distribution arrangement with GM SPO
is continuously renewable on an annual basis for the Company's heavy duty
aftermarket products.

     In the fourth quarter of 2001, the Company completed plans for the closure
and realignment of certain manufacturing facilities and administrative
functions in the United States, Canada and Europe. These actions were in
response to anticipated OE and aftermarket volume declines and support the
Company's ongoing efforts to reduce cost and improve efficiencies. A one-time
charge of $39.3 million was recorded in the fourth quarter of 2001 for the
estimated cost of the plan. The charge included $26.7 million for the estimated
cost of various voluntary and involuntary employee separation programs
associated with the resulting workforce reductions of approximately 820
employees. A total of $2.5 million was paid in the fourth quarter of 2001 and
$15.1 million, $4.6 million and $4.5 million are estimated to be paid in 2002,
2003 and 2004, respectively, for these programs. The charge also included $8.2
million, net of salvage value, for the write-down of certain assets which will
no longer be used as a result of the closures and realignments, and $4.4
million of other costs.

     In May 2000, the Company completed plans for the realignment of certain
manufacturing facilities in the United States, Canada and the United Kingdom. A
one-time charge of $35.2 million was recorded in the fourth quarter of fiscal
year 2000 for the estimated cost of the plan, which included various employee
separation programs and the write-down of certain production assets. Cash
payments relative to this charge were $5.0 million, $16.0 million and $3.1
million in fiscal 2000, the five months ended December 31, 2000 and the year
2001, respectively. Payments are expected to approximate $2.9 million and $0.1
million in 2002 and 2003, respectively.

                                       17
<PAGE>

     The following table sets forth unaudited results of operations for the
year ended December 31, 2000 and certain statements of operations data
expressed as a percentage of sales:

<TABLE>
<CAPTION>
                                                                               As a Percentage of Net Sales
                                                                   ------------------------------------------------------
                                                                                            Five
                                                          Year       Year      Year      Months Ended
                                                         Ended      Ended     Ended      December 31    Year Ended July 31
                                                         Dec. 31    Dec. 31   Dec. 31   ----------------------------------
                                                          2000       2001      2000     2000     1999     2000    1999
                                                         -----------------------------------------------------------------
                                                         $ in millions
                                                          (unaudited)
<S>                                                      <C>          <C>      <C>      <C>      <C>      <C>      <C>
Net sales                                                $1,087.0     100.0%   100.0%   100.0%   100.0%   100.0%   100.0%
Cost of goods sold                                          861.3      83.3     79.2     80.3     79.8     79.0     80.8
Special charges-cost of goods sold                             --       2.1       --       --       --       --       --
                                                         -----------------------------------------------------------------
Gross profit                                                225.7      14.6     20.8     19.7     20.2     21.0     19.2
Selling, general and administrative expenses                106.8      10.0      9.8     10.0     10.2      9.9      9.3
Special charges-SG&A                                           --       1.6       --       --       --       --       --
Amortization of goodwill and intangibles                      6.2       0.7      0.6      0.6      0.5      0.6      0.6
Restructuring charges                                        35.2       3.7      3.3       --       --      3.2       --
                                                         -----------------------------------------------------------------
Operating income (loss)                                      77.5      (1.4)     7.1      9.1      9.5      7.3      9.3
Interest expense and other non-operating items              (50.2)     (6.0)    (4.6)    (4.8)    (4.4)    (4.5)    (4.8)
                                                         -----------------------------------------------------------------
Income (loss) before income taxes (benefit), minority
 interest in income of subsidiaries, income (loss) from
 unconsolidated joint ventures and extraordinary item        27.3      (7.4)     2.5      4.3      5.1      2.8      4.5
Income taxes (benefit)                                        8.9      (1.6)     0.8      1.4      1.9      1.1      1.7
Minority interest in income of subsidiaries                  (6.7)     (0.9)    (0.6)    (0.6)    (0.7)    (0.6)    (0.4)
Income (loss) from unconsolidated joint ventures             (0.8)     (0.3)    (0.1)    (0.1)      --       --      0.6
                                                         -----------------------------------------------------------------
Income (loss) before extraordinary item                      10.9      (7.0)     1.0      2.2      2.5      1.1      3.0
Extraordinary item:
   Gain on early extinguishment of debt, net of tax            --       0.1       --       --       --       --       --
                                                         -----------------------------------------------------------------
Net income (loss)                                        $   10.9      (6.9)%    1.0%     2.2%     2.5%     1.1%     3.0%
                                                         =================================================================
</TABLE>

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     In 2001, the Company recorded special charges totaling $38.8 million, $21.6
million of which was reported as a deduction to gross profit and $17.2 million
of which was charged to operating expenses. The deduction to gross profit
included $13.8 million attributable to higher than anticipated warranty costs
relative to a limited class of heavy-duty OE alternators. The design and
production issues, which caused the unusually high level of claims, have been
corrected. The special warranty charge includes $8.2 million for claims in 2001
and $5.6 million for anticipated claims in 2002 and 2003. An additional $7.8
million was charged to gross profit to record the write down of inventory and
certain customer claims relative to the Company's 2001 restructuring actions.
The $17.2 million charged to operating expenses consists primarily of disputed
items related to the GM Acquisition. In the fourth quarter of 2001, the Company
conceded these claims in connection with the negotiation of other long-term
agreements with GM and Delphi Automotive Systems Corporation.

     Net Sales. Net sales of $1,053.5 million declined $33.6 million, or 3.1%,
due to reduced orders from GM and other customers in the OEM automotive
products market ($66.7 million), lower demand in the heavy duty OEM market
($56.3 million) and lower sales by M&M Knopf and other ($7.8 million). These
factors were partially offset by sales of previously consigned inventory ($40.0
million), the effect of the acquisitions of XL, Mazda and AMT in 2001 and Knopf
and Elmot in 2000 ($37.4 million) and higher demand for aftermarket
powertrain/drivetrain and electrical products ($19.8 million).

     Gross Profit. Gross profit of $154.2 million declined $71.5 million, or
31.7%, in 2001 from $225.7 million in 2000. Excluding the special charges of
$21.6 million discussed above, gross profit was $175.8 million in 2001, down
$49.9 million from 2000, and as a percentage of sales was 16.7% versus 20.8% in
2000. This year over year decline was due to lower sales volume, partially
offset by productivity improvements in the OEM automotive market ($19.2
million), lower product mix and fixed manufacturing leverage, partially offset
by higher volume in the powertrain/drivetrain aftermarket ($11.8 million),
lower volume offset by improved productivity in the heavy duty OEM market
($10.8 million), reduced fixed manufacturing leverage in the electrical
aftermarket ($9.0 million), and reduced third party core sales ($6.5 million).
These factors were partially offset by the effect of acquisitions in 2001 and
2000 ($7.4 million).

                                       18
<PAGE>

     Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses declined $0.9 million, or 0.9%, and as a
percentage of net sales were 10.0% in 2001 compared with 9.8% in 2000. Cost
reduction efforts were mostly offset by the effect of 2001 acquisitions.

     Operating Income. An operating loss of $14.9 million in 2001 compares with
operating income of $77.5 million in 2000. Excluding restructuring and special
charges, operating income of $63.1 million declined $49.7 million, or 44.1%,
from $112.8 million in 2000, and as a percentage of sales was 6.0% in 2001
compared with 10.4% in 2000. These declines were due primarily to the sales
volume issues discussed above.

     Interest Expense. Interest expense increased $10.0 million, or 19.6%, in
2001 due to higher levels of debt to fund operations ($3.9 million), the higher
interest rate and fees associated with the 11% senior subordinated debt issued
in April 2001 ($4.8 million) and debt to fund acquisitions ($1.2 million).

     Non-operating Income. Non-operating income of $1.8 million in 2001
consisted primarily of net foreign currency transaction gains. Non-operating
income of $1.8 million in 2000 included net foreign currency transaction gains,
primarily in Korea ($1.2 million) and a business dissolution fee from a
customer ($0.6 million).

     Income Taxes. The Company's consolidated effective income tax rate was
21.7% in 2001 compared with 32.8% in 2000. At December 31, 2001, the Company had
unrecognized tax net operating loss carryovers, research credits and alternative
minimum tax credits totaling approximately $45.0 million. The decrease in the
effective income tax rate year over year was due primarily to an $18.0 million
addition to the reserve for the value of these tax assets that is in excess of
their estimated future recognizable value.

     Net Income (Loss). The net loss of $72.6 million in 2001 compares with net
income of $10.9 million in 2000. This decline reflects the lower sales volume
and unusual charges discussed above. Excluding these items, the Company's net
loss in 2001 was $11.6 million.

FIVE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO FIVE MONTH ENDED DECEMBER 31,
1999

     Net Sales. Net sales of $442.7 million declined $4.1 million, or 0.9%, due
to lower demand from customers in the heavy duty OEM market ($23.6 million),
reduced orders from GM and other customers in the OEM automotive products
market ($4.7 million) and lower demand for powertrain/drivetrain products in
the aftermarket ($3.1 million). These factors were mostly offset by sales of
M&M Knopf ($23.9 million), which was acquired in March 2000, and increased
volume in the electrical products aftermarket ($3.4 million).

     Gross Profit. Gross profit of $87.2 million declined $3.2 million, or
3.6%, and as a percentage of sales declined to 19.7% in the five month period
of 2000 from 20.2% in the comparable period of 1999. The decline in gross
profit was due to lower volume and product mix in the heavy duty OEM market
($9.4 million), lower volume in the powertrain/drivetrain aftermarket ($1.8
million) and lower volume and product mix in the OEM automotive market ($1.4
million). These volume and product mix declines were mitigated by cost
improvements, including realization of cost savings associated with the June
2000 manufacturing realignment. Gross profit was favorably impacted by
increased volume in the electrical aftermarket ($5.3 million) and the
acquisition of M&M Knopf ($4.1 million). The decline in gross profit as a
percentage of sales reflects the effect of lower volume on fixed manufacturing
costs and unfavorable product mix, largely offset by cost improvements
throughout the Company.

     Selling, General and Administrative Expenses. SG&A expenses declined $1.3
million, or 2.9%, and as a percentage of sales improved from 10.2% in 1999 to
10.0% in 2000. The realization of cost reductions associated with the June 2000
realignment were partially offset by costs associated with the acquisition of
M&M Knopf.

     Operating Income. Operating income of $40.5 million declined $2.1 million,
or 4.8%, from $42.5 million in the five-month period of 1999. This decrease
reflects the sales volume, product mix and cost issues discussed above.

     Interest Expense. Interest expense increased $2.1 million, or 10.9%. This
increase was due primarily to higher levels of debt incurred to finance
acquisitions ($2.1 million) and higher rates reflecting increases by the
Federal Reserve.

     Non-operating Income. Non-operating income in the five-month period of 2000
included net foreign currency transaction gains, primarily in Korea ($1.2
million) and a business disolution fee from a customer ($0.6 milloin).

     Income Taxes. The Company's consolidated effective income tax rate of
32.0% in the five-month period ended December 31, 2000 compares with 37.9% in
the comparable period of 1999. This decrease reflects implementation of various
tax planning initiatives and acquisitions of foreign subsidiaries with lower
rates.

                                       19
<PAGE>

     Net Income. Net income of $9.7 million compares with $11.2 million. This
decline reflects lower sales volume, partially offset by cost improvements, non-
operating income and the lower effective income tax rate.

FISCAL YEAR ENDED JULY 31, 2000 COMPARED TO FISCAL YEAR ENDED JULY 31, 1999

     Net Sales. Net sales of $1,091.1 million increased $137.4 million, or
14.4%, due primarily to the effect of fiscal year 2000 and 1999 acquisitions
($93.1 million) and increased demand for electrical and powertrain/drivetrain
products in the aftermarket ($26.5 million) and automotive products in the OEM
market ($17.8 million). Sales in the heavy duty OEM market were down marginally
due to lower customer production. Price increases did not have a significant
effect on year-over-year sales as the Company continued to face price pressures
in most of its markets.

     Gross Profit. Gross profit of $228.9 million increased $46.1 million, or
25.2%, and as a percentage of sales improved from 19.2% in 1999 to 21.0% in
2000. The increase in gross profit was due primarily to acquisitions ($30.7
million) and sales growth in the electrical aftermarket ($13.6 million) and
automotive OEM market ($7.1 million), partially offset by lower demand and
margins in the heavy duty OEM market ($4.8 million). The improvement in gross
profit as a percentage of sales was due to the integration of strategic
acquisitions, productivity improvements realized from lean manufacturing
initiatives and the leveraging of higher production volume on fixed costs.

     Selling, General and Administrative Expenses. SG&A expenses increased
$19.3 million, or 21.7%, and as a percentage of net sales were 9.9% in fiscal
2000 compared to 9.3% in fiscal 1999. These increases were the result of
acquisitions and costs related to implementation of enterprise-wide systems.

     Operating Income. Operating income of $79.6 million declined $9.2 million,
or 10.4%, from $88.8 million in 1999. Excluding the effect of the non-recurring
charge of $35.2 million in 2000, operating income increased $26.0 million, or
29.3%, and as a percentage of sales improved from 9.3% in 1999 to 10.5% in
2000. This increase reflects the sales growth, gross margin improvement and
SG&A expense issues discussed above.

     Interest Expense. Interest expense increased $3.3 million, or 7.2%, in
fiscal year 2000. This increase was due primarily to higher average levels of
debt incurred to finance acquisitions ($2.7 million) and higher rates
reflecting increases by the Federal Reserve.

     Income Taxes. The Company's consolidated effective income tax rate of
37.0% in fiscal year 2000 compares with 38.0% reported in fiscal year 1999.
This decrease reflects implementation of various tax planning initiatives and
acquisitions of foreign subsidiaries with lower rates.

     Minority Interest in Income of Subsidiaries. Minority interests' share of
earnings of the Company's consolidated subsidiaries were $6.7 million in 2000
compared with $3.9 million in 1999. This increase reflects the consolidation of
Delco Remy Korea effective in the fourth quarter of 1999.

     Income (Loss) From Unconsolidated Joint Ventures. The loss of $0.4 million
in 2000 compares to income of $5.4 million in 1999. This change reflects the
consolidation of Delco Remy Korea, which was previously accounted for under the
equity method.

     Net Income. Net income of $12.4 million compares with $28.3 million.
Excluding the after-tax effect of the non-recurring charge, net income of $34.6
million, or $1.33 per share, increased 22.1% and 22.0%, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's short-term liquidity needs include required debt service
(including capital lease payments) day-to-day operating expenses, working
capital requirements and the funding of capital expenditures. Cash interest
payments are expected to approximate $67.9 million in 2002. Long-term liquidity
requirements include principal payments of long-term debt and the funding of
acquisitions. The Company's principal payments on long-term debt and capital
lease obligations are presented in Note 6 to Consolidated Financial Statements.
The Company's principal sources of cash to fund its short-term liquidity needs
consist of cash generated by operations and borrowings under the Senior Credit
Facility. At December 31, 2001, borrowings under the Senior Credit Facility were
$117.1 million, leaving $71.0 million unused and approximately $22.0 million
available under the $200 million facility, net of lines of credit.

  In connection with the separation from GM, one of the Company's subsidiaries
issued a contingent purchase price note to GM payable beginning in 2004. The
amount of the payment will be based upon a percentage of the Company's average
earnings over the three-year period ending December 31, 2003 in excess of
certain imputed earnings. It is not currently possible to estimate the amount of
payments, if any, payable under this note. The Company will also be required to
make additional payments in connection with its acquisitions of M&M Knopf, Delco
Remy Mexico, Delco Remy Korea and AMT. The Company expects that the aggregate
amount of these additional payments will be in the range of $15 million to $25
million, payable over about four years. The Company granted put/call options in
connection with the acquisitions of World Wide Automotive and Power Investments
that became exercisable in February 2001 for World Wide Automotive and March
2001 for Power Investments. The exercise prices that the Company would be
required to pay in 2002 and 2003 upon exercise of the put options, which are
based on earnings formulas, are currently estimated to be about $21 million in
total for the two acquisitions.

     Cash used in operating activities during 2001 of $2.6 million consisted of
net income excluding non-cash items of $38.0 million, working capital
investments of $32.4 million, excluding restructuring and special charges, and
cash restructuring payments of $8.2 million. The increase in working capital
was primarily a result of a $28.0 million decrease in accounts payable due to
timing of vendor payments.

                                       20
<PAGE>

     Cash used in investing activities included the acquisitions of Mazda
($17.1 million), XL ($2.4 million) and AMT ($0.5 million). In addition, the
Company increased its ownership position in World Wide Automotive, Inc. ($6.4
million) and Power Investments, Inc. ($2.4 million). Capital expenditures of
$20.4 million consisted primarily of production equipment and tooling.
Investments in joint ventures included iPower Technologies, L.L.C. ($5.0
million), Hitachi Remy Automotive GmbH ($2.0 million) and Continental ISAD ($1.6
million).

     Cash provided by financing activities consisted of proceeds of $157.3
million, net of discount, fees and expenses, on the issuance of the 11% senior
subordinated debt on April 26, 2001, payment of $17.8 million on the early
retirement of the GM subordinated Debenture and a $66.6 million net reduction in
the Senior Credit Facility and other debt.

     Cash used in operating activities during the five months ended December 31,
2000 of $13.5 million reflects cash generated from earnings adjusted for
non-cash items offset by increased working capital (primarily inventory) and
cash payments relative to the manufacturing realignment. The inventory increase
was due primarily to higher average return rates on cores and lower customer
demand.

     Capital expenditures of $11.8 million during the transition period were for
production equipment, tooling and enterprise-wide systems.

     Cash provided by financing activities was generated entirely from the
Company's Senior Credit Facility.

     Cash provided by operating activities of $70.9 million in fiscal year 2000
compares with $43.1 million in fiscal year 1999. This improvement was due
primarily to increased earnings excluding the non-recurring charge and non-cash
items. Earnings growth of $6.3 million excluding the non-recurring charge
included the results of Delco Remy Korea, which was reported as an
unconsolidated joint venture in fiscal 1999, a $8.6 million increase in
depreciation and amortization expense, a $2.8 million increase in minority
interest and a $5.8 million decline in earnings of joint ventures. Excluding the
amounts recorded from acquisitions, net working capital increased $19.3 million
in fiscal 2000 compared to a $6.1 million increase in fiscal 1999.

     Accounts receivable increased $1.6 million due primarily to very strong
shipments in the fourth quarter. Collections improved overall in fiscal year
2000. The $4.6 million decline in fiscal year 1999 was due to strong fourth
quarter collections. Inventories increased $18.2 million in fiscal year 2000 due
primarily to delayed product pull from aftermarket customers. The $17.7 million
increase in fiscal year 1999 reflected support for sales growth in the
electrical aftermarket. Accounts payable increased $15.8 million in fiscal year
2000 year and $13.6 million in fiscal year 1999. The $15.4 million increase in
other current assets in fiscal year 2000 reflects non-cash charges to the
reserve for non-recurring items and decreases in other accrued expenses.

     Cash used in investing activities was $107.6 million in fiscal year 2000
compared to $73.4 million in fiscal year 1999. Acquisitions in fiscal year 2000
included Knopf, Engine Master and Elmot, all of which were funded with proceeds
from the Senior Credit Facility. Capital expenditures, consisting primarily of
production equipment and tooling, were $38.4 million in fiscal year 2000 and
$25.1 million in fiscal year 1999. This increase reflects implementation of
enterprise-wide systems and projects to facilitate the global manufacturing
realignment. Investments in joint ventures in fiscal year 2000 included
Continental ISAD ($0.8 million) and Sahney Paris Rhone Ltd. ($0.4 million).

     Cash provided by financing activities in fiscal year 2000 and fiscal year
1999 were generated entirely from the Company's Senior Credit Facility. In
fiscal year 2000, a $1.2 million cash distribution was made to the minority
shareholders of Delco Remy Korea.

     Instruments governing the Company's indebtedness restrict the ability of
the Company's subsidiaries to make distributions to the Company.

     The Company believes that cash generated from operations, together with the
amounts available under the Senior Credit Facility, will be adequate to meet its
debt service requirements, capital expenditures and working capital needs for at
least the next twelve months, although no assurance can be given in this regard.
The Company's future operating performance and ability to extend or refinance
its indebtedness will be dependent on future economic conditions and financial,
business and other factors that are beyond the Company's control.

                                       21
<PAGE>

SEASONALITY

     The Company's business is seasonal, as its major OEM customers historically
have one or two week shutdowns of operations during July. In response, the
Company typically has shut down its own operations for one week each July,
depending on backlog, scheduled maintenance and inventory buffers, as well as an
additional week during the December holidays. Consequently, the Company's
results in the third and fourth quarters in the years ended December 31, 2001
and 2000 and the five-month periods ended December 31, 2000 and 1999 and the
results in the second and fourth quarters in the fiscal years ended July 31,
2000 and 1999 reflect the effects of these shutdowns. Refer to Note 17 to
Consolidated Financial Statements which pertains to quarterly (unaudited)
financial information.

EFFECTS OF INFLATION

     The Company believes that the relatively moderate inflation over the last
few years has not had a significant impact on the Company's revenues or
profitability and that it has been able to offset the effects of inflation by
increasing prices or by realizing improvements in operating efficiency. The
Company has provisions in many of its contracts which provide for the pass
through of fluctuations in the price of certain raw materials, such as copper
and aluminum.

FOREIGN SALES

     Approximately 22.6% of the Company's net sales in 2001, approximately 22.0%
of the Company's net sales in the five-month period ended December 31, 2000 and
approximately 22.3% and 21.3% of the Company's fiscal year 2000 and 1999 net
sales, respectively, were derived from sales made to customers in foreign
countries. Because of these foreign sales, the Company's business is subject to
the risks of doing business abroad, including currency exchange rate
fluctuations, limits on repatriation of funds, compliance with foreign laws and
other economic and political uncertainties.

ACCOUNTING PRONOUNCEMENTS

     For a discussion of pending accounting pronouncements that may affect the
Company, see Note 2 to the Company's financial statements included under Item 8.

EURO CONVERSION

     In January 1999, eleven European nations adopted a common currency, the
EURO, and formed the European Economic and Monetary Union ("EMU"). The EURO has
now become the sole legal tender for EMU countries. The adoption of the EURO
will affect a multitude of financial systems and business applications as the
commerce of these nations will be transacted in the EURO and the existing
national currency. The Company is currently addressing these issues and their
potential effect on information systems, currency exchange rate risk, taxation,
contracts, competition and pricing. Plans will be developed and implemented
which are expected to result in compliance with all laws and regulations.
However, there can be no certainty that such plans will be successfully
implemented or that external factors will not have an adverse effect on the
Company's operations. Any costs of compliance associated with the adoption of
the EURO will be expensed as incurred and the Company does not expect these
costs to be material to its results of operations, financial condition or
liquidity.

                                       22
<PAGE>

ITEM 7A    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     In the normal course of business, operations of the Company are exposed to
continuing fluctuations in foreign currency values, interest rates and commodity
prices that can affect the cost of operating, investing and financing.
Accordingly, the Company addresses a portion of these risks through a controlled
program of risk management that includes the use of derivative financial
instruments. The Company's objective is to reduce earnings and cash flow
volatility associated with these fluctuations. The Company's derivative
activities, all of which are for purposes other than trading, are initiated
within the guidelines of established policies and procedures designed to manage
market risk. The Company does not enter into any derivative transactions for
speculative purposes.

     The Company's primary interest rate risk exposure results from changes in
short-term U.S. dollar interest rates. In an effort to manage interest rate
exposures, the Company strives to achieve an acceptable balance between fixed
and variable rate debt positions. In order to limit the effect of interest rate
changes on earnings and cash flows, the Company maintains a significant
percentage of fixed rate debt (95% at December 31, 2001). In November 2000, the
Company entered into an interest rate swap on a notional amount of $100.0
million of the Senior Credit Facility. Under this transaction, the Company
swapped a variable rate for a fixed rate. The $100.0 million notional amount is
included in the fixed rate debt for purposes of analyzing a change in market
interest rates. As such, the Company is exposed to U.S. changes in interest
rates only on the Senior Credit Facility. A 100 basis point increase in U.S.
market interest rates on the amounts outstanding at December 31, 2001 under the
Senior Credit Facility would result in an increase in the Company's annual
interest expense of approximately $0.6 million.

     The Company's foreign currency risk exposure results from fluctuating
currency exchange rates, primarily the strengthening of the U.S. dollar against
the Korean Won and certain European currencies. The Company faces transactional
currency exposures that arise when its foreign subsidiaries (or the Company
itself) enter into transactions, generally on an intercompany basis, denominated
in currencies other than their local currency. The Company also faces currency
exposure that arises from translating the results of its global operations to
the U.S. dollar at exchange rates that have fluctuated from the beginning of the
period. Exposure to variability in foreign currency exchange rates is managed
primarily through the use of natural hedges, whereby funding obligations and
assets are both denominated in the local currency. From time to time, the
Company enters into exchange agreements to manage its exposure arising from
fluctuating exchange rates related to specific transactions. A hypothetical 10
percent strengthening in the exchange rates (primarily the South Korean Won
against the U.S. dollar) over a one-year period would decrease earnings by
approximately $3.6 million. A hypothetical 10 percent weakening in exchange
rates would reduce the carrying value of the Company's net investment in its
foreign subsidiaries at December 31, 2001 by approximately $4.8 million.

         In order to reduce the uncertainty of price movements with respect to
the purchase of certain commodities, primarily copper, the Company enters into
forward purchase contracts and various supply and purchase agreements with its
customers and vendors. Based on the Company's overall commodity hedge exposure
at December 31, 2001 and 2000 and July 31, 2000, a hypothetical 10 percent
change in market rates applied to the fair value of the instruments, would not
have a material effect on the Company's earnings, cash flows or financial
position in 2001, the five month transition period ended December 31, 2000 or in
fiscal year 2000.

                                       23
<PAGE>

ITEM 8     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF DELCO REMY INTERNATIONAL, INC.:                                                   Page
                                                                                                          ----
<S>                                                                                                        <C>
Report of Independent Auditors                                                                             25

Consolidated Statements of Operations for the year ended December 31, 2001,
the five months ended December 31, 2000 and 1999 and two years ended July 31, 2000                         26

Consolidated Balance Sheets at December 31, 2001 and 2000, and July 31, 2000                               27

Consolidated Statements of Stockholders' Equity for the year ended December 31, 2001,
the five months ended December 31, 2000 and two years ended July 31, 2000                                  28

Consolidated Statements of Cash Flows for the year ended December 31, 2001,
the five months ended December 31, 2000 and 1999 and two years ended July 31, 2000                         29

Notes to Consolidated Financial Statements                                                                 30
</TABLE>

                                       24
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and
Board of Directors of
Delco Remy International, Inc.

     We have audited the accompanying consolidated balance sheets of Delco Remy
International, Inc. as of December 31, 2001 and 2000 and July 31, 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year ended December 31, 2001, the five months ended December 31,
2000 and for each of the two years in the period ended July 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Delco Remy International, Inc. at December 31, 2001 and 2000 and July 31, 2000,
and the consolidated results of its operations and cash flows for the year ended
December 31, 2001, the five months ended December 31, 2000 and for each of the
two years in the period ended July 31, 2000, in conformity with accounting
principles generally accepted in the United States.

                                                /S/ ERNST & YOUNG LLP

Indianapolis, Indiana
March 18, 2002

                                       25
<PAGE>

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES
                                (in thousands)

<TABLE>
<CAPTION>
                                                                       Five Months Ended
                                                      Year Ended          December 31              Year Ended July 31
                                                      December 31    ---------------------------------------------------
                                                         2001          2000          1999          2000           1999
                                                      ------------------------------------------------------------------
                                                                                  (Unaudited)
<S>                                                  <C>             <C>           <C>           <C>
Net sales                                            $1,053,452      $442,737      $446,806      $1,091,097     $953,706
Cost of goods sold                                      877,626       355,515       356,369         862,172      770,902
Special charges-cost of goods sold                       21,586           --            --              --           --
                                                     -------------------------------------------------------------------
Gross profit                                            154,240        87,222        90,437         228,925      182,804
Selling, general and administrative expenses            105,798        44,146        45,460         108,051       88,795
Special charges-selling, general and administrative
 expenses                                                17,246           --            --              --           --
Amortization of goodwill and intangibles                  6,978         2,625         2,475           6,043        5,203
Restructuring charges                                    39,101           --            --           35,222          --
                                                     -------------------------------------------------------------------
Operating income (loss)                                 (14,883)       40,451        42,502          79,609       88,806
Interest expense                                        (60,877)      (21,790)      (19,650)        (48,766)     (45,505)
Non-recurring merger and tender offer expenses           (4,194)       (1,124)          --              --           --
Non-operating income (expense)                            1,849         1,501          (147)            129          --
                                                     -------------------------------------------------------------------
Income (loss) before income taxes (benefit),
 minority interest in income of subsidiaries,
 income (loss) from unconsolidated joint
 ventures and extraordinary item                        (78,105)       19,038        22,705          30,972       43,301
Income taxes (benefit)                                  (16,939)        6,094         8,605          11,460       16,454
Minority interest in income of subsidiaries              (9,254)       (2,778)       (2,841)         (6,742)      (3,921)
Income (loss) from unconsolidated joint ventures         (2,925)         (467)          (13)           (352)       5,420
                                                     -------------------------------------------------------------------
Income (loss) before extraordinary item                 (73,345)        9,699        11,246          12,418       28,346
Extraordinary item:
   Gain on early extinguishment of debt (less
    applicable income taxes of $428)                        698           --            --              --           --
                                                     -------------------------------------------------------------------
Net income (loss)                                       (72,647)        9,699        11,246          12,418       28,346
Preferred dividends                                      20,971           --            --              --           --
                                                     -------------------------------------------------------------------
Income (loss) attributable to common stockholders    $  (93,618)     $  9,699      $ 11,246      $   12,418     $ 28,346
                                                     ===================================================================
</TABLE>

                             See Accompanying Notes

                                       26
<PAGE>

                          CONSOLIDATED BALANCE SHEETS

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES
              (in thousands, except for share and per share data)

<TABLE>
<CAPTION>
                                                                                              December 31            July 31
                                                                                       -------------------------------------
                                                                                          2001          2000          2000
                                                                                       -------------------------------------
<S>                                                                                    <C>           <C>           <C>
Assets:

Current assets:
Cash and cash equivalents                                                              $   24,355    $   24,380    $  17,822
Trade accounts receivable (less allowance for doubtful accounts
 of $4,678, $3,115 and $2,970)                                                            160,380       173,466      169,563
Other receivables                                                                          10,316        16,205       15,233
Inventories                                                                               303,355       293,824      268,153
Deferred income taxes                                                                      21,175        16,539       18,145
Other current assets                                                                       13,755         8,909        8,864
                                                                                       -------------------------------------
Total current assets                                                                      533,336       533,323      497,780
Property and equipment                                                                    307,074       305,583      297,574
Less accumulated depreciation                                                             124,006       105,743       95,663
                                                                                       -------------------------------------
Property and equipment, net                                                               183,068       199,840      201,911
Deferred financing costs                                                                   12,640         8,694        9,432
Goodwill (less accumulated amortization of $30,380, $23,485 and $20,891)                  186,531       169,238      171,032
Investments in joint ventures                                                              11,144         7,016        5,333
Deferred income taxes                                                                      10,476            --           --
Other assets                                                                               10,210         6,359        3,752
                                                                                       -------------------------------------
Total assets                                                                           $  947,405    $  924,470    $ 889,240
                                                                                       =====================================

Liabilities and stockholders' equity:
Current liabilities:
  Accounts payable                                                                     $  132,149    $  156,075    $ 141,944
  Accrued interest payable                                                                 10,100         9,133       10,858
  Accrued restructuring charges                                                            32,424         7,692       24,778
  Other liabilities and accrued expenses                                                   57,015        33,790       40,085
  Current debt                                                                              6,771         8,107        7,454
                                                                                       -------------------------------------
Total current liabilities                                                                 238,459       214,797      225,119
Deferred income taxes                                                                          --        10,155       10,027
Long-term debt, less current portion                                                      593,656       519,284      484,270
Post-retirement benefits other than pensions                                               25,812        22,794       21,639
Accrued pension benefits                                                                   10,216         4,424        1,286
Accrued preferred dividends                                                                20,971            --           --
Other non-current liabilities                                                               6,655         3,884        3,886
Commitments and contingencies
Minority interest in subsidiaries                                                          30,107        28,014       25,187
Stockholders' equity:
  Preferred stock - Series A (par value $.01; authorized 3,500,000;
   issued 2,237,275.36 in 2001)                                                           223,728            --           --
  Common stock:
    Class A Shares (par value $.001; authorized 1,000; issued 1,000 in 2001)                   --           182          182
    Class B Shares (par value $.001; authorized 6,000,000; issued 2,497,337.49 in 2001)         3            63           63
    Class C Shares (par value $.001; authorized 6,000,000; issued 16,687 in 2001)              --            --           --
  Paid-in capital                                                                              --       104,176      104,176
  Retained earnings (deficit)                                                            (178,762)       34,269       24,570
  Accumulated other comprehensive loss                                                    (23,440)      (17,236)     (10,837)
  Stock purchase plan                                                                          --          (336)        (328)
                                                                                       -------------------------------------
Total stockholders' equity                                                                 21,529       121,118      117,826
                                                                                       -------------------------------------
Total liabilities and stockholders' equity                                             $  947,405    $  924,470    $ 889,240
                                                                                       =====================================
</TABLE>

                             See Accompanying Notes

                                       27
<PAGE>

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES
                                  (in thousands)

<TABLE>
<CAPTION>
                                                                                                  Accumulated
                                   Class A    Class B  Class C   Class A              Retained       Other       Stock
                                   Common     Common   Common   Preferred   Paid-In   Earnings   Comprehensive  Purchase
                                    Stock      Stock    Stock     Stock     Capital  (Deficit)       Loss         Plan     Total
                                  ------------------------------------------------------------------------------------------------
<S>                               <C>          <C>      <C>       <C>      <C>        <C>         <C>          <C>        <C>
Balance at July 31, 1998          $    182     $   63   $   --  $     --   $106,392   $(16,194)   $ (4,074)    $ (2,129)  $ 84,240
Repurchase of common stock              --         --       --        --       (340)        --          --         (284)      (624)
Other                                   --         --       --        --     (1,876)        --          --        1,876         --
Net income                              --         --       --        --         --     28,346          --           --     28,346
Currency translation adjustment         --         --       --        --         --         --      (2,442)          --     (2,442)
                                                                                                                          --------
Comprehensive income                    --         --       --        --         --         --          --           --     25,904
                                  ------------------------------------------------------------------------------------------------
Balance at July 31, 1999               182         63       --        --    104,176     12,152      (6,516)        (537)   109,520
Other                                   --         --       --        --         --         --          --          209        209
Net income                              --         --       --        --         --     12,418          --           --     12,418
Currency translation adjustment         --         --       --        --         --         --      (4,321)          --     (4,321)
                                                                                                                          --------
Comprehensive income                    --         --       --        --         --         --          --           --      8,097
                                  ------------------------------------------------------------------------------------------------
Balance at July 31, 2000               182         63       --        --    104,176     24,570     (10,837)        (328)   117,826
Cumulative effect of accounting
 change for derivative instruments      --         --       --        --         --         --         241           --        241
Other                                   --         --       --        --         --         --          --           (8)        (8)
Net income                              --         --       --        --         --      9,699          --           --      9,699
Currency translation adjustment         --         --       --        --         --         --      (1,747)          --     (1,747)
Unrealized losses on derivative
  instruments                           --         --       --        --         --         --      (4,893)          --     (4,893)
                                                                                                                          --------
Comprehensive income                    --         --       --        --         --         --          --           --      3,059
                                  ------------------------------------------------------------------------------------------------
Balance at December 31, 2000           182         63       --        --    104,176     34,269     (17,236)        (336)   121,118
Recapitalization                      (182)       (60)      --   209,255   (103,953)  (105,164)         --          336        232
Issuance of preferred stock
  from warrant exercise                 --         --       --    14,473         --    (14,472)         --           --          1
Dividends on preferred stock            --         --       --    20,971       (223)   (20,748)         --           --         --
Net loss                                --         --       --        --         --    (72,647)         --           --    (72,647)
Currency translation adjustment         --         --       --        --         --         --      (5,624)          --     (5,624)
Unrealized losses on derivative
 instruments                            --         --       --        --         --         --       2,155           --      2,155
Minimum pension liability               --         --       --        --         --         --      (2,735)          --     (2,735)
                                                                                                                          --------
Comprehensive loss                      --         --       --        --         --         --          --           --    (78,851)
                                  ------------------------------------------------------------------------------------------------
Balance at December 31, 2001      $     --     $    3   $   --  $244,699   $     --  $(178,762)   $(23,440)    $    (--)  $ 42,500
                                  ================================================================================================
</TABLE>

                             See Accompanying Notes

                                       28
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES
                                (in thousands)

<TABLE>
<CAPTION>
                                                                       Five Months Ended
                                                     Year Ended           December 31              Year Ended July 31
                                                     December 31  ------------------------------------------------------
                                                        2001           2000          1999           2000          1999
                                                     -------------------------------------------------------------------
                                                                                 (Unaudited)
<S>                                                  <C>            <C>            <C>            <C>           <C>
Operating Activities:
Net income (loss)                                    $ (72,647)     $   9,699     $  11,246      $  12,418     $  28,346
Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities:
   Depreciation                                         28,176         10,978        11,147         26,126        18,358
   Amortization                                          6,978          2,625         2,475          6,043         5,203
   Minority interest in income of subsidiaries           9,254          2,778         2,841          6,742         3,921
   (Income) loss from unconsolidated joint ventures      2,925            467            13            352        (5,420)
   Deferred income taxes                               (25,272)         1,680             1          2,310         9,983
   Post-retirement benefits other than pensions          3,018          1,155         1,646            589         4,555
   Accrued pension benefits                              5,792          3,138          (133)        (1,433)       (1,909)
   Non-cash interest expense                             1,802            740           733          1,763         1,648
   Changes in operating assets and liabilities,
    net of acquisitions and non-cash special charges:
      Accounts receivable                               (3,792)        (3,903)      (18,575)        (1,580)        4,621
      Inventories                                       (4,861)       (25,671)       (9,019)       (18,212)      (17,705)
      Accounts payable                                 (27,994)        14,131        11,140         15,835        13,634
      Other current assets and liabilities               4,279         (9,300)        1,542        (15,391)       (6,645)
      Restructuring charges                             39,101             --            --         35,222            --
      Cash payments for restructuring charges           (8,245)       (16,839)         (717)        (8,900)      (14,941)
      Non-cash special charges                          38,832             --            --             --            --
      Other non-current assets and liabilities, net         70         (5,182)        2,215          9,013          (563)
                                                     -------------------------------------------------------------------
Net cash provided by (used in) operating activities     (2,584)       (13,504)       16,555         70,897        43,086

Investing Activities:
Acquisitions, net of cash acquired                     (28,888)            --        (5,733)       (68,005)      (48,321)
Purchases of property and equipment                    (20,400)       (11,824)      (20,175)       (38,371)      (25,066)
Investments in joint ventures                           (8,662)        (1,892)           --         (1,179)           --
                                                     -------------------------------------------------------------------
Net cash used in investing activities                  (57,950)       (13,716)      (25,908)      (107,555)      (73,387)

Financing Activities:
Proceeds from issuance of long-term debt               157,291             --            --             --            --
Retirement of long-term debt                           (17,790)            --            --             --            --
Net borrowings (repayments) under revolving
 line of credit and other                              (66,648)        35,305         5,514         41,006        38,048
Deferred financing costs                                (5,561)            --            --             --            --
Merger and tender offer costs                           (5,318)            --            --             --            --
Distributions to minority interests                       (762)          (322)           --         (1,200)           --
                                                     -------------------------------------------------------------------
Net cash provided by financing activities               61,212         34,983         5,514         39,806        38,048

Effect of exchange rate changes on cash                   (703)        (1,205)         (108)          (635)         (551)
                                                     -------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents       (25)         6,558        (3,947)         2,513         7,196
Cash and cash equivalents at beginning of year          24,380         17,822        15,309         15,309         8,113
                                                     -------------------------------------------------------------------
Cash and cash equivalents at end of year             $  24,355      $  24,380     $  11,362      $  17,822     $  15,309
                                                     ===================================================================
</TABLE>

                             See Accompanying Notes

                                       29
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES
                               December 31, 2001
                            (dollars in thousands)

1.   ORGANIZATION AND ACQUISITIONS

DELCO REMY AMERICA ACQUISITION

     On July 31, 1994, Delco Remy International, Inc. (the "Company" or "DRI")
through a wholly-owned subsidiary, Delco Remy America, Inc. ("DRA"), purchased
substantially all of the assets, other than facilities, and assumed certain
liabilities of specific business activities of the Delco Remy Division of
General Motors Corporation (the "GM Acquisition"). The specific business
activities purchased are engaged in the design, manufacture, remanufacture and
sale of heavy duty starter motors and generators, automotive starter motors, and
related components.

  The GM Acquisition was recorded based on the best estimates available,
however, certain purchase price adjustments remained unresolved between General
Motors Corporation ("GM") and the Company.  In 2001, the Company recorded a
charge of $16,081 to operations under the caption "special charges - selling,
general and administrative expenses" related to the unresolved issues (see
Note 3).

     GM is entitled to receive an additional contingent purchase payment which
will be paid beginning in 2004 and will be based upon a percentage of average
earnings of the Company in the three year period ending December 31, 2003 in
excess of certain imputed earnings. Since the additional contingent purchase
price, if any, is based upon future operations of the Company which cannot be
determined at this time, no provision for such payment has been made in the
accompanying consolidated financial statements. The additional contingent
purchase price, if any, will increase the goodwill recorded for the GM
Acquisition.

     Concurrent with the GM Acquisition, the Company entered into certain supply
agreements with GM whereby the Company would be the sole-source supplier to GM
for component parts manufactured by the Company at the date of the GM
Acquisition. The supply agreement for automotive starter motors has an initial
term of ten years, while the supply agreement for heavy duty starter motors and
generators had an initial term of six years. In fiscal year 1999, the Company
and GM amended the agreement for the Company's price of automotive products and
extended the agreement term to August 31, 2008. The Supply Agreement for heavy
duty products terminated on July 31, 2000. Sales to GM were not adversely
affected and the Company now has the ability to provide an expanded heavy duty
product offering to GM and other customers. GM's obligations to distribute the
Company's automotive aftermarket products terminates on July 31, 2009.

CALENDAR YEAR 2001 ACQUISITIONS AND INVESTMENTS

     In July 2001, the Company and Hitachi Ltd. formed Hitachi Remy Automotive
GmbH to develop, manufacture and market automotive starting motors and
alternators in European and North American markets. The Company's ownership
position in this business is 49%. This investment is accounted for under the
equity method.

     In June 2001, the Company, through a wholly-owned subsidiary, purchased the
North American remanufacturing business of Mazda North American Operations
("Mazda"). The purchase price of $17,116, including expenses and excluding
future contingent payments, was funded through proceeds from the Company's
Senior Credit Facility. The acquisition was accounted for as a purchase with
resulting goodwill of $17,116. Amortization of goodwill in 2001 was based on an
amortization period of 20 years. The business, located in Jacksonville, Florida,
is responsible for the remanufacturing of Mazda automatic transmissions,
transaxles and rotary engines for Mazda's service requirements in North America.
The Company will continue to remanufacture these components to support Mazda's
service and replacement parts needs in North America.

                                       30
<PAGE>

     In May 2001, the Company acquired 100% of the capital stock of Auto Matic
Transmission International A/S ("AMT") for approximately $500. AMT, based in
Soborg, Denmark, remanufactures automatic transmissions for passenger cars and
commercial vehicles.

     In February 2001, the Company acquired the assets of XL Component
Distribution Limited ("XL") for approximately $2,416. Goodwill of $2,416 was
recorded in connection with the acquisition. XL, headquartered in Droitwich,
Worcestershire, England, is involved in the remanufacturing, packaging and
distribution of steering racks, brake calipers, ignition distributors, ignition
leads, transmission components and rotating electrics.

     Payments totaling $6,434 were made in 2001 to acquire additional shares
from the minority shareholders of World Wide Automotive, Inc. ("World Wide"),
which was acquired in 1997. These payments increased the Company's ownership
percentage of World Wide from 82.5% to 88.2%.

     Payments totaling $2,422 were made in 2001 to acquire additional shares
from the minority shareholders of Power Investments, Inc. ("Power"), which was
acquired in 1996. These payments increased the Company's ownership percentage of
Power from 82.5% to 85.8%.

FIVE MONTH TRANSITION PERIOD INVESTMENT

     In December 2000, the Company and Aero Vironment, Inc. formed iPower
Technologies, L.L.C. ("iPower") to pursue the development and commercialization
of high-technology products in the distributed generation and hybrid electric
vehicle markets. The Company owned 50% of iPower on December 31, 2001. This
investment is accounted for under the equity method.

FISCAL YEAR 2000 ACQUISITIONS AND INVESTMENTS

     In August 1999, the Company, through a wholly-owned subsidiary, purchased
the assets of Engine Master, a remanufacturer of gasoline engines located in
Dallas, Texas, for $5,844 in cash. The acquisition was treated as a purchase for
accounting purposes and resulted in goodwill of $1,076 which is being amortized
over 35 years.

     In March 2000, the Company, through a wholly-owned subsidiary, purchased
100% of the capital shares of M&M Knopf Auto Parts, Inc. ("Knopf") from certain
shareholders. The purchase price of $61,322, net of cash acquired and including
the payoff of certain debt of Knopf, was funded through proceeds from the
Company's Senior Credit Facility and is subject to certain adjustments. The
acquisition was accounted for as a purchase. Resulting goodwill of approximately
$37,000 is being amortized over 30 years. The purchase price is subject to an
additional contingent payment of cash and/or common stock of the Company in
fiscal year 2005, subject to the achievement by Knopf of certain earnings goals.
The amount of this payment cannot currently be determined. This additional
contingent purchase price, if any, will increase the goodwill recorded for the
acquisition.

     In April 2000, the Company, through a wholly-owned subsidiary, purchased
100% of the capital shares of Elmot-DR Sp z.o.o, a Polish manufacturer of
starters and alternators for the OEM and aftermarket in Europe, for $839 in
cash, net of cash acquired. The acquisition was treated as a purchase for
accounting purposes with no resulting goodwill.

     In January 2000, the Company and Continental AG formed Continental ISAD
Electric Systems GmbH & Co. ("Continental ISAD") to develop and produce an
integrated starter and alternator product. The Company's ownership position in
this business is 49%. This investment is accounted for under the equity method.

FISCAL YEAR 1999 ACQUISITIONS

     On November 13, 1998, the Company, through a wholly-owned subsidiary,
purchased all of the common stock of Williams Technologies, Inc. ("Williams")
for $38,840 in cash, net of cash acquired and less Williams' intercompany and
third-party debt. The purchase was funded through proceeds from the Company's
Senior Credit Facility. The acquisition was treated as a purchase for accounting
purposes and resulted in goodwill of $21,104 which was being amortized over 35
years through 2001. Williams is a remanufacturer of automatic transmissions and
torque converters for automotive and medium and heavy duty truck applications.
Its primary market is the dealer network of major North American and foreign
original equipment vehicle manufacturers. Results of operations for Williams are
included in the Company's consolidated results from the acquisition date.

                                       31
<PAGE>

     On June 25, 1999, the Company, through a wholly-owned subsidiary, purchased
31% of the capital shares of Delco Remy Korea (formerly Remy Korea Limited) from
certain shareholders for $6,204 in cash, net of cash acquired. The purchase was
funded through proceeds from the Company's Senior Credit Facility. This
investment increased the Company's ownership position in Delco Remy Korea to
81%. The acquisition was treated as a purchase for accounting purposes with no
resulting goodwill. During fiscal year 1997, the Company acquired a 50% interest
in Delco Remy Korea for approximately $5,300. Effective June 25, 1999, the
Company accounted for Delco Remy Korea as a consolidated subsidiary. It was
accounted for under the equity method prior to that date. Delco Remy Korea is a
manufacturer of automotive starter motors and parts for the U.S. original
equipment market, as well as customers in Asian markets.

UNAUDITED PRO FORMA RESULTS OF OPERATIONS

     The unaudited pro forma consolidated results of operations, assuming the
Williams, Delco Remy Korea and Knopf acquisitions had been consummated as of the
beginning of the preceding fiscal year, are as follows:

                                           Year Ended July 31
                                     ------------------------------
                                         2000               1999
                                     ------------------------------
Net sales                            $ 1,132,506        $ 1,052,335
Operating income                          87,190            114,965
Net income                                15,123             32,270

     The acquisitions in the year ended December 31, 2001 did not have a
significant effect on the Company's consolidated results of operations. There
were no acquisitions in the five month period ended December 31, 2000.

     The pro forma consolidated financial information has been prepared for
comparative purposes only and does not purport to present what the Company's
consolidated results of operations would actually have been if the operations
were combined during the periods presented and is not intended to project future
results or trends of operations.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of DRI and its
subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.

     Certain prior year amounts have been reclassified to conform to the current
year's presentation.

     The Company changed its fiscal year to December 31, effective August 1,
2000. Prior to August 1, 2000, the fiscal year ended on July 31. Accordingly,
the Company's audited financial statements include statements of operations,
stockholders' equity and cash flows for the five-month transition period ended
December 31, 2000.

NATURE OF OPERATIONS

     The Company designs, manufactures, remanufactures and distributes
electrical, powertrain/drivetrain and related components and provides core
exchange services for automobiles and light trucks, medium- and heavy-duty
trucks and other heavy-duty and industrial applications. Products include
starter motors, alternators, engines, transmissions, torque converters, fuel
systems and traction control systems. The Company serves the aftermarket and
original equipment manufacturer market, principally in North America, as well as
Europe, Latin America and Asia Pacific.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents includes all cash balances and highly liquid
investments held primarily in repurchase agreements collateralized by U.S.
Government securities with a maturity of ninety days or less when purchased. The
carrying amount of cash equivalents approximates fair value.

                                       32
<PAGE>

CONCENTRATIONS OF CREDIT RISK AND OTHER RISKS

     Substantially all of the Company's accounts receivable are due from
customers in the original equipment and aftermarket automotive industries, both
in the U.S. and internationally. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral. The Company maintains allowances for doubtful customer accounts for
estimated losses resulting from the inability of its customers to make required
payments. If the financial condition of the Company's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

     The percentage of the Company's labor force covered by a collective
bargaining agreement and covered by such an agreement that will expire within
one year is 24.9% and 1.1%, respectively.

     The Company conducts a significant portion of its business with GM. See
Note 11.

Derivative Financial Instruments

     Effective August 1, 2000, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that all derivatives
be recognized on the balance sheet at fair value. Changes in fair values of
derivatives are accounted for based upon their intended use and designation.

     In the normal course of business, operations of the Company are exposed to
continuing fluctuations in foreign currency values, interest rates and
commodity prices that can affect the cost of operating, investing and financing.
Accordingly, the Company addresses a portion of these risks through a controlled
program of risk management that includes the use of derivative financial
instruments. The Company's objective is to reduce earnings and cash flow
volatility associated with these fluctuations.  The Company's derivative
activities, all of which are for purposes other than trading, are initiated
within the guidelines of established policies and procedures designed to manage
market risk. The Company does not enter into any derivative transactions for
speculative purposes. From time to time, the Company enters into foreign
currency exchange agreements to manage its exposure arising from fluctuating
exchange rates related to specific transactions.

      In order to hedge anticipated U.S. dollar-denominated intercompany sales
of inventory by its South Korean subsidiary to a U.S. subsidiary against
fluctuations between the South Korean Won and U.S. dollar, the Company
entered into a series of non-deliverable currency forward contracts. At
maturity, each contract was settled at the difference between fair value and
contract value. These derivative contracts were designated as cash flow hedges
and, accordingly, changes in fair value were charged to other comprehensive
income (loss) (see Note 10). Realized gains and losses recorded upon settlement
were charged to earnings in the periods in which earnings are impacted by the
variability of the cash flows of the settled intercompany sale. The final
contract was settled in December 2001. In November 2000, the Company entered
into an interest rate swap to hedge the exposure on a portion of its variable
rate debt. The swap converts the libor-based rate into a fixed rate of 6.51% on
debt of $100,000 for a period of two years. This swap has been designated as a
cash flow hedge and changes in fair value are charged to other comprehensive
income (loss) (see Note 10). Realized gains and losses are charged to earnings
as interest expense in the periods in which earnings are impacted by the
variability of the cash flows of the interest paid. The notional amounts of the
Company's foreign exchange contracts are summarized as follows:

<TABLE>
<CAPTION>
                                                     December 31
                                    -------------------------------------------          July 31
                                            2001                   2000                   2000
                                    -------------------------------------------------------------------
                                    Notional      Fair      Notional      Fair      Notional      Fair
                                     Amount      Value       Amount      Value       Amount      Value
                                    --------    -------     --------    -------     --------    -------
        <S>                         <C>         <C>         <C>         <C>         <C>         <C>
        Forwards                    $ 2,716     $ 2,750     $ 6,353     $ 5,914     $ 6,436     $ 6,048
        Non-deliverable forwards         --          --      37,536      33,152      62,602      62,829
</TABLE>

      The market value of the interest rate swap at December 31, 2001 and 2000
was $(4,028) and $(1,505), respectively.


                                       33
<PAGE>

INVENTORIES

     Inventories are carried at lower of cost or market determined on the
first-in, first-out (FIFO) method. Raw materials also include supplies and
repair parts which consist of materials consumed in the manufacturing process
but not directly incorporated into the finished products. Inventories consist
of the following:

                              December 31
                        -----------------------      July 31
                          2001          2000          2000
                        -------------------------------------
Raw materials           $ 176,704    $  154,550    $  132,713
Work-in-process            50,131        51,668        52,605
Finished goods             76,520        87,606        82,835
                        -------------------------------------
                        $ 303,355    $  293,824    $  268,153
                        =====================================


  The Company writes down its inventory for estimated obsolescence or
unmarketable inventory by the difference between the cost of the inventory and
the estimated market value of the inventory based upon assumptions about market
conditions and future demand.  If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be
required.

  The Company provides an allowance for the estimated cost of product
warranties, based on management's estimate of future product failure rates. If
actual product failure rates differ from management's estimates, revisions to
the estimated warranty liability may be required.

PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost and include certain expenditures
for leased facilities. Depreciation is calculated primarily using the
straight-line method over the estimated useful lives of the related assets (15
to 40 years for buildings and 3 to 15 years for machinery and equipment).

GOODWILL AND LONG-LIVED ASSETS

     Goodwill represents the excess of purchase price over fair value of the net
assets acquired and is amortized by the straight-line method over 15 to 35 years
through 2001.

     The carrying amount of goodwill and long-lived assets are regularly
reviewed for indicators of impairment in value, which in the view of management
are other than temporary, including unexpected or adverse changes in the
following: (i) the economic or competitive environments in which the Company
operates; (ii) profitability analysis and (iii) cash flow analysis. If facts and
circumstances suggest that a subsidiary's goodwill and long-lived assets are
impaired, the Company assesses the fair value of the underlying business and
reduces goodwill and long-lived assets to an amount that results in the book
value of the subsidiary approximating fair value.

INVESTMENTS IN JOINT VENTURES

     Investments in companies representing an ownership interest of 20% to 50%
are accounted for by the equity method. At December 31, 2001, the Company's
ownership interest and carrying value of these investments were: Sahney Paris
Rhone Ltd. (47.5%, $4.7 million); iPower (50%, $3.9 million); Hitachi Remy
Automotive GmbH (49%, $1.8 million) and Continental ISAD (49%, $.7 million).

INCOME TAXES

  The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes, which requires deferred tax assets and liabilities
be recognized using enacted tax rates for the effect of temporary differences
between the book and tax bases of recorded assets and liabilities.  SFAS No. 109
also requires deferred tax assets be reduced by a valuation allowance if it is
more likely than not that some portion or all of the deferred tax asset will not
be realized.

The Company evaluates quarterly the realizability of its deferred tax assets by
assessing its valuation allowance and by adjusting the amount of such allowance,
if necessary.  The factors used to assess the likelihood of realization are the
Company's forecast of future taxable income and available tax planning
strategies that could be implemented to support the realization of certain
deferred tax assets.

Failure to achieve forecasted taxable income may affect the ultimate realization
of certain deferred tax assets.  Factors that may affect the Company's ability
to achieve sufficient forecasted taxable income include, but are not limited to,
general economic conditions, increased competition, or delays in product
availability.

PENSION AND POST-RETIREMENT PLANS

  The Company sponsors various defined benefit pension and post-retirement plans
which produce significant costs developed from actuarial valuations.  Inherent
in these valuations are key assumptions regarding discount rates, expected
return on plan assets, rates of compensation increases, and the rates of health
care benefit increases.  The Company is required to consider current market
conditions in determining these assumptions.  If future trends in these
assumptions prove to differ from management's assumptions, revisions to the plan
assets, benefit obligations and components of expense may be required.

RECOGNITION OF REVENUE

     Substantially all of the Company's revenue is recognized at the time
product is shipped to customers. The Company's remanufacturing operations obtain
used diesel and gasoline engines, fuel systems, transmissions, starter motors
and generators, commonly known as cores, from its customers as trade-ins. Net
sales and cost of goods sold are reduced by $198,603, $83,558, $185,324, and
$156,383 for the year 2001, the five months ended December 31, 2000 and fiscal
years 2000 and 1999, respectively, to reflect the cost of cores for
remanufactured product shipped.

FOREIGN CURRENCY TRANSLATION

     Financial statements of foreign subsidiaries are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and
liabilities and at the average exchange rate for each year for revenue and
expenses. Translation adjustments are recorded as a separate component of
stockholders' equity and reflected in comprehensive income (loss).

                                       34
<PAGE>

EARNINGS PER SHARE

     As a result of the recapitalization of the Company (see Note 8), the
Company's publicly traded common stock was delisted. Consequently, the Company
has not presented earnings per share in its consolidated financial statements as
it believes its presentation is not meaningful to investors.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's financial instruments generally consist of cash and cash
equivalents, trade and other receivables, accounts payable and long-term debt.
The fair value of the Company's fixed rate debt was estimated using a discounted
cash flow analysis based upon the Company's current incremental borrowing rates.
With the exception of the Senior Notes and the Senior Subordinated Notes, the
carrying amounts of these financial instruments approximated their fair value at
December 31, 2001 and 2000 and at July 31, 2000. At December 31, 2001, the
Senior Notes have a face value of $145,000 and a fair value of $141,042, the
10 5/8% Senior Subordinated Notes have a face value of $140,000 and a fair value
of $144,452 and the 11% Senior Subordinated Notes have a face value of $165,000
and a fair value of $169,950.

USE OF ESTIMATES

     Preparation of the consolidated financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities at the date of the
consolidated financial statements, and the reported amounts of revenue and
expense during the year. Actual results could differ from those estimates.

                                       35
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

  On October 3, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of and also supersedes the
accounting and reporting provisions of APB Opinion Number 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual, and Infrequently Occurring Events and
Transactions, for segments of a business to be disposed of. Among its many
provisions, SFAS No. 144 retains the fundamental requirements of both previous
standards, however, it resolves significant implementation issues related to
FASB Statement No. 121 and broadens the separate presentation of discontinued
operations in the income statement required by APB Opinion Number 30 to include
a component of an entity (rather than a segment of a business). The provisions
of SFAS No. 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001 with early application encouraged. The Company
does not believe the adoption of SFAS No. 144 will have a material affect on its
results of operations, financial position or cash flows. However, the Company is
evaluating the impact, if any, the changes in the presentation of discontinued
operations will have on its financial statements.

  On June 29, 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 142
addresses accounting and reporting of acquired goodwill and other intangible
assets and must be adopted by the Company with an effective date of January 1,
2002. In addition, the goodwill impairment testing provisions of SFAS No. 142
must be applied to any goodwill or other intangible assets that are recognized
in the Company's financial statements at the time of adoption. Upon adoption,
goodwill will no longer be amortized and will be tested for impairment at least
annually. For the year ended December 31, 2001, the Company recorded
amortization of goodwill and other intangible assets of approximately $7.0
million and the Company believes the adoption of the standard will result in the
avoidance of annual amortization expense of approximately $7.7 million
beginning in 2002. At December 31, 2001, the Company had goodwill and other
intangible assets totaling approximately $190.0 million, net of accumulated
amortization. Any goodwill or other intangible assets impairment losses
recognized from the initial impairment test are required to be reported as a
cumulative effect of a change in accounting principle in the Company's financial
statements. The Company is evaluating the impact, if any, SFAS No. 142 will have
on its financial statements upon adoption in 2002.

  On June 29, 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, Business Combinations (SFAS No. 141).  SFAS 141 must be applied to all
business combinations that are completed after June 30, 2001.  Among its many
provisions, SFAS No. 141 eliminated the pooling-of-interests method of
accounting for business combinations, requires the purchase method of accounting
for business combinations and changes the criteria to recognize intangible
assets separately from goodwill.  The adoption of SFAS No. 141 did not have a
material affect on the Company's financial statements.

3.   RESTRUCTURING AND SPECIAL CHARGES

      In the fourth quarter of 2001, the Company completed plans for the closure
and realignment of certain manufacturing facilities and administrative functions
in the United States, Canada and Europe. These actions were in response to
anticipated OE and aftermarket volume declines and to support the Company's
ongoing efforts to reduce cost and improve efficiencies. A one-time charge of
$39,349 was recorded in the fourth quarter of 2001 for the estimated cost of the
plan. The charge included $26,727 for the estimated cost of various voluntary
and involuntary employee separation programs associated with the resulting
workforce reductions of approximately 820 employees. A total of $2,482 was paid
in the fourth quarter of 2001 and $15,066, $4,593 and $4,586 are estimated to be
paid in 2002, 2003 and 2004, respectively, for these programs. The charge also
included $8,192, net of salvage value, for the write-down of certain assets
which will no longer be used as a result of the closures and realignments, and
$4,430 of other costs. In addition, a reserve of $1,992 was established in
connection with the acquisition of XL in February 2001.

     In 2001, the Company recorded special charges-cost of goods sold of $21,586
and special charges-selling, general and administrative expenses of $17,246. The
special charges included a write down of $7,791 for inventories and customer
claims, and $1,165 for accounts receivable related to operations being closed in
the 2001 restructuring plan, classified with the cost of goods sold and selling,
general and administrative expenses, respectively. The special charges-cost of
goods sold also included $13,795 for higher than expected warranty returns for a
limited class of heavy-duty OE alternators. The design and production issues
which caused the unusually high level of claims, have been corrected. The
special warranty charge includes $8,148 for claims in 2001 and $5,647 for
anticipated claims in 2002 and 2003 for the problems identified as part of the
unexpected returns. The special charge-selling, general and administrative
expenses also included $16,081 for disputed items related to the GM Acquisition.
In the fourth quarter of 2001, the Company conceded these claims in connection
with the negotiation of other long-term agreements with GM and Delphi Automotive
Systems Corporation.

     In May 2000, the Company completed plans for the realignment of certain
manufacturing facilities in the United States, Canada and the United Kingdom. A
one-time charge of $35,222 was recorded in June 2000 for the estimated cost of
the plan. The reserve included $27,098 for the estimated cost of various
voluntary and involuntary employee separation programs associated with the
resulting workforce reductions of approximately 860 employees. A total of
$5,011, $15,961 and $3,087 were paid in fiscal year 2000, the five months ended
December 31, 2000 and the year ended December 31, 2001, respectively. An
additional $2,907 and $132 are expected to be paid in 2002 and 2003,
respectively. The reserve also included $8,124, net of salvage value, for the
write-down of certain production assets which will no longer be used as a result
of the realignment. Additionally, a reserve of $1,050 was established in
connection with the acquisition of Elmot in March 2000.

     In May 1998, the Company offered an incentive separation payment to DRA
hourly employees through an employee termination program. A total of 337
employees accepted the Company's offer. A reserve of $26,515 was established for
these separation costs, $9,974 of which were paid in fiscal year 1998, $11,565
of which were paid in fiscal year 1999, and $3,889 of which were paid in fiscal
year 2000. An additional $900 was paid in the five months ended December 31,
2000 and $187 was paid in 2001.

                                       36
<PAGE>

     The following table summarizes the provisions and reserves for
restructuring charges:

<TABLE>
<CAPTION>
                                                    Termination  Exit/Impairment
                                                     Benefits         Costs         Total
                                                     --------------------------------------
<S>                                                  <C>           <C>            <C>
Reserve at July 31, 1998                             $  20,783     $  14,736      $  35,519
Payments and charges in fiscal year 1999               (15,808)      (13,845)       (29,653)
                                                     --------------------------------------
Reserve at July 31, 1999                                 4,975           891          5,866
Provision fiscal year in 2000                           27,098         8,124         35,222
Payments and charges in fiscal year 2000                (8,900)       (8,460)       (17,360)
Reserve established in connection with acquisition       1,050           --           1,050
                                                     --------------------------------------
Reserve at July 31, 2000                                24,223           555         24,778
Payments and charges in the five month
 transition period                                     (16,861)         (225)       (17,086)
                                                     --------------------------------------
Reserve at December 31, 2000                             7,362           330          7,692
Provision in 2001                                       26,727        12,622         39,349
Payments and charges in 2001                            (7,809)       (8,800)       (16,609)
Reserve established in connection with acquisition       1,801           191          1,992
                                                     --------------------------------------
Reserve at December 31, 2001                         $  28,081     $   4,343      $  32,424
                                                     ======================================
</TABLE>

4.   ALLOWANCE FOR DOUBTFUL ACCOUNTS

     The activity in the allowance for doubtful accounts is as follows:

<TABLE>
<CAPTION>
                                   Year Ended  Five Months Ended      Year Ended July 31
                                   December 31    December 31     -------------------------
                                      2001           2000            2000           1999
                                   --------------------------------------------------------
<S>                                <C>             <C>            <C>            <C>
Balance at beginning of period     $    3,115      $   2,970      $   2,105      $    2,083
Additions charged to costs
 and expenses                           2,449          1,334          1,401           1,984
Acquisition of certain businesses         --             --           1,049              50
Uncollectible accounts written off,
 net of recoveries                       (886)        (1,189)        (1,585)         (2,012)
                                   --------------------------------------------------------
Balance at end of period           $    4,678      $   3,115      $   2,970      $    2,105
                                   ========================================================
</TABLE>

5.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

                                            December 31
                                    ------------------------        July 31
                                      2001            2000           2000
                                    ----------------------------------------
Land and buildings                  $  21,720      $  21,228      $   19,231
Buildings under capital leases         23,813         25,585          25,312
Leasehold improvements                 12,478         10,459          10,409
Machinery and equipment               249,063        248,311         242,622
                                    ----------------------------------------
                                    $ 307,074      $ 305,583      $  297,574
                                    ========================================


                                       37
<PAGE>

6.   LONG-TERM DEBT

     Borrowings under long-term debt arrangements consist of the following:

<TABLE>
<CAPTION>
                                                       December 31
                                               ------------------------        July 31
                                                 2001            2000           2000
                                               ----------------------------------------

<S>                                            <C>            <C>            <C>
Senior Credit Facility                         $ 117,087      $ 182,403      $  146,884
Senior Notes                                     145,000        145,000         145,000
10 5/8 Senior Subordinated Notes                 140,000        140,000         140,000
11% Senior Subordinated Notes                    163,037             --              --
GM Subordinated Debenture                             --         18,873          18,802
Other, including capital lease obligations        35,303         41,115          41,038
                                               ----------------------------------------
                                                 600,427        527,391         491,724
Less current portion                               6,771          8,107           7,454
                                               ----------------------------------------
                                               $ 593,656      $ 519,284      $  484,270
                                               ========================================
</TABLE>

SENIOR CREDIT FACILITY

     Though December 31, 2001, the Senior Credit Facility provided revolving
loans in the aggregate principal amount of $300,000 for general purposes
(including acquisitions) and terminated on October 31, 2003. On March 15, 2002,
the Senior Credit Facility was amended. Among other things, the amendment
reduced the aggregate maximum principal amount to $200,000; changed the maturity
date to March 31, 2003 and adjusted certain covenants retrospectively at
December 31, 2001 and going forward. The Company is in compliance with the
amended covenants. The Company has the option of paying an interest rate of one
bank's prime rate or a LIBOR-based rate. The weighted average interest on
amounts outstanding at December 31, 2001 and 2000, and July 31, 2000 were 8.28%,
8.67% and 8.15%, respectively. At December 31, 2001, approximately $71,000 was
unused and approximately $22,000 was available under the Senior Credit Facility.

     The Senior Credit Facility contains various covenants which include, among
other things: (i) limitations on additional borrowings and encumbrances; (ii)
the maintenance of certain financial ratios and compliance with certain
financial tests and limitations; (iii) limitations on cash dividends paid; (iv)
limitations on investments and capital expenditures; and (v) limitations on
leases and sales of assets.

     The Senior Credit Facility is collateralized by a lien on substantially all
assets of the Company and its domestic subsidiaries and by all the capital stock
of such subsidiaries held by the Company or any such other subsidiary.

SENIOR NOTES

     On December 22, 1997, the Company issued $145,000 of 8 5/8% Senior Notes
due December 15, 2007 (the "Senior Notes"). The proceeds from the Senior Notes
were $141,375, net of issuance costs. The proceeds were used to repay higher
interest bearing debt.

     The Senior Notes are general unsecured senior obligations of the Company
and rank pari passu in right of payment with all existing and future senior
indebtedness of the Company and senior in right of payment to all existing and
future subordinated obligations of the Company. In addition, the obligations of
the Company under the Senior Notes will be fully and unconditionally guaranteed
on a joint and several basis by each of the Company's existing and future
domestic restricted subsidiaries. The subsidiary guarantees will rank pari passu
in right of payment with all existing and future senior indebtedness of the
subsidiary guarantors and senior in right of payment to all existing and future
subordinate obligations of the subsidiary guarantors. The Senior Notes and the
subsidiary guarantees will be effectively subordinated to all existing and
future secured indebtedness of the Company and the subsidiary guarantors as well
as to any liabilities of subsidiaries other than subsidiary guarantors.

     The Senior Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after December 15, 2002, at the redemption prices set
forth in the note agreement plus accrued and unpaid interest, if any, to the
date of redemption. Interest is payable semi-annually on June 15 and December 15
of each year.

     Upon the occurrence of a change of control (as defined), each holder of the
Senior Notes will have the right to require the Company to purchase all or a
portion of such holder's notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase.

     The indenture pursuant to which the Senior Notes were issued contains
certain covenants that, among other things, limit the ability of the Company and
its restricted subsidiaries to (i) incur additional indebtedness, (ii) pay
dividends or make other distributions with respect to capital stock (as defined)
of the Company and its restricted subsidiaries, (iii) sell assets of the Company
or its restricted subsidiaries, (iv) issue or sell restricted subsidiary stock,
(v) enter into certain transactions with affiliates, (vi) create certain liens,
(vii) enter into certain mergers and consolidations and (viii) incur
indebtedness which is subordinate to senior indebtedness and senior to the
Senior Subordinated Notes and the 10 5/8% Senior Subordinated Notes.

10 5/8% SENIOR SUBORDINATED NOTES

     On August 2, 1996, the Company issued $140,000 of 10 5/8% Senior
Subordinated Notes due August 1, 2006 (the "10 5/8% Senior Subordinated Notes").

     The 10 5/8% Senior Subordinated Notes are unsecured senior subordinated
obligations of the Company and are subordinated in right of payment to all
existing and future senior indebtedness, pari passu with all present and future
senior subordinated indebtedness and senior to all present and future
subordinated indebtedness of the Company or the relevant subsidiary guarantors,
as defined in the indenture. The 10 5/8% Senior Subordinated Notes are also
effectively subordinated to any secured indebtedness to the extent of the value
of the assets securing such indebtedness.

     The 10 5/8% Senior Subordinated Notes are redeemable at the option of the
Company, in whole or in part, on or after August 1, 2001, at the redemption
prices set forth in the note agreement plus accrued and unpaid interest, if any,
to the redemption date. Interest is payable semi-annually on February 1 and
August 1 of each year.

     Upon the occurrence of a change of control, each holder of the 10 5/8%
Senior Subordinated Notes will have the right to require the Company to
purchase all or a portion of such holder's notes at a price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase.

     The indenture pursuant to which the 10 5/8% Senior Subordinated Notes were
issued contains certain covenants that, among other things, limit the ability of
the Company and its restricted subsidiaries to (i) incur additional
indebtedness, (ii) pay dividends or make other distributions with respect to
capital stock (as defined) of the Company and its restricted subsidiaries, (iii)
sell assets of the Company or its restricted subsidiaries, (iv) issue or sell
restricted subsidiary stock, (v) enter into certain transactions with
affiliates, (vi) create certain liens, (vii) enter into certain mergers and
consolidations and (viii) incur indebtedness which is subordinate to senior
indebtedness and senior to the Senior Subordinated Notes.

11% SENIOR SUBORDINATED NOTES

     On April 26, 2001, the Company issued $165,000 of 11% senior subordinated
notes due May 1, 2009 (the "11% Senior Subordinated Notes"). Net proceeds (after
discounts, commissions, and expenses) of approximately $157,000 were used to
retire the GM Subordinated Debenture of approximately $19,000 and repay
approximately $138,000 outstanding under the Company's Senior Credit Facility.

     The 11% Senior Subordinated Notes are unsecured senior subordinated
obligations of the Company and are subordinated in right of payment to all
existing and future senior indebtedness, pari passu with all present and future
senior subordinated indebtedness and senior to all present and future
subordinated indebtedness of the Company or the relevant subsidiary guarantor,
as defined in the indenture. The 11% Senior Subordinated Notes are also
effectively subordinated to any secured indebtedness to the extent of the value
of the assets securing such indebtedness.

     The 11% Senior Subordinated Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after May 1, 2005, at the
redemption prices set forth in the note agreement plus accrued and unpaid
interest, if any, to the redemption date. Interest is payable semi-annually in
arrears on May 1 and November 1, and commenced on November 1, 2001.

     Upon the occurrence of a change in control, each holder of the 11% Senior
Subordinated Notes will have the right to require the Company to purchase all or
a portion of such holder's notes at a price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase.

     The indenture pursuant to which the 11% Senior Subordinated Notes were
issued contains certain covenants that, among other things, limit the ability of
the Company and its restricted subsidiaries to (i) incur additional indebtedness
unless a coverage ratio is met, (ii) make restricted payments, as defined, (iii)
make dividend payments or make other distributions on its capital stock, (iv)
sell assets of the Company or its restricted subsidiaries, (v) enter into
certain transactions with affiliates, (vi) create certain liens, and (vii) enter
into certain mergers and consolidations.

    The Company recorded an extraordinary gain of $698 (net of tax of $428) on
the early retirement of the GM Subordinated Debenture.

                                       38
<PAGE>

GM SUBORDINATED DEBENTURE

     On December 22, 1997, the Company converted preferred stock into a
subordinated debenture with General Motors (the "GM Subordinated Debenture").
The debenture bore interest at the rate of 8% annually and would have matured on
July 31, 2004. The GM Subordinated Debenture was retired in connection with the
issuance of the 11% Senior Subordinated Notes in April 2001.

CAPITAL LEASE OBLIGATIONS

     Capital leases have been capitalized using interest rates ranging from 8.1%
to 15.2%. The net book value of assets under capital leases were $13,634,
$15,322 and $16,026 at December 31, 2001 and 2000 and July 31, 2000,
respectively.

OTHER

     Total cash interest paid for fiscal year 2001, the transition period and
fiscal years 2000 and 1999 was $57,901, $22,636, $46,835, and $41,502,
respectively.

     Required principal payments of long-term debt and capitalized leases are as
follows:

2002               $   6,771
2003                 120,913
2004                   3,464
2005                   3,756
2006                 143,002
Thereafter           322,521
                   ---------
                   $ 600,427
                   =========

                                       39
<PAGE>

7.   EMPLOYEE BENEFIT PLANS

AGREEMENTS WITH GM

     In connection with the GM Acquisition, the Company and GM agreed to
allocate the responsibility for employee pension benefits and post-retirement
health care and life insurance on a pro-rata basis between DRA and GM. The
allocation is primarily determined upon years of service with DRA and aggregate
years of service with DRA and GM. Effective August 1, 1994, DRA established
hourly and salaried pension and post-retirement health care and life insurance
plans which are similar to the respective GM plans.

PENSION AND POST-RETIREMENT HEALTH CARE AND LIFE INSURANCE PLANS

     DRA has defined benefit pension plans covering substantially all employees.
The plan covering salaried employees provides benefits that are based upon years
of service and final estimated average compensation. Benefits for hourly
employees are based on stated amounts for each year of service. DRA's funding
policy is to contribute amounts to provide the plans with sufficient assets to
meet future benefit payment requirements consistent with actuarial
determinations of the funding requirements of federal laws. Plan assets are
primarily invested in mutual funds which invest in both debt and equity
instruments.

     DRA maintains hourly and salaried benefit plans that provide
post-retirement health care and life insurance to retirees and eligible
dependents. The benefits are payable for life, although DRA retains the right to
modify or terminate the plans providing these benefits. The salaried plan has
cost sharing features such as deductibles and co-payments. Salaried employees
who were not GM employees prior to 1992 are not eligible for the above described
post-retirement benefits. It is DRA's policy to fund these benefits as claims
are incurred.

                                       40
<PAGE>

     The changes in benefit obligations and plan assets, components of expense,
and assumptions for the plans are as follows:

<TABLE>
<CAPTION>
                                                                                                 Post-Retirement Health Care
                                                        Pension Benefits                           and Life Insurance Plans
                                         -----------------------------------------------------------------------------------------
                                            Year    Five Months                          Year    Five Months
                                           Ended      Ended      Year Ended July 31     Ended       Ended     Year Ended July 31
                                           Dec. 31    Dec. 31   --------------------   Dec. 31     Dec. 31   ---------------------
                                            2001       2000        2000      1999        2001        2000        2000       1999
                                         -----------------------------------------------------------------------------------------
Change in benefit obligations
<S>                                      <C>        <C>         <C>        <C>         <C>         <C>         <C>        <C>
Benefit obligation at beginning of year  $ 25,447   $ 24,444    $ 18,406   $ 17,656    $ 18,000    $ 15,734    $ 15,040   $ 13,006
Service cost                                2,450        711       2,618      2,111       2,579         959       2,782      3,538
Interest cost                               2,105        749       1,584      1,237       1,402         524       1,028        924
Amendments                                    117        636       2,496         --          --          --          --         --
Actuarial loss (gain)                       4,078       (334)        752     (1,636)      2,140       1,021        (404)    (2,428)
Benefits paid                              (1,521)      (759)     (1,202)      (962)       (824)       (238)       (330)        --
Curtailment gains                              --         --        (210)        --          --          --      (2,382)        --
                                         -----------------------------------------------------------------------------------------
Benefit obligation at end of year        $ 32,676   $ 25,447    $ 24,444   $ 18,406    $ 23,297    $ 18,000    $ 15,734   $ 15,040
                                         =========================================================================================

Change in plan assets
Fair value of plan assets at beginning
   of year                               $ 20,736   $ 21,551    $ 16,749   $ 12,516    $     --    $     --    $     --   $     --
Actual return on plan assets               (1,271)      (170)      1,687      1,635          --          --          --         --
Employer contributions                      1,587         --       4,317      3,560         824         238          --         --
Benefits paid                              (1,521)      (645)     (1,202)      (962)       (824)       (238)         --         --
                                         -----------------------------------------------------------------------------------------
Fair value of plan assets at end of year $19,531    $ 20,736    $ 21,551   $ 16,749    $     --    $     --    $     --   $     --
                                         =========================================================================================

Funded status                            $(13,145)  $ (4,711)   $ (2,893)  $ (1,657)   $ (23,297)   $(18,000)   $(15,734)  $(15,040)
Unrecognized actuarial loss (gain)          7,124       (304)     (1,014)    (1,819)      (2,515)     (4,794)     (5,905)    (6,010)
Unrecognized prior service cost             3,128      3,276       2,621        757          --          --          --         --
                                         -----------------------------------------------------------------------------------------
Net amount recognized                    $ (2,893)  $ (1,739)   $ (1,286)  $ (2,719)   $ (25,812)   $(22,794)   $(21,639)  $(21,050)
                                         =========================================================================================

Amounts recognized in the consolidated
   balance sheet consist of:
Accrued benefit liability                $(10,216)  $ (4,424)   $ (3,262)  $ (2,719)   $(25,812)   $(22,794)   $(21,639)  $(21,050)
Intangible asset                            2,913      2,685       1,976         --          --          --          --         --
Accumulated other comprehensive loss        4,410         --          --         --          --          --          --         --
                                         -----------------------------------------------------------------------------------------
Net amount recognized                    $ (2,893)  $ (1,739)   $ (1,286)  $ (2,719)   $(25,812)   $(22,794)   $(21,639)  $(21,050)
                                         =========================================================================================

Components of expense
Service costs                            $  2,450   $    711    $  2,618   $  2,111    $  2,579    $    959    $  2,782   $  3,538
Interest costs                              2,105        749       1,584      1,237       1,402         524       1,028        924
Expected return on plan assets             (2,082)      (866)     (1,802)    (1,331)         --          --          --         --
Amortization of prior service cost            265        110         158         77          --          --          --         --
Recognized net actuarial loss (gain)            2         (8)         --          8        (139)        (91)       (314)        93
Curtailments                                   --         --         266         --          --          --          --         --
                                         -----------------------------------------------------------------------------------------
Net periodic pension cost                $  2,740   $     696   $  2,824   $  2,102    $  3,842    $  1,392    $  3,496   $  4,555
                                         =========================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                               Post-Retirement Health Care
                                                     Pension Benefits                            and Life Insurance Plans
                                         ---------------------------------------------------------------------------------------
                                             Year    Five Months                        Year    Five Months
                                            Ended      Ended      Year Ended July 31    Ended      Ended    Year Ended July 31
                                           Dec. 31    Dec. 31    --------------------  Dec. 31    Dec. 31  ---------------------
                                             2001       2000         2000      1999      2001       2000        2000      1999
                                         ---------------------------------------------------------------------------------------
Weighted-average assumptions
<S>                                          <C>        <C>         <C>       <C>         <C>        <C>         <C>       <C>
Discount rate                                 7.25%      7.75%       8.00%     7.75%      7.25%      7.75%       8.00%     7.75%
Expected return on plan assets               10.00%     10.00%      10.00%    10.00%        --         --          --        --
Rate of compensation increase                 5.00%      5.00%       5.00%     5.00%      5.00%      5.00%       5.00%     5.00%
</TABLE>

                                       41
<PAGE>

     Measurement of the accumulated post-retirement benefit obligation was based
on a 10.00% annual rate of increase in the cost of covered health care benefits.
The rate was assumed to decrease ratably to 4.75% through 2007 and remain level
at that rate thereafter. An increase and decrease of one-percentage-point in the
assumed health care trend rates would have the following effects on service and
interest cost in the year ended December 31, 2001 and the accumulated
post-retirement benefit obligation at December 31, 2001.

<TABLE>
<CAPTION>
                                                                                                  1% Increase          1% Decrease
                                                                                                  --------------------------------
<S>                                                                                               <C>                  <C>
Effect on total of service and interest cost components of net periodic
 post-retirement health care benefit cost                                                         $     1,012          $      (762)
Effect on the health care component of the accumulated post-
 retirement benefit obligation                                                                          5,511               (4,185)
</TABLE>

DEFINED CONTRIBUTION PLANS

     The Company sponsors two voluntary savings plans. One plan is for eligible
salaried employees and the other plan is for UAW hourly employees. These plans
allow participants to make contributions pursuant to section 401(k) of the
Internal Revenue Code. The salaried plan has Company matching contribution
provisions, while the hourly UAW plan does not. Charges to operations were
$2,234 in the fiscal year 2001, $911 in the five month period ended December 31,
2000 and $1,731 and $1,227 in fiscal years 2000 and 1999, respectively.

PROFIT SHARING PLANS

     DRA sponsors a profit sharing plan covering UAW union employees.
Distributions are determined based upon formulas established by management and
are made annually. Profit sharing expense for the year ended December 31, 2001,
the five month period ended December 31, 2000 and the fiscal years ended July
31, 2000 and 1999 was $--, $728, $2,514 and $1,804, respectively.


8.   STOCKHOLDERS' EQUITY

     On February 7, 2001, the Company agreed to a going private transaction with
its largest stockholder, Court Square Limited ("Court Square"), pursuant to
which Court Square made a cash tender offer for all of the Company's common
stock not owned by it. Following completion of the merger on March 14, 2001, the
New York Stock Exchange delisted the Company's common stock and the Company
terminated the registration of its common stock under the Exchange Act. For
financial accounting purposes the transaction was treated as a leveraged
recapitalization whereby the assets are not revalued and the excess purchase
price of the redeemed shares over the par value and paid-in capital of the
common stock and the redemption value of the preferred stock ($105,164) has been
charged to the Company's retained earnings.

PREFERRED STOCKHOLDERS AGREEMENT

     In connection with the Company's recapitalization, the stockholders entered
into a Preferred Stockholders Agreement dated March 14, 2001 (the "Preferred
Stockholders Agreement"), containing additional agreements among the
stockholders regarding the Company's preferred stock. Subject to certain
limitations, neither Court Square nor DRI Group may sell any of their shares of
preferred stock without offering the other stockholders a pro rata opportunity
to participate in the sale. Subject to certain conditions, if holders of at
least 50% of the common stock approve the sale of the Company, each stockholder
has agreed to consent to the sale and, if the sale includes the sale of stock,
each stockholder has agreed to sell all of the stockholder's preferred stock on
the terms and conditions approved by holders of a majority of the common stock
then outstanding.

PREFERRED STOCK

     The Company's Amended and Restated Certificate of Incorporation provides
for the issuance of 3,500,000 shares of preferred stock, all of which will be
designated as 12% Series A Cumulative Compounding Preferred Stock. The preferred
stock has a stated value of $100 per share and is entitled to semi-annual
dividends which commenced September 15, 2001. Dividends, which are cumulative,
accrue at a rate of 12%, compounding annually. As of December 31, 2001,
2,237,257.23 shares of preferred stock were outstanding. The vote of a majority
of the outstanding shares of the preferred stock, voting as a separate class,
will be required to (1) create, authorize or issue any other class or series of
stock entitled to a preference prior to the preferred stock upon any dividend or
distribution or any liquidation, distribution of assets, dissolution or winding
up of the Company, or increase the authorized amount of any such other class or
series, or (2) amend the Certificate of Incorporation if the amendment would
adversely affect the relative rights and preferences of the holders of the
preferred stock. Except as described above or as otherwise required by law, the
preferred stock is not entitled to vote.

     The Company may not pay any dividend upon capital stock junior to the
preferred stock, except for a dividend payable in capital stock junior to the
preferred stock (including the common stock or junior stock), or redeem or
otherwise acquire shares of junior stock, unless all cumulative dividends on the
preferred stock have been paid in full. Upon liquidation, dissolution or winding
up, holders of preferred stock are entitled to receive out of the Company's
legally available assets, before any amount is paid to holders of junior stock,
an amount equal to $100 per share of preferred stock, plus all accrued and
unpaid dividends to the date of final distribution. If available assets are
insufficient to pay the holders of the outstanding shares of preferred stock in
full, the assets, or proceeds from the sale of the assets, will be distributed
ratably among the holders of the preferred stock. The preferred stock is not
mandatorily redeemable prior to April 16, 2021. The Company anticipates that the
dividends on the preferred stock will be declared and accrued but not paid. The
Company's ability to pay cash dividends, and to redeem the preferred stock, is
subject to restrictions contained in the senior credit facility, the 8 5/8%
Senior Notes Due 2007, the 10 5/8% Senior Subordinated Notes Due 2006 and the
11% Senior Subordinated Notes due 2009.

                                       42
<PAGE>

COMMON STOCK

     The Company's Amended and Restated Certificate of Incorporation provides
for the issuance of 12,001,000 shares of common stock, divided into three
classes consisting of 1,000 shares of Class A Common Stock, 6,000,000 shares of
Class B Common Stock and 6,000,000 shares of Class C Common Stock. As of
December 31, 2001, 1,000 shares of Class A Common Stock, 2,497,337.49 shares of
Class B Common Stock and 16,687 shares of Class C Common Stock were outstanding.

     The holders of Class A Common Stock are entitled to vote on all matters
submitted to a vote of the stockholders. The original holders of Class A Common
Stock, or Court Square, Citicorp or Citibank, N.A. or any direct or indirect
subsidiary of Citicorp or Citibank, N.A., in each case, to the extent that the
entity is the owner of Class A Common Stock, are entitled to that number of
votes equal to, in the aggregate, 51% of the total number of votes entitled to
be cast by the holders collectively owning all of the outstanding shares of
Class A Common Stock and Class B Common Stock. The number of votes to be cast by
the holder of Class A Common Stock may vary and is determined, in each instance,
prior to a vote of stockholders. If at any time the aggregate principal amount
of indebtedness outstanding under the (1) Indenture dated August 1, 1996 among
the Company, certain of its subsidiaries and National City Bank of Indiana; and
(2) Indenture dated December 22, 1997 among the Company, certain of the
Company's subsidiary guarantors and United States Trust Company of New York is
less than $50,000,000, the holder of Class A Common Stock will be entitled to
one vote for each share of Class A Common Stock held. So long as the holders of
the Class A Common Stock are entitled to more than one vote per share, in any
election of Company directors, 21% (rounded up to the nearest whole director) of
the directors to be elected shall be elected by a majority of the votes cast by
the holders of shares of outstanding Class B Common Stock other than Court
Square or any person that is or is deemed to be in the consolidated tax group of
which Court Square is a member.

     The holders of Class B Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders. The
Company cannot amend the Amended and Restated Certificate of Incorporation,
enter into any plan of liquidation, recapitalization, reorganization,
reclassification, consolidation or merger, sell all or substantially all of the
Company's assets or stock or enter into any other business combination without
the approval of a majority of the holders of Class B Common Stock. Except as
required by law, the holders of Class C Common Stock have no voting rights.

     Under the Company's Amended and Restated Certificate of Incorporation,
shares of Class A Common Stock are convertible into an equal number of shares of
Class B Common Stock. Shares of Class B Common Stock are convertible into an
equal number of shares of Class C Common Stock. Shares of Class C Common Stock
are convertible into an equal number of shares of Class B Common Stock. In the
case of a conversion from Class C Common Stock, which is nonvoting, into Class B
Common Stock, which is voting, the holder of shares to be converted would be
permitted under applicable law to hold the total number of shares of Class B
Common Stock which would be held upon conversion.

SECURITIES TRANSFER, RECAPITALIZATION AND HOLDERS AGREEMENT

     In connection with the Company's recapitalization, our stockholders entered
into the Securities Transfer, Recapitalization and Holders Agreement dated March
14, 2001 (the "Stockholders Agreement"), containing certain agreements among the
stockholders regarding the Company's capital stock and corporate governance.

     According to the Stockholders Agreement, so long as Court Square owns at
least 5% of the Company's common stock outstanding, Court Square has the right
to designate observers to attend meetings of the Board of Directors. The
Stockholders Agreement contains provisions which, with certain exceptions,
restrict the ability of the stockholders to transfer any of the Company's common
stock or preferred stock. Subject to certain conditions, if holders of at least
50% of the common stock approve the sale of the Company, each stockholder has
agreed to consent to the sale and, if the sale includes the sale of stock, each
stockholder has agreed to sell all of the stockholder's common stock on the
terms and conditions approved by holders of a majority of the common stock then
outstanding. Subject to some limitations, neither Court Square nor DRI
Acquisition Group LLC ("DRI Group") may sell any of their shares of common stock
without offering the other stockholders a pro rata opportunity to participate in
the sale.

     The Stockholders Agreement also provides for certain additional
restrictions on transfer of shares by the Company's executive officers and other
employees ("management investors"), including the Company's right to repurchase
certain shares upon termination of the management investor's employment prior to
March 14, 2006, at a formula price, and the grant of a right of first refusal in
the Company's favor in the event a management investor elects to transfer his
shares of common stock.

                                       43
<PAGE>

REGISTRATION RIGHTS AGREEMENT

     In connection with their entry into the Stockholders Agreement, the
Company, Court Square, World Equity Partners, L.P., DRI Group, the management
investors and certain other stockholders entered into a Registration Rights
Agreement dated March 14, 2001 (the "Registration Rights Agreement"). In
accordance with the Registration Rights Agreement, upon the written request of
Court Square the Company will prepare and file a registration statement with the
SEC concerning the distribution of all or part of the shares held by that party
and its best efforts to cause the registration statement to become effective. If
at any time the Company files a registration statement for common stock pursuant
to a request by Court Square or otherwise, it will allow the other parties to
the Registration Rights Agreement to have their shares of common stock (or a
portion of their shares under certain circumstances) included in the registered
offering of the Company's common stock. The Company is not bound by this
requirement if it is filing a registration statement on Form S-8, Form S-4 or
any similar form, a registration statement filed in connection with a share
exchange or an offering solely to our employees or existing stockholders, or a
registration statement registering a unit offering. The Company will pay the
registration expenses of the selling stockholders (other than underwriting
commissions, brokerage fees and transfer taxes applicable to the shares sold by
the stockholders or the fees and expenses of any accountants or other
representatives retained by selling stockholder).


                                       44
<PAGE>

DIVIDENDS

     Payment of dividends is dependent upon certain factors, including the
Company's earnings, financial condition and capital requirements and the terms
of the Company's financing agreements. The ability of the Company to make
dividend payments is also restricted by the terms of certain of its debt
instruments.



                                       45
<PAGE>


9.   INCOME TAXES

     The following is a summary of the components of the provision for income
taxes (benefit):

<TABLE>
<CAPTION>
                                                        Five
                                         Year Ended  Months Ended     Year Ended July 31
                                        December 31   December 31  -------------------------
                                           2001          2000           2000          1999
                                        ----------------------------------------------------
Current:
<S>                                     <C>          <C>            <C>            <C>
   Federal                              $       -    $      62      $     669      $     257
   State and local                          1,727          597          1,323          1,478
   Foreign                                  3,480        3,289          7,157          5,214
                                        ----------------------------------------------------
                                            5,207        3,948          9,149          6,949
Deferred:
   Federal                                (19,963)       4,180          1,280          7,146
   State and local                         (3,258)          54          3,350          1,703
   Foreign                                  1,075       (2,088)        (2,319)           656
                                        ----------------------------------------------------
                                          (22,146)       2,146          2,311          9,505
                                        ----------------------------------------------------
                                        $ (16,939)   $   6,094      $  11,460      $  16,454
                                        ====================================================
</TABLE>

     Income (loss) before income taxes (benefit), minority interest in income of
subsidiaries, income (loss) from unconsolidated joint ventures and extraordinary
items was taxed in the following jurisdictions:

                                       46
<PAGE>

<TABLE>
<CAPTION>
                                                      Five
                                      Year Ended   Months Ended       Year Ended July 31
                                      December 31   December 31    ------------------------
                                         2001          2000           2000          1999
                                       ----------------------------------------------------
                                       <S>          <C>            <C>            <C>
Domestic                               $(100,033)   $  11,659      $   8,031      $  25,101
Foreign                                   23,308        7,888         23,174         19,844
Eliminations                              (1,380)        (509)          (233)        (1,644)
                                       ----------------------------------------------------
                                       $ (78,105)   $  19,038      $  30,972      $  43,301
                                       ====================================================
</TABLE>

     A reconciliation of income taxes at the United States federal statutory
rate to the effective income tax rate follows:

<TABLE>
<CAPTION>
                                                        Five
                                        Year Ended   Months Ended     Year Ended July 31
                                        December 31   December 31  ------------------------
                                           2001          2000           2000          1999
                                        ---------------------------------------------------
<S>                                        <C>          <C>            <C>            <C>
Federal statutory income tax rate          35.0%        35.0%          35.0%          35.0%
State and local income taxes--
 net of federal tax benefit                 1.3          2.2            7.9            4.8
Foreign operations                         12.1        (6.8)         (10.6)          (2.3)
Goodwill                                   (1.3)         2.2            2.4             .7
Provision for or release of
 valuation allowance for net
 deferred tax assets                      (21.6)          --             --            2.7
Other items                                (3.8)        (0.6)           2.3           (2.9)
                                        ---------------------------------------------------
Effective income tax rate                  21.7%        32.0%          37.0%          38.0%
                                        ===================================================
</TABLE>

     State and local income taxes include provisions for Indiana and Michigan
which do not provide proportional benefit in loss years.

     The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:

<TABLE>
<CAPTION>
                                                              December 31
                                                       ----------------------     July 31
                                                          2001         2000         2000
                                                       ------------------------------------
Deferred tax assets:
<S>                                                    <C>          <C>           <C>
   Restructuring charges                               $  21,969    $   5,358     $  11,079
   Employee benefits                                      13,709       10,514        10,096
   Inventories                                             5,049        4,326         4,609
   Warranty                                                3,579        2,418         2,625
   Non-compete agreements                                    824          824           824
   Alternative minimum tax credits                         3,937        3,937         3,825
   Foreign deferred assets                                 5,022        4,338         2,321
   Net operating loss carryforwards                       39,594       15,025        12,414
   Other                                                   6,104        3,901         4,335
                                                       ------------------------------------
Total deferred tax assets                                 99,787       50,641        52,128
   Valuation allowance                                   (25,745)      (7,779)       (7,779)
                                                       ------------------------------------
Deferred tax assets net of valuation allowance            74,042       42,862        44,349
Deferred tax liabilities:
   Depreciation                                          (19,462)     (21,280)      (20,674)
   Foreign deferred liabilities                           (1,586)          --            --
   Research expenses                                      (6,985)      (7,274)       (6,894)
   Other                                                 (14,358)      (8,562)       (8,663)
                                                       ------------------------------------
      Total deferred tax liabilities                     (42,391)     (37,116)      (36,231)
                                                       ------------------------------------
   Net deferred tax asset                              $  31,651    $   5,746     $   8,118
                                                       ====================================
</TABLE>

     At December 31, 2001, the Company had unused Federal net operating loss
carryforwards of approximately $63,800 that expire during 2018 through 2021. The
Company also had unused alternative minimum tax credit carryforwards of
$3,937 that may be carried forward indefinitely. While management
is optimistic that all net deferred tax assets will be utilized, such
realization is dependent upon future taxable earnings. The Company's
carryforwards expire at specific future dates, and utilization of certain
carryforwards is limited to specific amounts each year. Accordingly, the Company
has recorded a valuation allowance against a portion of these net deferred tax
assets. Income tax payments (refunds), including state taxes, for the year ended
December 31, 2001, five month period ended December 31, 2000 and years ended
July 31, 2000 and 1999 were $1,277, $743, $10,726 and $617, respectively.

     No provision has been made for United States federal and state or
foreign taxes that may result from future remittances of undistributed earnings
of foreign subsidiaries ($73,850 at December 31, 2001) because it is expected
that such earnings will be reinvested in these foreign operations indefinitely.
It is not practical to estimate the amount of taxes that might be payable on the
eventual remittances of such earnings.

                                       47
<PAGE>

10.  ACCUMULATED OTHER COMPREHENSIVE LOSS

     The Company's other comprehensive loss consists of unrealized net gains and
losses on the translation of the assets and liabilities of its foreign
operations, currency instruments and interest rate swaps and minimum pension
liability adjustments. The before tax income (loss), related income tax effect
and accumulated balance are as follows:

<TABLE>
<CAPTION>
                                             Foreign     Unrealized    Unrealized    Minimum     Accumulated
                                            Currency   Gains/(Losses)  Losses on     Pension        Other
                                           Translation   Currency    Interest Rate  Liability   Comprehensive
                                           Adjustment   Instruments      Swaps     Adjustments      Loss
                                           ---------------------------------------------------------------
<S>                                        <C>          <C>           <C>          <C>           <C>
Balance at July 31, 1998                   $  (4,074)   $     --      $     --     $     --      $  (4,074)
   Before tax loss                            (3,939)         --            --           --         (3,939)
   Income tax effect                          (1,497)         --            --           --         (1,497)
                                           ---------------------------------------------------------------
   Other comprehensive loss                   (2,442)         --            --           --         (2,442)
                                           ---------------------------------------------------------------
Balance at July 31, 1999                      (6,516)         --            --           --         (6,516)
   Before tax loss                            (6,859)         --            --           --         (6,859)
   Income tax effect                          (2,538)         --            --           --         (2,538)
                                           ---------------------------------------------------------------
   Other comprehensive loss                   (4,321)         --            --           --         (4,321)
                                           ---------------------------------------------------------------
Balance at July 31, 2000                     (10,837)         --            --           --        (10,837)
   Cumulative effect of accounting
    change for derivative instruments            --           241           --                         241
   Before tax loss                            (2,569)      (4,561)       (1,505)         --         (8,635)
   Income tax effect                            (822)        (691)         (482)         --         (1,995)
                                           ---------------------------------------------------------------
   Other comprehensive loss                   (1,747)      (3,870)       (1,023)         --         (6,640)
                                           ---------------------------------------------------------------
Balance at December 31, 2000                 (12,584)      (3,629)       (1,023)         --        (17,236)
   Before tax (loss) income                   (8,322)       4,320        (2,523)      (4,410)      (10,935)
   Income tax effect                          (2,698)         691        (1,049)      (1,675)       (4,731)
                                           ---------------------------------------------------------------
   Other comprehensive (loss) income          (5,624)       3,629        (1,474)      (2,735)       (6,204)
                                           ---------------------------------------------------------------
Balance at December 31, 2001               $ (18,208)   $     --      $  (2,497)   $  (2,735)    $ (23,440)
                                           ===============================================================
</TABLE>

11.  TRANSACTIONS WITH GM

     The Company and GM have entered into several transactions and agreements
related to their respective businesses. In addition to the transactions
disclosed elsewhere in the accompanying consolidated financial statements and
related notes, the Company entered into the following transactions with GM:

<TABLE>
<CAPTION>
                                                        Five
                                        Year Ended  Months Ended     Year Ended July 31
                                        December 31  December 31   ------------------------
                                           2001         2000           2000        1999(a)
                                        ---------------------------------------------------
<S>                                     <C>           <C>          <C>           <C>
Sales                                   $ 258,105     $ 124,596    $  332,665    $  359,162
Material purchases and
 costs for services                        16,619         2,002         4,500        34,273
</TABLE>

(a) Includes transactions with Delphi Automotive Systems Corporation which was
divested by GM in fiscal 1999.

     In addition, the Company had the following balances with GM:

                                               December 31
                                        -------------------------   July 31
                                           2001          2000         2000
                                        -------------------------------------
Trade accounts receivable               $  24,411     $  36,406    $   32,722
Other receivables                             207         5,704         4,768

                                       48
<PAGE>

12.  LEASE COMMITMENTS

     The Company occupies space and uses certain equipment under lease
arrangements. Rent expense was $9,879, $4,064, $9,091 and $7,793 for the year
ended December 31, 2001, five month period ended December 31, 2000 and years
ended July 31, 2000 and 1999, respectively. Rental commitments at December 31,
2001 for long-term non-cancelable operating leases were as follows:

Year ending 2002                                                   $    7,209
Year ending 2003                                                        5,737
Year ending 2004                                                        5,038
Year ending 2005                                                        4,266
Year ending 2006                                                        3,442
Thereafter                                                              7,612
                                                                   ----------
                                                                   $   33,304
                                                                   ==========

13.  COMMITMENTS AND CONTINGENCIES

     The Company is party to various legal actions and administrative
proceedings and subject to various claims arising in the ordinary course of
business, including those relating to commercial transactions, product
liability, safety, health, taxes, environmental and other matters. The Company
believes that the ultimate liability, if any, in excess of amounts already
provided for in the financial statements or covered by insurance on the
disposition of these matters will not have a material adverse effect on the
financial position, results of operations or cash flows of the Company.

     Two subsidiaries of the Company have identified certain possible violations
of Environmental Law regarding air emissions. The subsidiaries have notified the
EPA and/or the applicable state agencies under federal or state voluntary audit
disclosure rules regarding these violations, and they have taken or are taking
steps to correct the violations. One of the subsidiaries has been informed that
the state environmental agency is contemplating a proceeding (by issuing a
notice of violation), and given the nature of the other subsidiary's violations,
a proceeding may be initiated at that facility as well. The Company is unable at
this time to evaluate what penalties, if any, will be imposed.

14.  BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION

     The Company is a global vehicular parts designer, manufacturer,
remanufacturer, marketer and distributor, and a provider of core exchange
services. Products include starter motors, alternators, engines, transmissions,
traction control systems, torque converters and fuel systems which are
principally sold or distributed to OEMs for both original equipment manufacture
and aftermarket operations, as well as to warehouse distributors and retail
automotive parts chains. It manages its business and operates in a single
reportable business segment. Because of the similar economic characteristics of
the operations, including the nature of products, production processes,
customers and methods of distribution, those operations have been aggregated
following the provisions of SFAS No. 131 for segment reporting purposes.

     The Company is a multi-national corporation with operations in many
countries, including the United States, Canada, Mexico, Brazil, Hungary, Poland,
Germany, South Korea, the United Kingdom, Ireland, Belgium, Tunisia and the
Netherlands. As a result, the Company's financial results could be significantly
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in the foreign markets in which the Company distributes its
products. The Company's operating results are exposed to changes in exchange
rates between the U.S. dollar and the South Korean Won, the Mexican Peso and
various European currencies. Exposure to variability in foreign currency
exchange rates is managed primarily through the use of natural hedges, whereby
funding obligations and assets are both denominated in the local currency. From
time to time, the Company enters into exchange agreements to manage its exposure
arising from fluctuating exchange rates related to specific transactions. Sales
are attributed to geographic locations based on the location of product
production.

<TABLE>
<CAPTION>
                                                             Five
                                         Year Ended      Months Ended       Year Ended July 31
                                         December 31      December 31   -------------------------
                                            2001             2000            2000          1999
                                       ----------------------------------------------------------
Net sales to external customers:
<S>                                    <C>                <C>           <C>            <C>
   United States                       $   889,010        $ 381,077     $   937,451    $  845,945
   Europe                                   91,587           27,303          62,427        46,325
   Canada                                   33,971           14,350          43,811        47,270
   Asia Pacific                             13,690           10,934          33,854         3,386
   Latin America                            25,194            9,073          13,554        10,780
                                       ----------------------------------------------------------
      Total net sales                  $ 1,053,452        $ 442,737     $ 1,091,097    $  953,706
                                       ==========================================================
</TABLE>

                                       49
<PAGE>

                                                December 31
                                       -----------------------------    July 31
                                            2001          2000           2000
                                       -----------------------------------------
Long-lived assets:
   United States                       $   308,585     $ 296,974     $   300,785
   Europe                                   37,985        27,148          27,015
   Canada                                   11,832        13,759          12,342
   Asia Pacific                             28,993        28,766          29,843
   Latin America                            26,674        24,500          21,475
                                       -----------------------------------------
      Total long-lived assets          $   414,069     $ 391,147     $   391,460
                                       =========================================

     Customers that accounted for a significant portion of consolidated net
sales were as follows:

<TABLE>
<CAPTION>
                                                       Five
                                      Year Ended   Months Ended       Year Ended July 31
                                      December 31   December 31   -------------------------
                                         2001          2000           2000          1999
                                    -------------------------------------------------------
<S>                                 <C>             <C>           <C>            <C>
General Motors Corporation:
   North American OE Operations     $   180,958     $  93,696     $   257,684    $  241,288
   Other                                 77,147        30,900          74,981       117,874
International Truck and
 Engine Corporation                     117,345        53,433         141,443       127,842
</TABLE>

     Following is a summary of the composition by product category of the
Company's sales to external customers. Third-party sales for core exchange
services are included in the "Other" category.

<TABLE>
<CAPTION>
                                                       Five
                                      Year Ended   Months Ended       Year Ended July 31
                                      December 31   December 31   -------------------------
                                         2001          2000          2000           1999
                                    -------------------------------------------------------
<S>                                 <C>              <C>          <C>            <C>
Electrical systems                  $   741,641      $337,308     $   859,204    $  793,727
Powertrain/drivetrain                   248,693        77,313         194,303       149,279
Other                                    63,118        28,116          37,590        10,700
                                    -------------------------------------------------------
Total                               $ 1,053,452      $442,737     $ 1,091,097    $  953,706
                                    =======================================================
</TABLE>

15.  OTHER INFORMATION

SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                                        Five
                                        Year Ended  Months Ended      Year Ended July 31
                                        December 31  December 31   ------------------------
                                           2001         2000          2000          1999
                                    -------------------------------------------------------
<S>                                 <C>               <C>          <C>           <C>
Cash paid for interest              $      57,901     $  22,636    $   46,835    $   41,502
Cash paid for income taxes,
 net of refunds received                    1,277           743        10,726           617
Detail of acquisitions:
   Fair value of assets acquired    $       9,119     $    --      $   45,219    $   63,786
   Liabilities assumed                    (10,152)         --         (15,783)      (33,398)
   Goodwill recorded                       24,146          --          38,569        23,383
   Minority interest                        5,775          --            --          (5,450)
                                    -------------------------------------------------------
   Net cash paid for acquisitions          28,888          --          68,005        48,321
   Cash acquired                               82          --           1,669         4,571
                                    -------------------------------------------------------
   Total                            $      28,970     $    --      $   69,674    $   52,892
                                    =======================================================
</TABLE>

                                       50
<PAGE>

RESEARCH AND DEVELOPMENT COSTS

     The Company spent approximately $15,500, $7,200, $16,300 and $13,500 in the
year ended December 31, 2001, five month period ended December 31, 2000 and
fiscal years ended July 31, 2000 and 1999, respectively, on research and
development activities. All expenditures were Company funded.

16.  FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND
     NON-GUARANTOR SUBSIDIARIES

     The Company conducts a significant portion of its business through
subsidiaries. The Senior Notes and the Senior Subordinated Notes referred to in
Note 6, Long-term Debt, are fully and unconditionally guaranteed, jointly and
severally, by certain direct and indirect wholly-owned subsidiaries (the
Subsidiary Guarantors). Certain of the Company's subsidiaries do not guarantee
the Senior Notes and the Senior Subordinated Notes (the Non-Guarantor
Subsidiaries). The claims of creditors of Non-Guarantor Subsidiaries have
priority over the rights of the Company to receive dividends or distributions
from such subsidiaries.

     Presented below is condensed consolidating financial information for the
Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at
December 31, 2001 and 2000 and July 31, 2000 and for the year ended December 31,
2001, five month period ended December 31, 2000 and the fiscal years ended July
31, 2000 and 1999.

     The equity method has been used by the Company with respect to investments
in subsidiaries. The equity method has been used by Subsidiary Guarantors with
respect to investments in Non-Guarantor Subsidiaries. Separate financial
statements for Subsidiary Guarantors are not presented.

     The following table sets forth the Guarantor and direct Non-Guarantor
Subsidiaries:

<TABLE>
<S>                                             <C>
Guarantor Subsidiaries                          Non-Guarantor Subsidiaries
Delco Remy America, Inc.                        Delco Remy Hungary RT (formerly Autovill RT Ltd.)
Nabco, Inc.                                     Power Investments Canada Ltd.
The A&B Group, Inc.                             Remy UK Limited
A&B Enterprises, Inc.                           Delco Remy International (Europe) GmbH
Dalex, Inc.                                     Remy India Holdings, Inc.
A&B Cores, Inc.                                 Remy Korea Holdings, Inc.
R&L Tool Company, Inc.                          World Wide Automotive Distributors, Inc.
MCA, Inc. of Mississippi                        Kraftube, Inc.
Power Investments, Inc.                         Tractech (Ireland) Ltd.
Franklin Power Products, Inc.                   Central Precision Limited
International Fuel Systems, Inc.                Electro Diesel Rebuild BVBA
Power Investments Marine, Inc.                  Electro-Rebuild Tunisia S.A.R.L.
Marine Corporation of America                   Delco Remy Mexico, S. de R.L. de C.V.
Powrbilt Products, Inc.                         Publitech, Inc.
World Wide Automotive, Inc.                     Delco Remy Brazil, Ltda.
Ballantrae Corporation                          Western Reman Ltd.
Tractech, Inc.                                  Engine Rebuilders Ltd.
Williams Technologies, Inc.                     Reman Transport Ltd.
Western Reman, Inc.                             Delco Remy Remanufacturing
Engine Master, L.P.                             Delco Remy Germany GmbH
M & M Knopf Auto Parts, Inc.                    Remy Componentes S. de R.L. de C.V.
Reman Holdings, Inc.                            Delco Remy Belgium BVBA
Remy International, Inc.                        Magnum Power Products, LLC
Jax Reman, LLC                                  Elmot-DR, Sp.z.o.o
                                                XL Component Distribution Ltd.
                                                AutoMatic Transmission International A/S



</TABLE>

                                       51
<PAGE>

           DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                 Condensed Consolidating Balance Sheet
                                                                            December 31, 2001
                                             ------------------------------------------------------------------------------
                                               Delco Remy
                                              International                       Non-
                                               Inc. (Parent    Subsidiary      Guarantor
                                              Company Only)    Guarantors     Subsidiaries   Eliminations    Consolidated
                                             ------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>              <C>
Assets:
Current assets:
   Cash and cash equivalents                   $      --      $        232    $    24,123     $      --        $    24,355
   Trade accounts receivable                          --           133,952         26,428            --            160,380
   Other receivables                                  --             2,871          7,445            --             10,316
   Inventories                                        --           247,953         57,489          (2,087)(c)      303,355
   Deferred income taxes                            17,184            --            3,991            --             21,175
   Other current assets                              4,759           3,572          5,424            --             13,755
                                             ------------------------------------------------------------------------------
Total current assets                                21,943         388,580        124,900          (2,087)         533,336

Property and equipment                                  57         205,640        101,377            --            307,074
Less accumulated depreciation                           25         100,921         23,060            --            124,006
                                             ------------------------------------------------------------------------------
Property and equipment, net                             32         104,719         78,317            --            183,068

Deferred financing costs                            11,431           1,209           --              --             12,640
Goodwill, net                                         --           160,328         26,203            --            186,531
Investment in affiliates                           526,038            --             --          (514,894)(a)       11,144
Deferred income taxes                               11,121              12           (657)           --             10,476
Other assets                                         2,531           3,263          4,416            --             10,210
                                             ------------------------------------------------------------------------------
Total assets                                   $   573,096    $    658,111    $   233,179     $  (516,981)     $   947,405
                                             ==============================================================================

Liabilities and stockholders' equity:
Current liabilities:
   Accounts payable                            $     1,304    $     98,691    $    32,154     $      --        $   132,149
   Intercompany accounts                           (59,671)         53,781          6,491            (601)(c)         --
   Accrued interest payable                          9,927              --            173            --             10,100
   Accrued restructuring charges                      --            27,519          4,905            --             32,424
   Other liabilities and accrued expenses            7,568          32,881         16,566            --             57,015
   Current debt                                       --               804          5,967            --              6,771
                                             ------------------------------------------------------------------------------
Total current liabilities                          (40,872)        213,676         66,256            (601)         238,459

Long-term debt, less current portion               548,683          34,580         10,393            --            593,656
Post-retirement benefits other than pensions          --            25,812           --              --             25,812
Accrued pension benefits                              --             9,035          1,181            --             10,216
Accrued preferred dividends                         20,971            --             --              --             20,971
Other non-current liabilities                        1,842           4,089            724            --              6,655
Minority interest in subsidiaries                     --            12,696         17,411            --             30,107

Stockholders' equity:
   Common stock:
      Preferred stock-Series A                     223,728            --             --              --            223,728
      Class A Shares                                  --              --             --              --                 --
      Class B Shares                                     3            --             --              --                  3
      Class C Shares                                  --              --             --              --                 --
   Paid-in capital                                    --              --             --              --                 --
   Subsidiary investment                              --           291,416         93,099        (384,515)(a)           --
   Retained earnings (deficit)                    (178,762)         69,542         62,323        (131,865)(b)     (178,762)
   Accumulated other comprehensive loss             (2,497)         (2,735)       (18,208)           --            (23,440)
                                             ------------------------------------------------------------------------------
Total stockholders' equity                          42,472         358,223        137,214        (516,380)          21,529
                                             ------------------------------------------------------------------------------
Total liabilities and stockholders' equity     $   573,096    $    658,111    $   233,179     $  (516,981)     $   947,405
                                             ==============================================================================
</TABLE>

_______________
(a) Elimination of investments in subsidiaries.
(b) Elimination of investments in subsidiaries' earnings.
(c) Elimination of intercompany profit in inventory.

                                       52
<PAGE>

                    DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                            Condensed Consolidating Statement of Operations
                                                                  For the Year Ended December 31, 2001
                                             ------------------------------------------------------------------------------
                                               Delco Remy
                                              International                       Non-
                                               Inc. (Parent     Subsidiary     Guarantor
                                              Company Only)     Guarantors   Subsidiaries    Eliminations     Consolidated
                                             ------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>              <C>
Net sales                                      $        --    $  1,061,654    $   425,063     $  (433,265)(a)  $ 1,053,452
Cost of goods sold                                      --         939,199        371,692        (433,265)(a)      877,626
Special charges - cost of goods sold                    --          16,086          5,500                           21,586
                                             ------------------------------------------------------------------------------
Gross profit                                            --         106,369         47,871            --            154,240
Selling, general and administrative expenses        14,502          63,753         27,543            --            105,798
Special charges - SG & A                                --          16,206          1,040                           17,246
Amortization of goodwill and intangibles                --           6,248            730            --              6,978
Restructuring charges                                   --          36,691          2,410            --             39,101
                                             ------------------------------------------------------------------------------
Operating (loss) income                            (14,502)        (16,529)        16,148            --            (14,883)
Interest expense                                   (42,822)        (17,024)        (1,031)           --            (60,877)
Non-recurring merger and tender offer
 expenses                                           (4,194)             --             --            --             (4,194)
Non-operating income (expense)                        (900)            192          2,557            --              1,849
                                             ------------------------------------------------------------------------------
Income (loss) before income tax (benefit),
 minority interest in income of
 subsidiaries, loss from unconsolidated
 joint ventures and
 equity in earnings of subsidiaries                (62,418)        (33,361)        17,674              --          (78,105)
Income taxes (benefit)                              (7,697)        (13,616)         4,374              --          (16,939)
Minority interest in income of subsidiaries             --          (4,072)        (5,182)             --           (9,254)
Loss from unconsolidated joint ventures                 --              --         (2,925)             --           (2,925)
Equity in earnings of subsidiaries                 (17,926)             --             --          17,926(b)           --
                                             ------------------------------------------------------------------------------
Income (loss) before extraordinary item            (72,647)        (23,817)         5,193          17,926          (73,345)
Extraordinary item:
 Gain on early extinguishment of debt (loss
 applicable income taxes of $428)                       --             698             --              --              698
                                             ------------------------------------------------------------------------------
Net income (loss)                                  (72,647)        (23,119)         5,193          17,926          (72,647)
Preferred dividends                                 20,971              --             --              --           20,971
                                             ------------------------------------------------------------------------------
Income (loss) available to common
 stockholders                                  $   (93,618)   $    (23,119)   $     5,193     $    17,926      $   (93,618)
                                             ==============================================================================
</TABLE>

_______________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net loss from consolidated subsidiaries.

                                       53
<PAGE>

                    DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                            Condensed Consolidating Statement of Cash Flows
                                                                  For the Year Ended December 31, 2001
                                             ------------------------------------------------------------------------------
                                               Delco Remy
                                              International                       Non-
                                              Inc. (Parent      Subsidiary      Guarantor
                                              Company Only)     Guarantors    Subsidiaries   Eliminations     Consolidated
                                             ------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>              <C>
Operating Activities:
Net income (loss)                              $   (72,647)   $    (23,119)   $     5,193     $    17,926 (a)  $   (72,647)
Adjustments to reconcile net income (loss)
 to net cash provided by (used in)
 operating activities:
Depreciation                                             5          19,942          8,229            --             28,176
Amortization                                          --             6,248            730            --              6,978
Minority interest in income of subsidiaries           --             4,072          5,182            --              9,254
Loss from unconsolidated joint ventures               --              --            2,925            --              2,925
Equity (loss) in earnings of subsidiaries           17,926            --             --           (17,926)(a)         --
Deferred income taxes                              (24,751)           --             (521)           --            (25,272)
Post-retirement benefits other than pensions          --             3,018           --              --              3,018
Accrued pension benefits                              --             5,284            508            --              5,792
Non-cash interest expense                            1,017             785           --              --              1,802
Changes in operating assets and liabilities,
 net of acquisitions and non-cash special charges:
  Accounts receivable                                 --            (8,804)         5,012            --             (3,792)
  Inventories                                         --            (2,382)        (2,479)           --             (4,861)
  Accounts payable                                     339         (11,036)       (17,297)           --            (27,994)
  Intercompany accounts                           (150,098)        135,247         14,851            --               --
  Other current assets and liabilities               8,745          (1,144)        (3,322)           --              4,279
  Restructuring charges                               --            36,691          2,410            --             39,101
  Cash payments for restructuring charges             --            (8,245)          --              --             (8,245)
  Non-cash special charges                            --            32,292          6,540            --             38,832
  Other non-current assets and liabilities,
    net                                            (16,187)         16,711           (454)           --                 70
                                             ------------------------------------------------------------------------------
Net cash provided by (used in)
 operating activities                             (235,651)        205,560         27,507            --             (2,584)

Investing Activities:
Acquisitions, net of cash acquired                 (17,116)         (8,856)        (2,916)           --            (28,888)
Purchases of property and equipment                    (37)        (10,808)        (9,555)           --            (20,400)
Investments in joint ventures                         --              --           (8,662)           --             (8,662)
                                             ------------------------------------------------------------------------------
Net cash used in investing activities              (17,153)        (19,664)       (21,133)           --            (57,950)

Financing Activities:
Proceeds from issuance of long-term debt           157,291            --             --              --            157,291
Retirement of long-term debt                          --           (17,790)          --              --            (17,790)
Net borrowing (repayment) under revolving
 line of credit and other                          106,392        (167,618)        (5,422)           --            (66,648)
Deferred financing costs                            (5,561)           --             --              --             (5,561)
Merger and tender offer costs                       (5,318)           --             --              --             (5,318)
Distributions to minority interests                   --              --             (762)           --               (762)
                                             ------------------------------------------------------------------------------
Net cash provided by (used in) financing
 activities                                        252,804        (185,408)        (6,184)           --             61,212
Effect of exchange rate changes on cash               --              --             (703)           --               (703)
                                             ------------------------------------------------------------------------------
Net increase (decrease) in
 cash and cash equivalents                            --               488           (513)           --                (25)
Cash and cash equivalents
 at beginning of year                                 --              (256)        24,636            --             24,380
                                             ------------------------------------------------------------------------------
Cash and cash equivalents at end of year       $      --      $        232    $    24,123     $      --        $    24,355
                                             ==============================================================================
</TABLE>

_______________
(a) Elimination of equity in earnings of subsidiary.

                                       54
<PAGE>

                     DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                 Condensed Consolidating Balance Sheet
                                                                            December 31, 2000
                                             ------------------------------------------------------------------------------
                                               Delco Remy
                                              International                       Non-
                                              Inc. (Parent     Subsidiary       Guarantor
                                              Company Only)    Guarantors     Subsidiaries   Eliminations     Consolidated
                                             ------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>              <C>
Assets:
Current assets:
   Cash and cash equivalents                   $      --      $       (256)   $    24,636     $      --        $    24,380
   Trade accounts receivable                          --           141,028         32,438            --            173,466
   Other receivables                                  --             9,886          6,319            --             16,205
   Inventories                                        --           243,410         52,465          (2,051)(c)      293,824
   Deferred income taxes                            14,256            --            2,283            --             16,539
   Other current assets                              2,667           2,694          3,548            --              8,909
                                             ------------------------------------------------------------------------------
Total current assets                                16,923         396,762        121,689          (2,051)         533,323

Property and equipment                                  40         217,644         87,899            --            305,583
Less accumulated depreciation                           40          90,536         15,167            --            105,743
                                             ------------------------------------------------------------------------------
Property and equipment, net                           --           127,108         72,732            --            199,840

Deferred financing costs                             6,806           1,888           --              --              8,694
Goodwill, net                                         --           146,163         23,075            --            169,238
Investment in affiliates                           515,616            --             --          (508,600)(a)        7,016
Other assets                                           770           3,087          2,502            --              6,359
                                             ------------------------------------------------------------------------------
Total assets                                   $   540,115    $    675,008    $   219,998     $  (510,651)     $   924,470
                                             ==============================================================================

Liabilities and stockholders' equity:
Current liabilities:
   Accounts payable                            $       965    $    109,727    $    45,383     $      --        $   156,075
   Intercompany accounts                            90,427         (81,466)        (8,360)           (601)(c)         --
   Accrued interest payable                          6,719             919          1,495            --              9,133
   Accrued non-recurring charges                      --             6,798            894            --              7,692
   Other liabilities and accrued expenses            5,256          20,623          7,911            --             33,790
   Current debt                                       --             1,526          6,581            --              8,107
                                             ------------------------------------------------------------------------------
Total current liabilities                          103,367          58,127         53,904            (601)         214,797

Deferred income taxes                               12,209            --           (2,054)           --             10,155
Long-term debt, less current portion               285,000         219,266         15,018            --            519,284
Post-retirement benefits other than pensions          --            22,794           --              --             22,794
Accrued pension benefits                              --             3,751            673            --              4,424
Other non-current liabilities                        2,208             971            705            --              3,884
Minority interest in subsidiaries                     --            11,351         16,663            --             28,014

Stockholders' equity:
   Common stock:
      Class A Shares                                   182            --             --              --                182
      Class B Shares                                    63            --             --              --                 63
   Paid-in capital                                 104,176            --             --              --            104,176
   Subsidiary investment                              --           266,087         94,172        (360,259)(a)         --
   Retained earnings                                34,269          92,661         57,130        (149,791)(b)       34,269
   Accumulated other comprehensive loss             (1,023)           --          (16,213)           --            (17,236)
   Stock purchase plan                                (336)           --             --              --               (336)
                                             ------------------------------------------------------------------------------
Total stockholders' equity                         137,331         358,748        135,089        (510,050)         121,118
                                             ------------------------------------------------------------------------------
Total liabilities and stockholders' equity     $   540,115    $    675,008    $   219,998     $  (510,651)     $   924,470
                                             ==============================================================================
</TABLE>

_______________
(a) Elimination of investments in subsidiaries.
(b) Elimination of investments in subsidiaries' earnings.
(c) Elimination of intercompany profit in inventory.

                                       55
<PAGE>

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                              Condensed Consolidating Statement of Operations
                                                                For the Five Months Ended December 31, 2000
                                              -------------------------------------------------------------------------------
                                               Delco Remy
                                              International                       Non-
                                               Inc.(Parent     Subsidiary       Guarantor
                                              Company Only)    Guarantors      Subsidiaries    Eliminations      Consolidated
                                              -------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>                <C>
Net sales                                      $      --      $    456,628    $   170,952     $  (184,843)(a)    $   442,737
Cost of goods sold                                    --           392,758        147,600        (184,843)(a)        355,515
                                              -------------------------------------------------------------------------------
Gross profit                                          --            63,870         23,352            --               87,222
Selling, general and administrative expenses         5,275          23,472         15,399            --               44,146
Amortization of goodwill and intangibles                26           2,228            371            --                2,625
                                              -------------------------------------------------------------------------------
Operating (loss) income                             (5,301)         38,170          7,582            --               40,451
Interest expense                                   (13,753)         (7,661)          (376)           --              (21,790)
Non-recurring merger and tender offer expenses      (1,124)           --              --             --               (1,124)
Non-operating income                                  --               602            899            --                1,501
                                              -------------------------------------------------------------------------------
(Loss) income before income tax (benefit),
 minority interest in income of subsidiaries,
 loss from unconsolidated joint ventures and
 equity in earnings of subsidiaries                (20,178)         31,111          8,105            --               19,038
Income taxes (benefit)                              (7,331)         12,276          1,149            --                6,094
Minority interest in income of subsidiaries           --            (1,589)        (1,189)           --               (2,778)
Loss from unconsolidated joint ventures               --              --             (467)           --                 (467)
Equity in earnings of subsidiaries                  22,546            --              --          (22,546)(b)           --
                                              -------------------------------------------------------------------------------
Net income (loss)                              $     9,699    $     17,246    $     5,300     $   (22,546)       $     9,699
                                              ================================================================================
</TABLE>

_______________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net income from consolidated subsidiaries.

                                       56

<PAGE>

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                             Condensed Consolidating Statement of Cash Flows
                                                               For the Five Months Ended December 31, 2000
                                              -------------------------------------------------------------------------------
                                               Delco Remy
                                              International                       Non-
                                              Inc. (Parent     Subsidiary       Guarantor
                                              Company Only)    Guarantors      Subsidiaries   Eliminations       Consolidated
                                              -------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>                <C>
Operating Activities:
Net income (loss)                              $     9,699    $     17,246    $     5,300     $   (22,546)(a)    $     9,699
Adjustments to reconcile net income (loss)
 to net cash provided by (used in)
 operating activities:
Depreciation                                          --             7,255          3,723            --               10,978
Amortization                                            26           2,228            371            --                2,625
Minority interest in income of subsidiaries           --             1,589          1,189            --                2,778
Loss from unconsolidated joint ventures               --              --              467            --                  467
Equity (loss) in earnings of subsidiaries          (22,546)           --             --             22,546(a)           --
Deferred income taxes                                1,188           --              492            --                1,680
Post-retirement benefits other than pensions          --             1,155           --              --                1,155
Accrued pension benefits                              --             3,089             49            --                3,138
Non-cash interest expense                              455             285           --              --                  740
Changes in operating assets and liabilities,
 net of acquisitions:
  Accounts receivable                                 --              (758)        (3,145)           --               (3,903)
  Inventories                                         --           (22,513)        (3,158)           --              (25,671)
  Accounts payable                                    (291)          4,032         10,390            --               14,131
  Intercompany accounts                             16,998         (25,808)         8,810            --                --
  Other current assets and liabilities              (3,508)         (2,467)        (3,325)           --               (9,300)
  Cash payments for restructuring charges             --           (14,103)        (2,736)           --              (16,839)
  Other non-current assets and liabilities, net     (2,021)            362         (3,523)           --               (5,182)
                                              -------------------------------------------------------------------------------
Net cash provided by (used in)
 operating activities                                 --           (28,408)        14,904            --              (13,504)

Investing Activities:
Purchases of property and equipment                   --            (4,752)        (7,072)           --              (11,824)
Investments in joint ventures                         --            (1,892)          --              --               (1,892)
                                              -------------------------------------------------------------------------------
Net cash used in investing activities                 --            (6,644)        (7,072)           --              (13,716)

Financing Activities:
Net borrowing under revolving line
 of credit and other                                  --            34,130          1,175            --               35,305
Distributions to minority interests                   --             --              (322)           --                 (322)
                                              -------------------------------------------------------------------------------
Net cash provided by financing activities             --            34,130            853            --               34,983
Effect of exchange rate changes on cash               --             --            (1,205)           --               (1,205)
                                              -------------------------------------------------------------------------------
Net increase (decrease) in
 cash and cash equivalents                            --              (922)         7,480            --                6,558
Cash and cash equivalents
 at beginning of year                                 --               666         17,156            --               17,822
                                              -------------------------------------------------------------------------------
Cash and cash equivalents at end of year       $      --      $       (256)   $    24,636     $      --          $    24,380
                                              ===============================================================================
</TABLE>

_______________
(a) Elimination of equity in earnings of subsidiary.

                                       57
<PAGE>

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                    Condensed Consolidating Balance Sheet
                                                                              July 31, 2000
                                              -------------------------------------------------------------------------------
                                               Delco Remy
                                              International                         Non-
                                               Inc. Parent     Subsidiary        Guarantor
                                              Company Only)    Guarantors       Subsidiaries   Eliminations      Consolidated
                                              -------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>                <C>
Assets:
Current assets:
   Cash and cash equivalents                   $     --       $        666    $    17,156     $     --           $    17,822
   Trade accounts receivable                         --            140,270         29,293           --               169,563
   Other receivables                                 --              7,982          7,251           --                15,233
   Inventories                                       --            220,944         49,258          (2,049)(c)        268,153
   Deferred income taxes                            15,370           --             2,775           --                18,145
   Other current assets                              1,613           2,643          4,608           --                 8,864
                                              -------------------------------------------------------------------------------
Total current assets                                16,983         372,505        110,341          (2,049)           497,780

Property and equipment                                  40         212,528         85,006           --               297,574
Less accumulated depreciation                           40          81,865         13,758           --                95,663
                                              -------------------------------------------------------------------------------

Property and equipment, net                          --            130,663         71,248           --               201,911

Deferred financing costs                             7,261           2,171          --              --                 9,432
Goodwill, net                                         (185)        148,045         23,172           --               171,032
Investment in affiliates                           488,843           --             --           (483,510)(a)          5,333
Other assets                                           671             612          2,469           --                 3,752
                                              -------------------------------------------------------------------------------
Total assets                                   $   513,573    $    653,996    $   207,230     $  (485,559)       $   889,240
                                              ===============================================================================

Liabilities and stockholders' equity:
Current liabilities:
   Accounts payable                            $     1,256    $    105,695    $    34,993     $       --         $   141,944
   Intercompany accounts                            73,912         (56,141)       (17,170)           (601)(c)          --
   Accrued interest payable                          9,001             132          1,725             --              10,858
   Accrued non-recurring charges                     --             21,148          3,630             --              24,778
   Other liabilities and accrued expenses            3,924          23,163         12,998             --              40,085
   Current debt                                      --              1,868          5,586             --               7,454
                                              -------------------------------------------------------------------------------
Total current liabilities                           88,093          95,865         41,762            (601)           225,119

Deferred income taxes                                9,574           --               453             --              10,027
Long-term debt, less current portion               285,000         184,283         14,987             --             484,270
Post-retirement benefits other than pensions         --             21,639          --                --              21,639
Accrued pension benefits                             --                662            624             --               1,286
Other non-current liabilities                        2,243             985            660              (2)             3,886
Minority interest in subsidiaries                    --              9,060         16,127             --              25,187

Stockholders' equity:
   Common stock:
      Class A Shares                                   182           --             --                --                 182
      Class B Shares                                    63           --             --                --                  63
   Paid-in capital                                 104,176           --             --                --             104,176
   Subsidiary investment                             --            266,087         91,624        (357,711)(a)          --
   Retained earnings                                24,570          75,415         51,830        (127,245)(b)         24,570
   Accumulated other comprehensive loss              --              --           (10,837)            --             (10,837)
   Stock purchase plan                                (328)          --             --                --                (328)
                                              -------------------------------------------------------------------------------
Total stockholders' equity                         128,663         341,502        132,617        (484,956)           117,826
                                              -------------------------------------------------------------------------------
Total liabilities and stockholders' equity     $   513,573    $    653,996    $   207,230     $  (485,559)       $   889,240
                                              ===============================================================================
</TABLE>

_______________
(a) Elimination of investments in subsidiaries.
(b) Elimination of investments in subsidiaries' earnings.
(c) Elimination of intercompany profit in inventory.

                                       58

<PAGE>

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                              Condensed Consolidating Statement of Operations
                                                                    For the Year Ended July 31, 2000
                                              -------------------------------------------------------------------------------
                                               Delco Remy
                                               International                       Non-
                                                Inc.(Parent     Subsidiary       Guarantor
                                               Company Only)    Guarantors      Subsidiaries    Eliminations      Consolidated
                                               ------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>                <C>
Net sales                                      $     --        $ 1,098,395    $   384,044     $  (391,342)(a)    $  1,091,097
Cost of goods sold                                   --            928,770        324,744        (391,342)(a)         862,172
                                               ------------------------------------------------------------------------------
Gross profit                                         --            169,625         59,300           --                228,925
Selling, general and administrative expenses        13,922          67,152         26,977           --                108,051
Amortization of goodwill and intangibles               108           5,064            871           --                  6,043
Non-recurring charge                                 --             30,133          5,089           --                 35,222
                                               ------------------------------------------------------------------------------
Operating (loss) income                            (14,030)         67,276         26,363           --                 79,609
Interest expense                                   (30,259)        (16,646)        (1,861)          --                (48,766)
Non-operating income                                 --              --               129           --                    129
                                               ------------------------------------------------------------------------------
(Loss) income before income tax (benefit),
 minority interest in income of subsidiaries,
 loss from unconsolidated joint ventures and
 equity in earnings of subsidiaries                (44,289)         50,630         24,631           --                 30,972
Income taxes (benefit)                             (13,966)         20,553          4,873           --                 11,460
Minority interest in income of subsidiaries          --             (3,244)        (3,498)          --                 (6,742)
Loss from unconsolidated joint ventures              --              --              (352)          --                   (352)
Equity in earnings of subsidiaries                  42,741           --             --            (42,741)(b)           --
                                               ------------------------------------------------------------------------------
Net income                                     $    12,418     $    26,833    $    15,908     $   (42,741)       $     12,418
                                               ==============================================================================
</TABLE>

_______________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net income from consolidated subsidiaries.

                                       59
<PAGE>

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                              Condensed Consolidating Statement of Cash Flows
                                                                    For the Year Ended July 31, 2000
                                              -------------------------------------------------------------------------------
                                               Delco Remy
                                              International                        Non-
                                              Inc. (Parent     Subsidiary        Guarantor
                                              Company Only)    Guarantors       Subsidiaries   Eliminations      Consolidated
                                              -------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>                <C>
Operating Activities:
Net income                                     $    12,418    $     26,833    $    15,908     $   (42,741)(a)    $    12,418
Adjustments to reconcile net income
   to net cash provided by (used in)
   operating activities:
Depreciation                                         --             19,044          7,082            --               26,126
Amortization                                           108           5,064            871            --                6,043
Minority interest in income of subsidiaries          --              3,244          3,498            --                6,742
Loss from unconsolidated
   joint ventures                                    --              --               352            --                  352
Equity (loss) in earnings of subsidiaries          (42,741)          --             --              42,741(a)          --
Deferred income taxes                                 (373)          5,458         (2,775)           --                2,310
Post-retirement benefits other than pensions         --                589          --               --                  589
Accrued pension benefits                             --             (2,057)           624            --               (1,433)
Non-cash interest expense                            1,092             671          --               --                1,763
Changes in operating assets and liabilities,
 net of acquisitions:
  Accounts receivable                                --             (2,046)           466            --               (1,580)
  Inventories                                        --            (15,245)        (2,967)           --              (18,212)
  Accounts payable                                     620          11,180          4,035            --               15,835
  Intercompany accounts                             75,521         (76,633)         1,112            --                --
  Other current assets and liabilities               3,904         (14,184)        (5,111)           --              (15,391)
  Restructuring charges                              --             30,133          5,089            --               35,222
  Cash payments for restructuring charges            --             (8,230)          (670)           --               (8,900)
  Other non-current assets and liabilities, net     18,619         (12,429)         2,823            --                9,013
                                                -------------------------------------------------------------------------------
Net cash provided by (used in) operating
 activities                                         69,168         (28,608)        30,337            --               70,897

Investing Activities:
Acquisitions, net of cash acquired                 (69,168)          --             1,163            --              (68,005)
Purchases of property and equipment                  --            (17,365)       (21,006)           --              (38,371)
Investments in joint ventures                        --             (1,179)         --               --               (1,179)
                                              -------------------------------------------------------------------------------
Net cash used in investing activities              (69,168)        (18,544)       (19,843)           --             (107,555)

Financing Activities:
Net borrowing (repayments) under revolving line of credit
 and other                                           --             48,060         (7,054)           --               41,006
Distributions to minority interests                  --              --            (1,200)           --               (1,200)
                                              -------------------------------------------------------------------------------
Net cash provided by (used in) financing
 activities                                          --             48,060         (8,254)           --               39,806
Effect of exchange rate changes on cash              --              --              (635)           --                 (635)
                                              -------------------------------------------------------------------------------
Net increase in cash and cash equivalents            --                908          1,605            --                2,513
Cash and cash equivalents
 at beginning of year                                --               (242)        15,551            --               15,309
                                              -------------------------------------------------------------------------------
Cash and cash equivalents at end of year       $     --       $        666    $    17,156     $      --          $    17,822
                                              ===============================================================================
</TABLE>

_______________
(a) Elimination of equity in earnings of subsidiary.

                                       60
<PAGE>

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                             Condensed Consolidating Statement of Operations
                                                                    For the Year Ended July 31, 1999
                                               ------------------------------------------------------------------------------
                                                Delco Remy
                                               International                       Non-
                                               Inc. (Parent     Subsidiary       Guarantor
                                               Company Only)    Guarantors     Subsidiaries     Eliminations     Consolidated
                                               ------------------------------------------------------------------------------

<S>                                            <C>             <C>             <C>             <C>               <C>
Net sales                                      $       --      $    953,652    $   266,447     $  (266,393)(a)   $    953,706
Cost of goods sold                                     --           811,669        223,982        (264,749)(a)        770,902
                                               ------------------------------------------------------------------------------
Gross profit                                           --           141,983         42,465          (1,644)(c)        182,804
Selling, general and administrative expenses         11,241          58,242         19,312            --               88,795
Amortization of goodwill and intangibles                  5           4,680            518            --                5,203
                                               ------------------------------------------------------------------------------
Operating (loss) income                             (11,246)         79,061         22,635          (1,644)            88,806
Interest expense                                    (27,693)        (16,390)        (1,422)           --              (45,505)
                                               ------------------------------------------------------------------------------
(Loss) income before income tax (benefit),
   minority interest in income of
   subsidiaries, income from
   unconsolidated joint ventures
   and equity in earnings of subsidiaries           (38,939)         62,671         21,213          (1,644)            43,301
Income taxes (benefit)                               (4,528)         15,584          5,997            (599)(c)         16,454
Minority interest in income of subsidiaries            --            (2,898)        (1,023)           --               (3,921)
Income from unconsolidated joint ventures              --              --            5,420            --                5,420
Equity in earnings of subsidiaries                   62,757            --             --           (62,757)(b)           --
                                               ------------------------------------------------------------------------------
Net income (loss)                              $     28,346    $     44,189    $    19,613     $   (63,802)      $     28,346
                                               ==============================================================================
</TABLE>

__________________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net income from consolidated subsidiaries.
(c) Elimination of intercompany profit in inventory.

                                       61
<PAGE>

                DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                              Condensed Consolidating Statement of Cash Flows
                                                                    For the Year Ended July 31, 1999
                                               ------------------------------------------------------------------------------
                                                Delco Remy
                                               International                       Non-
                                               Inc. (Parent     Subsidiary       Guarantor
                                               Company Only)    Guarantors     Subsidiaries     Eliminations     Consolidated
                                               ------------------------------------------------------------------------------

<S>                                            <C>             <C>             <C>             <C>               <C>
Operating Activities:
Net income                                     $     28,346    $     44,189    $    19,613     $   (63,802)(a)   $     28,346
Adjustments to reconcile net income
   to net cash provided by (used in)
   operating activities:
Depreciation                                             20          15,010          3,328             --              18,358
Amortization                                              5           4,680            518             --               5,203
Minority interest in income of subsidiaries             --            2,898          1,023             --               3,921
Income from unconsolidated joint ventures               --              --          (5,420)            --              (5,420)
Equity (loss) in earnings of subsidiaries           (62,757)            --             --           62,757(a)            --
Deferred income taxes                                 6,428           3,555            --              --               9,983
Post-retirement benefits other than pensions            --            4,555            --              --               4,555
Accrued pension benefits                                --           (1,909)           --              --              (1,909)
Non-cash interest expense                               --            1,648            --              --               1,648
Changes in operating assets and liabilities,
   net of acquisitions:
  Accounts receivable                                   --           (2,634)         7,255             --               4,621
  Inventories                                           --          (13,500)        (5,849)          1,644(b)         (17,705)
  Accounts payable                                      506           6,479          6,649             --              13,634
  Intercompany accounts                              48,638         (38,324)        (9,715)           (599)(b)           --
  Other current assets and liabilities               (4,001)         (1,662)          (982)            --              (6,645)
  Cash payments for restructuring charges               --          (14,941)           --              --             (14,941)
  Other non-current assets and liabilities, net      27,877         (23,302)        (5,138)            --                (563)
                                                 ------------------------------------------------------------------------------
Net cash provided by (used in)
   operating activities                              45,062         (13,258)        11,282             --              43,086

Investing Activities:
Acquisitions, net of cash acquired                  (45,042)            --          (3,279)            --             (48,321)
Purchase of property and equipment                      (20)        (19,267)        (5,779)            --             (25,066)
                                               ------------------------------------------------------------------------------
Net cash used in investing activities               (45,062)        (19,267)        (9,058)            --             (73,387)

Financing Activities:
Net borrowing under revolving line of
   credit and other                                     --           32,158          5,890             --              38,048
                                               ------------------------------------------------------------------------------
Net cash provided by financing activities               --           32,158          5,890             --              38,048
Effect of exchange rate changes on cash                 --              --            (551)            --                (551)
                                               ------------------------------------------------------------------------------
Net increase (decrease) in cash and
   cash equivalents                                     --             (367)         7,563             --               7,196
Cash and cash equivalents at
   beginning of year                                    --              125          7,988             --               8,113
                                               ------------------------------------------------------------------------------
Cash and cash equivalents at end of year       $        --     $       (242)   $    15,551     $       --        $     15,309
                                               ==============================================================================
</TABLE>

___________________
(a) Elimination of equity in earnings of subsidiary.
(b) Elimination of intercompany profit in inventory.

                                       62
<PAGE>

17.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
Quarter Ended:                                       3/31/01      6/30/01       9/30/01       12/31/01      Total Year
                                                   --------------------------------------------------------------------
As Restated:
<S>                                                 <C>           <C>           <C>            <C>           <C>
Net sales                                           $259,900       268,918       270,304        254,330       1,053,452
Gross profit                                          41,000        49,805        44,995         18,440         154,240
Net income (loss)                                     (5,830)        3,942        (3,014)       (67,745)        (72,647)

As Initially Reported:

Net sales                                           $261,663      $271,316      $271,090
Gross profit                                          48,287        54,961        47,694
Net income (loss)                                     (1,888)        5,818        (1,713)
</TABLE>

The Company restated net sales and earnings in the first three quarter of 2001
for the reclassification of certain currency hedging activities to net sales
from non-operating expense, retiming of special charges-cost of goods sold
relative to the unusual warranty claims and to correct the recording of certain
intercompany transactions.

<TABLE>
<CAPTION>
                                                   Two Months   Three Months   Five Months
                                                      Ended         Ended         Ended
Transition Period Ended:                             9/30/00      12/31/00      12/31/00
                                                   ---------------------------------------

<S>                                                 <C>           <C>           <C>
Net sales                                           $183,333      $259,404      $442,737
Gross profit                                          32,872        54,350        87,222
Net income                                             1,325         8,374         9,699
</TABLE>

<TABLE>
<CAPTION>
Quarter Ended:                                      10/31/99       1/31/00       4/30/00        7/31/00      Total Year
                                                   --------------------------------------------------------------------

<S>                                                 <C>           <C>           <C>            <C>           <C>
Net sales                                           $277,189      $260,012      $274,928       $278,968      $1,091,097
Gross profit                                          56,471        52,801        60,669         58,984         228,925
Net income (loss)                                      7,974         6,907        10,199        (12,662)         12,418
</TABLE>

ITEM 9     DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
           DISCLOSURE

There were no disagreements with the independent accountants.

                                       63
<PAGE>

                                    PART III

ITEM 10    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Harold K. Sperlich, Chairman of the Board of Directors. Mr. Sperlich has
been Chairman of the Board of Directors since the Company's inception in 1994.
Since retiring from Chrysler Corporation in 1988, having served as its
President, Mr. Sperlich has served as a consultant to the automotive industry.
Before joining Chrysler in 1977, Mr. Sperlich held several senior administrative
and operating posts with Ford Motor Company. Age: 72

     Thomas J. Snyder, President, Chief Executive Officer and Director.
Mr. Snyder was elected Chief Executive Officer effective January 1, 2000. He was
elected President, Chief Operating Officer and Director when the Company was
founded in 1994. From 1973 to 1994, he held a variety of managerial and
executive positions with the Delco Remy Division of GM. He is a member of the
Board of the Indiana Chamber of Commerce and of Saint John's Health Systems. He
is a member of the Board of Visitors of Hudson Institute and of Indiana
University's Kelley School of Business in Indianapolis. Age: 57

     E.H. Billig, Vice Chairman of the Board of Directors. Mr. Billig has been
Vice Chairman of the Board of Directors since the Company's inception in 1994.
Mr. Billig has been Chairman of the Board of MSX International, Inc. since 1997,
where he was also Chief Executive Officer until January 2000. He was formerly
President and Chief Operating Officer of MascoTech, Inc. He is also a director
of Titan Wheel International, Inc. Age: 74

     Richard M. Cashin, Jr., Director. Mr. Cashin has been a director since the
Company's inception in 1994. Mr. Cashin was President from 1994 to April 2000
and a Managing Director for more than five years of Citicorp Venture Capital
Ltd, ("CVC"). From April 2000 to April 2001, he was a partner of Cashin Capital
Partners, a private equity investment firm. Since April 2001, he has been the
Chairman of One Equity Partners, the private equity arm of Bank One. In
addition, Mr. Cashin serves as a director of Lifestyle Furnishings International
Ltd., Fairchild Semiconductor Corporation, Freedom Forge, Hoover Group, Inc.,
Gerber Childrenswear Inc., JAC Holdings, GVC Holdings, Titan Wheel
International, Inc., and Flender AG. Age: 48

     Alexander P. Coleman, Director. Mr. Coleman has been a director since 2001.
Mr. Coleman is a Managing Investment Partner of Dresdner Kleinwort Benson
Private Equity LLC, Dresdner Bank A.G.'s U.S. private equity arm, and a Managing
Director of Dresdner Kleinwort Wasserstein. Mr. Coleman joined Dresdner
Kleinwort Benson in January 1996. Mr. Coleman is a director of KMC Telecom,
Gardenburger, Gateway HomeCare and Sharkrack. Age: 35

     Michael A. Delaney, Director. Mr. Delaney has been a director since the
Company's inception in 1994. Mr. Delaney has been a Managing Director of CVC
since 1995 and a Vice President for the past six years. Mr. Delaney is Vice
President and Managing Director of Court Square. He is also director of GVC
Holdings, JAC Holdings, SC Processing, Inc., MSX Internatinal, Inc.,
International Knife and Saw Inc., Great Lakes Dredge and Dock Corporation,
Trianon Industries Inc., ChipPac Inc. and Strategic Industries Inc. Age: 47

     James R. Gerrity, Director. Mr. Gerrity has been a director since the
Company's inception in 1994. From 1986 to 1993, Mr. Gerrity was President and a
director of Dyneer Corporation. Mr. Gerrity currently is a director of Wescor
Graphics, Inc., Ballantrae Corporation, Inc. and Flender AG. Age: 60

     Robert J. Schultz, Director. Mr. Schultz became a director in 1997. Mr.
Schultz retired as Vice Chairman and a member of the Board of Directors of GM in
1993. Mr. Schultz joined GM in 1955 and served as General Manger of GM's Delco
Electronics Division and Group Executive of Chevrolet-Pontiac-GM of Canada. Mr.
Schultz is also a director of MCT Corporation and was Chairman of the Board of
OEA, Inc. until its sale earlier last year. He is also a member of the Board of
Trustees of California Institute of Technology. Age: 71

     Joseph M. Silvestri, Director. Mr. Silvestri has been a director since
2001. Mr. Silvestri has been a Vice President of CVC since 1990. Mr. Silvestri
is also Vice President of Court Square. Moreover, Mr. Silvestri is also a
director of Triumph Group, Euramax International, MacDermid, and ISG Resources.
Age: 40

    Susan E. Goldy, Esquire, Senior Vice President and General Counsel. Ms.
Goldy has been Senior Vice President and General Counsel since February 2000.
Prior to that, she had been Vice President and General Counsel since 1997.
Before joining the Company, she was a partner in the law firm of Dechert.
Age: 48

                                       64
<PAGE>

     Roderick English, Senior Vice President, Human Resources and
Communications. Mr. English has been Senior Vice President of Human Resources
and Communications since November 1997. Prior to that Mr. English had been
Senior Vice President of Human Resources and Communications at Delco Remy
America since the Company's inception in 1994. Mr. English joined the Delco Remy
Division of GM in 1976 and became Plant Manager of plant 17 in 1992. Prior to
that, Mr. English served as Divisional Manager of Labor Relations since 1989.
Age: 50

     Richard L. Keister, President, Aftermarket. Mr. Keister has been President
of Aftermarket since October 2001. Prior to that, Mr. Keister was President of
the Electrical Aftermarket Division since 1997. Prior to 1997, he was President
of World Wide Automotive, which was founded by Mr. Keister in 1976 and acquired
by the Company in 1997. Age: 56

     David E. Stoll, Vice President, Treasurer and Secretary, and, since
November 9, 2001, Acting Chief Financial Officer. Mr. Stoll was Vice President,
Controller and Secretary since the Company's inception in 1994. During fiscal
year 2000, he was elected to the position of Treasurer. Prior to joining the
Company, he was Vice President of Finance of Dyneer Corporation since 1987 and,
prior to that, served as corporate controller since 1973. Age: 59

     Allen R. Wilkie, Vice President and Operations Controller. Mr. Wilkie has
been Vice President and Operations Controller since June 2000 and Operations
Controller since March 1996. Prior to that, Mr. Wilkie served as Vice President,
Controller of Ameron International, Inc. from March 1994 through March 1996.
Age: 51

     Richard L. Reinhart, Vice President and Controller. Mr. Reinhart joined
Delco Remy in January 2001. Prior to that, Mr. Reinhart had been with Lear
Corporation since November 1996, most recently as Financial Director of Lear's
Ford European Group in Coventry, England. Prior to Lear, Mr. Reinhart had been
with Allied Signal since 1978 in various management positions, most recently as
Group Controller of the Filter and Spark Plug Group in Allied Signal's
Automotive Sector. Age: 46

     Patrick C. Mobouck, Vice President-Managing Director, Europe. Mr. Mobouck
has been Vice President-Managing Director, Europe since July 1997. He has also
been Chairman of Autovill since August 1997. Before joining the Company, Mr.
Mobouck was with Monroe Auto Equipment since 1987, most recently as Managing
Director-Europe, Middle East and Africa. Age: 47

     Richard L. Stanley, President, Delco Remy America. Mr. Stanley has been
President of Delco Remy America since November 1998. Prior to that, Mr. Stanley
had been Senior Vice President, Automotive Systems since the Company's inception
in 1994. Mr. Stanley joined the Delco Remy Division of GM in 1978, serving most
recently as Director of Customer Programs since 1992 and as European Chief
Engineer since 1988. Age 45

                                       65
<PAGE>

ITEM 11    EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

     The following table sets forth, for the year ending December 31, 2001, the
five-month transition period ending December 31, 2000 and the two years ending
July 31, 2000 and 1999, the information regarding the cash compensation paid by
the Company, as well as other compensation paid or accrued for that period, to
each of the executive officers of the Company named below, in all capacities in
which they served.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                           Long Term
                                                                                          Compensation /(1)/
                                                                                          ------------------
                                                                 Compensation               Securities
                                                          --------------------------        Underlying        All Other
Name and Principal Position                Year           Salary($)         Bonus($)        Options(#)     Compensation($)
--------------------------------------------------------------------------------------------------------------------------
                                                            (dollars in thousands)
<S>                                        <C>            <C>               <C>             <C>            <C>
Thomas J. Snyder                           2001             425.0            268.3               --             21.2/(3)/
 President and Chief                       2000/(2)/        158.3            244.7            52,100             5.5/(3)/
 Executive Officer                         2000             350.0            387.3             7,000            17.3/(3)/
                                           1999             295.0            292.4             7,000            13.8/(3)/

Richard L. Keister,                        2001             260.0            182.0               --             10.0/(4)/
 President, Aftermarket                    2000/(2)/        101.6             97.3               --              2.1/(4)/
                                           2000             230.3             99.5             3,500             8.6/(4)/
                                           1999             218.1            154.2             3,500             7.5/(4)/

Richard L. Stanley                         2001             291.5            110.5               --             10.2/(5)/
 President, Delco Remy                     2000/(2)/        117.3            143.4            17,550             1.2/(5)/
 America                                   2000             275.0            218.6             5,000            11.2/(5)/
                                           1999             220.0            135.6             5,000             7.0/(5)/

Roderick English,                          2001             262.5             99.6               --             10.4/(6)/
 Senior Vice President,                    2000/(2)/        105.0            106.6            12,500             1.7/(6)/
 Human Resources and                       2000             237.7            161.8             5,000             9.9/(6)/
 Communications                            1999             214.2            156.6             5,000             4.5/(6)/

Susan E. Goldy                             2001             257.5             97.6               --             21.7/(7)/
 Senior Vice President                     2000/(2)/        104.2            102.9            12,150             9.2/(7)/
 and General Counsel                       2000             245.0            162.8             3,500            22.5/(7)/
                                           1999             230.0            136.7             3,500            23.1/(7)/
</TABLE>

    /(1)/  All options held by the executive officers and directors listed in
           this table were subsequently cancelled on March 14, 2001. See the
           Section below entitled "Stock Options" for more information.

    /(2)/  For the five-month transition period ending December 31, 2000.

    /(3)/  Includes the following: (i) $9,437, $7,778 and $5,875 in matching
           contributions under the Company's 401(k) Plan in fiscal years 2001,
           2000 and 1999, respectively; and (ii) $11,785, $5,512, $9,542
           and $7,947 in premiums paid under a life insurance policy in fiscal
           year 2001, the five-month transition period ending December 31, 2000
           and fiscal years 2000 and 1999, respectively.

    /(4)/  Includes the following: (i) $4,658, $3,615 and $2,285 in matching
           contributions under the Company's 401(k) Plan in fiscal years 2001,
           2000 and 1999, respectively; (ii) $1,995, $523, $1,203 and $1,019 in
           premiums paid under a life insurance policy in fiscal year 2001, the
           five-month period ending December 31, 2000 and fiscal years 2000 and
           1999, respectively; and (iii) $3,517, $1,315, $3,157 and $3,517 in
           premiums paid under a disability insurance policy in fiscal year
           2001, the five-month period ending December 31, 2000 and fiscal years
           2000 and 1999, respectively.

                                       66
<PAGE>

    /(5)/  Includes the following: (i) $8,429 $9,216 and $5,826 in matching
           contributions under the Company's 401(k) Plan in fiscal years 2001,
           2000 and 1999, respectively; and (ii) $1,777, $1,178, $1,958 and
           $1,138 in premiums paid under a life insurance policy in fiscal year
           2001, the five-month transition period ending December 31, 2000 and
           fiscal years 2000 and 1999 respectively.

    /(6)/  Includes the following: (i) $7,027, $7,007 and $2,575 in matching
           contributions under the Company's 401(k) Plan in fiscal years 2001,
           2000 and 1999, respectively; and (ii) $3,371, $1,654, $2,925 and
           $1,907 in premiums paid under a life insurance policy in fiscal year
           2001, the five-month period ending December 31, 2000 and the fiscal
           years 2000 and 1999, respectively.

    /(7)/  Includes the following: (i) $3,419, $3,683 and $4,211 in matching
           contributions under the Company's 401(k) Plan in fiscal years 2001,
           2000 and 1999, respectively; (ii) $2,000, $2,000, $2,000 and $2,000
           in salaried medical retiree benefits in fiscal year 2001, the
           five-month transition period ending December 31, 2000 and fiscal
           years 2000 and 1999, respectively; (iii) $1,508, $1,294, $2,310 and
           $2,240 in premiums paid under a life insurance policy in fiscal year
           2001, the five-month transition period ending December 31, 2000 and
           fiscal years 2000 and 1999 respectively; and (iv) $14,808, $5,939,
           $14,525 and $14,622 in living allowances in fiscal year 2001, the
           five-month transition period ending December 31, 2000 and fiscal
           years 2000 and 1999, respectively.

STOCK OPTIONS

     In conjunction with the going private transaction and the merger that
followed, all previously existing stock options held by executive officers and
directors of the Company were cancelled and both the Company's 1997 Stock-Based
Incentive Compensation Plan and the Company's 1997 Non-Qualified Stock Option
Plan for Non-Employee Directors were terminated. Furthermore, no options were
exercised during the period from August 1, 2000 to the date of the merger. There
are currently no options outstanding to purchase securities of the Company. See
Item 13, "Certain Relationships and Related Transactions", for a description of
other agreements entered into between the Company and its executive officers and
directors as a result of the going private transaction and the merger.

RETIREMENT PLANS

     Delco Remy America, Inc., a wholly owned subsidiary of the Company,
established the Delco Remy America Salaried Retirement Plan (the "Retirement
Plan") primarily to provide eligible salaried employees with a monthly pension
benefit after retirement for life. As of December 31, 2001, the named executive
officers of the Company have been credited with the following amounts of service
under the Retirement Plan: Harold K. Sperlich - 7.4 years; Thomas J. Snyder -
39.4 years; Richard L. Stanley - 23.8 years, and Susan E. Goldy - 5 years.

CHANGE OF CONTROL AGREEMENTS

     The Company executed change of control agreements with the following
executive officers: Mr. Snyder, Mr. Stanley, Ms. Goldy, Mr. English and Mr.
Mobouck. These agreements entitle each of the eligible executive officers to
receive payments and benefits upon the occurrence of a change of control of the
Company followed by termination of the executive's employment within the two
years immediately following the change of control under specified circumstances.
In case of Mr. Snyder, the total payment will be equal to $2.7 million, and he
will be entitled to receive continuation of medical, dental and life insurance
benefits until his sixty-fifth birthday. Each eligible executive officer other
than Mr. Snyder will receive a payment of $1.0 million (or if the termination
occurs after the first two years following execution of the change of control
agreements, his or her average compensation in the three full calendar years
immediately preceding the termination of employment) and continuation of
medical, dental and life insurance benefits for a period of one year after the
termination of employment with the Company.

     Payments and other benefits received by Mr. Snyder will be subject to
gross-up tax treatment so that the Company will compensate Mr. Snyder for any
excise taxes applicable to payments and other benefits, including the gross-up
payment, received by him upon a change of control. Payments and other benefits
received by the other eligible executives will be subject to cut-back treatment
so that any payments or other benefits to be received by any of them will be
reduced to a level which eliminates any excise taxes. Under some circumstances,
the present value of the payments and other benefits to be provided to the
executives in connection with a change of control will not be deductible by the
Company.

                                       67
<PAGE>

AMENDMENTS TO BENEFIT PLANS

     As a condition to the execution of the change of control agreements, the
Company required the applicable executive officers to agree to amendments to the
Company's benefit plans. The Company amended the definition of "Change in
Control" in the Delco Remy International, Inc. Supplemental Executive Retirement
Plan (the "Executive Retirement Plan") to conform to the definition contained in
the change of control agreements. In addition, the Company amended the Executive
Retirement Plan to provide that, upon a change in control, the Company will not
be required to place any funds in trust unless the Board of Directors determines
in good faith that the change in control or any related or contemplated
financing transaction will impair in any material respect the financial
condition or creditworthiness of the Company or any other surviving successor or
entity. The Company further amended the Executive Retirement Plan to remove the
provision providing for accelerated vesting of benefits upon a change in
control. All affected persons consented to the amendments.

SPLIT-DOLLAR INSURANCE AGREEMENTS

     The Company entered into Collateral Assignment Split-Dollar Insurance
Agreements, effective as of August 1, 2000, with certain key
management employees. The employees own the life insurance policies. However,
they have assigned the policies to the Company as security for the repayment of
premiums paid by the Company. The Company's interest in the cash value of the
policy is equal to the premium paid by the Company, and the employees have a
remaining interest in the cash value. If an employee dies while the collateral
assignment is in place, the Company has a right to receive a portion of the
death benefit equal to the amount of the premiums previously paid by the
Company, with any excess payable to designated beneficiaries of the employee.
Under the agreements, the employee is provided with life insurance protection
under a universal life insurance product (the "Policy"). The collateral
assignment will terminate on the first to occur of the following events:

     . total cessation of the business of the Company;
     . bankruptcy, receivership or dissolution of the Company;
     . surrender or cancellation of the Policy by the employee;
     . employee entering into Competition (as defined by the agreements) with
       the Company or an affiliated Employer;
     . the delivery by the employee of a written notice terminating the
       agreement;
     . death of the employee;
     . termination of the employee's employment with the Company for Cause (as
       defined by the agreements); or
     . as of the date the employee turns 65 (a "Termination Event").

     Upon the occurrence of any of these events other than death of an employee,
the employee has an option to tender an amount equal to the amount of the
premiums paid by the Company under the agreements, and upon receipt of the
repayment the Company will release the assignment of the Policy by the employee.
Messrs. Snyder, English and Stanley and Ms. Goldy are parties to the agreements.

     As a condition to execution of the change of control agreements, the
Company required the applicable executives to agree to amend the agreements to
conform the definition of Change in Control to the definition included in the
Change of Control Agreements. The Company also amended the agreements to provide
that the Company's obligations to place substantial sums in trust for the
benefit of the beneficiaries in connection with a Change in Control will be
triggered only if the Board of Directors of the Company determines in good faith
that the Change in Control or any related or contemplated financing transaction
will impair in any material respect the financial condition or creditworthiness
of the Company or any other surviving or successor entity.

                                       68
<PAGE>

EMPLOYMENT AGREEMENT

     The Company entered into an employment agreement with Mr. Snyder which
provides for his employment until July 2002. Mr. Snyder's agreement will
automatically extend for successive additional 12-month periods after July 2002
until notice by either the Company or Mr. Snyder. Mr. Snyder receives an annual
base salary of $425,000, subject to merit increases as determined by the Board
of Directors, plus annual performance bonuses as determined by the Board of
Directors. The agreement provides that Mr. Snyder may not engage in any business
competitive with the Company while employed by the Company and for a period of
one year thereafter.

DIRECTOR COMPENSATION

     Mr. Sperlich received $337,650 in directors fees during 2001 for services
related to special projects (in connection with acquisitions and strategic
alliances) undertaken by him at the direction of the Board of Directors in their
capacity as Directors.

     During 2001, Mr. Billig, Mr. Cashin, Mr. Gerrity and Mr. Schultz each
received an annual fee of $40,000, and Mr. Billig, Mr. Cashin and Mr. Schultz
each received a fee of $1,200 for each Board of Directors meeting attended and
$1,000 for each meeting of a committee of the Board of Directors attended.

     In addition to the fees discussed above, Mr. Gerrity received $163,334
during 2001 for services related to special projects (in connection with
acquisitions and strategic alliances) undertaken by him at the direction of the
Board of Directors in their capacity as Directors.

     In connection with the going private transaction and the merger that
followed, the Company's Board of Directors formed a special committee (the
"Special Committee") to evaluate the terms of the tender offer and merger. The
members of the Special Committee were Mr. Sperlich and Mr. Schultz. In
connection with Mr. Sperlich's and Mr. Schultz's service on the Special
Committee, each of them received $1,000 per meeting of the Special Committee
attended as compensation, such amount being the standard compensation the
Company pays directors for attendance at meetings of the Board, plus
reimbursement for all of their out of pocket expenses incurred in attending
meetings of the Special Committee.

                                       69
<PAGE>

ITEM 12    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     In connection with the going private transaction and the merger that
followed, the Company adopted its Amended and Restated Certificate of
Incorporation, which is attached hereto as Exhibit 3.1 and the terms of which
are incorporated herein by reference. The Company recapitalized its capital
stock into three classes of common stock, Class A, Class B and Class C, and one
class of preferred stock.

     The Amended and Restated Certificate of Incorporation provides that the
Company may issue 3,500,000 shares of preferred stock, all of which has been
designated as 12% Series A Cumulative Compounding Preferred Stock. The
preferred stock will be entitled to semi-annual dividends commencing September
15, 2001, which accrue at a rate of 12%. As of the date hereof, 2,237,257.23
shares of the Company's preferred stock were outstanding. The vote of a
majority of the outstanding shares of the preferred stock is required to
authorize or issue any other class or series of stock entitled to any
preferences prior to the preferred stock or to amend the Amended and Restated
Certificate of Incorporation if the amendment would adversely affect the rights
and preferences of the holders of the preferred stock. Except as described in
the immediately preceding sentence or as otherwise required by law, the
preferred stock is not entitled to vote.

     The Amended and Restated Certificate of Incorporation provides that the
Company may issue 12,001,000 shares of common stock, divided into three classes
consisting of one thousand shares of Class A Common Stock, 6 million shares of
Class B Common Stock, and 6 million shares of Class C Common Stock. As of the
date hereof, 1,000 shares of Class A Common Stock, 2,497,337.49 shares of Class
B common stock and 16,687 shares of Class C Common Stock were issued and
outstanding.

     The following table sets forth as of March 14, 2002 the number and
percentage of shares of each class of common stock and preferred stock
beneficially owned by (i) each person or group that is known to the Company to
be the beneficial owner of more than 5% of each class of common stock, (ii) each
director and named executive officer of the Company and (iii) all directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
                                                               Number and Percent of Shares
                               --------------------------------------------------------------------------------------------
                                    Preferred Stock       Class A Stock /(1)/    Class B Stock /(1)/    Class C Stock /(1)/
Name of Beneficial Owner          Number      Percent     Number   Percent     Number      Percent      Number     Percent
---------------------------------------------------------------------------------------------------------------------------
<S>                           <C>             <C>        <C>        <C>    <C>             <C>             <C>         <C>
Citicorp Venture Capital
 Equity Partners, L.P.        1,650,910.36    73.79%          --     --    1,785,072.63    71.48%          --          --
 399 Park Avenue
 New York, New York
 10043

Berkshire Hathaway Inc.         460,404.96    20.58%          --     --      498,098.94    19.94%          --          --
 1440 Kiewit Plaza
 Omaha, Nebraska 68131

Court Square Capital Limited /(2)/     --        --         1,000   100%            --        --        16,687         100%
 399 Park Avenue
 New York, NY 10043

Harold K. Sperlich                     --        --           --     --             --        --           --          --

Thomas J. Snyder /(3)/            9,174.50      .41%          --     --       51,425.69     2.06%          --          --

Susan E. Goldy                    1,921.06      .09%          --     --       14,078.34      .56%          --          --

Roderick English                  2,618.14      .12%          --     --       14,833.25      .59%          --          --

Patrick C. Mobouck                  327.36      .01%          --     --       13,354.16      .53%          --          --

Richard Stanley                   5,728.72      .26%          --     --       19,697.73      .79%          --          --

E.H. Billig                            --        --           --     --             --        --           --          --

Richard M. Cashin, Jr.            8,614.61      .39%          --     --        9,319.90      .37%          --          --

Michael A. Delaney                     --        --           --     --             --        --           --          --

James R. Gerrity /(4)/            4,307.30      .19%          --     --        4,659.94      .19%          --          --

Robert J. Schultz                      --        --           --     --             --        --           --          --

Joseph M. Silvestri                    --        --           --     --             --        --           --          --

All directors and executive
 officers as a group (12 persons)31,400.26     1.40%          --     --      112,971.03     4.52%          --          --
</TABLE>
___________________________________

    /(1)/ The original holders of the voting Class A Common Stock are entitled
          to a number of votes equal to 51% of the total number of votes
          entitled to be cast by the holders collectively owning all of the
          Class A Common Stock and the Class B Common Stock. The holders of
          Class B Common Stock are entitled to one vote for each share held of
          record on all matters submitted to a vote of the stockholders. Except
          as required by law, the holders of Class C Common Stock have no
          voting rights. The Class A Common is convertible into an equal number
          of shares of Class B Common Stock, the Class B Common Stock is
          convertible into an equal number of shares of Class C Common Stock and
          the Class C Common Stock is convertible into an equal number of shares
          of Class B Common Stock.

    /(2)/ Court Square is a Delaware corporation principally engaged in the
          business of making leveraged acquisitions. Court Square is owned by
          Citicorp Banking Corporation, a Delaware corporation. Citicorp, a
          Delaware corporation, owns all of the outstanding capital stock of
          Citicorp Banking Corporation. Citigroup Holdings Company, a Delaware
          corporation, owns all of the outstanding common stock of Citicorp.
          Citigroup Inc., a Delaware corporation, or Citigroup, owns all the
          outstanding common stock of Citigroup Holdings Company.

    /(3)/ Includes 1,292.19 shares of preferred stock and 14,397.98 shares of
          Class B Common Stock held by Daisy Farm Limited Partnership of which
          Mr. Snyder is the general partner.

    /(4)/ Includes 4,194 shares of Class B Common Stock and 3,876.57 shares of
          preferred stock and 466 shares of Class B Common Stock and 430.73
          shares of preferred stock held by The James R. Gerrity Living Trust
          and The Susan Gerrity Living Trust, respectively.

                                       70

<PAGE>

ITEM 13    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On February 7, 2001, the Company agreed to a going private transaction with
Court Square, pursuant to which Court Square made a cash tender offer for all of
the Company's common stock not owned by Court Square. Following completion of
the tender offer on February 23, 2001, an affiliate of Court Square merged with
the Company and the merger eliminated the remaining common stock not owned by
Court Square. The aggregate consideration for the shares purchased in the tender
offer and the merger was about $104.2 million. The Company did not incur any
indebtedness in connection with the tender offer and merger. Following
completion of the merger on March 14, 2001, the New York Stock Exchange delisted
the Company's common stock, and the Company terminated the registration of its
common stock under the Exchange Act.

     In connection with the going private transaction and the merger that
followed, the Company amended its Certificate of Incorporation to recapitalize
its capital stock into three classes of common stock, Class A, Class B and Class
C, and one class of preferred stock.

                                       71

<PAGE>

     Also, the Company:

        . issued a new warrant to World Equity Partners, L.P., which has since
          been exercised and the shares obtained have been sold to Berkshire
          Hathaway Inc.;

        . executed change of control agreements with some of its then current
          executive officers;

        . amended some of its benefit plans; and

        . entered into Collateral Assignment Split-Dollar Insurance Agreements
          with some members of its key management.

     See Item 11, "Change of Control Agreements," "Amendments to Benefit
Plans" and "Split-Dollar Insurance Agreements" for a description of these
agreements.

     Also in connection with the going private transaction and the merger that
followed and the merger, the Company executed the Securities Transfer,
Recapitalization and Holders Agreement (the "Securities Holders Agreement") with
DRI Acquisition Corporation, Court Square, DRI Group, World Equity Partners,
L.P., Thomas J. Snyder, J. Timothy Gargaro, Joseph P. Felicelli, Richard L. and
Sandra Stanley, Susan E. Goldy, Roderick English, Patrick C. Mobouck, Richard
Keister, Daisy Farm Limited Partnership, the James R. Gerrity Living Trust dated
March 6, 1990 and the Susan Gerrity Living Trust dated March 6, 1990. The
Securities Holders Agreement is attached hereto as Exhibit 10.8 and the terms of
the Securities Holders Agreement are incorporated herein by reference. In the
descriptions of the Securities Holders Agreement, Preferred Stockholders
Agreement and Registration Rights Agreement that follow, each of the parties,
other than the Company, are sometimes referred to as the "Company's
stockholders."

     According to the Securities Holders Agreement, so long as Court Square owns
at least 5% of the common stock outstanding, Court Square has the right to
designate observers to attend meetings of the Board of Directors of the Company.
The Securities Holders Agreement contains provisions which, with certain
exceptions, restrict the ability of the Company's stockholders to transfer any
of the common stock or preferred stock. If holders of at least 50% of the
Company's common stock approve the sale of the Company, each Company stockholder
has agreed to consent to the sale and, if the sale includes the sale of stock,
each Company stockholder has agreed to sell all of such stockholder's common
stock on the terms and conditions approved by holders of a majority of the
common stock then outstanding. Subject to some limitations, none of Court
Square, World Equity Partners, L.P. or DRI Group may sell any of their shares of
common stock without offering the other Company stockholders a pro rata
opportunity to participate in such sale.

     The Securities Holders Agreement also provides for certain additional
restrictions on transfer of shares by the Company's stockholders, including the
Company's right to repurchase certain shares from those stockholders employed
by the Company, upon termination of such person's employment prior to 2006 at a
formula price, and the grant of a right of first refusal in favor of the
Company in the event such person elects to transfer its shares of common stock.


                                       72
<PAGE>

     The Company's stockholders also entered into a Preferred Stockholders
Agreement (the "Preferred Stockholders Agreement") containing certain
additional agreements among the Company's stockholders regarding the Company's
preferred stock. Subject to some limitations, none of Court Square, World Equity
Partners, L.P. or DRI Group may sell any of their shares of preferred stock
without offering the Company's stockholders a pro rata opportunity to
participate in such sale. If holders of at least 50% of the common stock approve
the sale of the Company, each Company stockholder has agreed to consent to the
sale and, if the sale includes the sale of stock, each Company stockholder has
agreed to sell all of such Company stockholder's preferred stock on the terms
and conditions approved by holders of a majority of the Company's common stock
then outstanding. The Preferred Stockholders Agreement is attached hereto as
Exhibit 10.21 and the terms of the Preferred Stockholders Agreement are
incorporated herein by reference.

     In connection with the foregoing, the Company and the Company's
stockholders also entered into a Registration Rights Agreement. According to the
Registration Rights Agreement, upon the written request of Court Square or World
Equity Partners, L.P. the Company will prepare and file a registration statement
with the Securities and Exchange Commission concerning the distribution of all
or part of the shares held by such party and use its best efforts to cause such
registration statement to become effective. If at any time the Company files a
registration statement for common stock pursuant to a request by either Court
Square or World Equity Partners' L.P. or otherwise, the Company will allow the
other parties to the Registration Rights Agreement to have their shares of
common stock (or a portion of their shares under certain circumstances) included
in the registered offering of the common stock. The Company is not bound by this
requirement if it is filing a registration statement on Form S-8, Form S-4 or
any similar form, a registration statement filed in connection with a share
exchange or an offering solely to the Company's employees or existing
stockholders, or a registration statement registering a unit offering. The
Company will pay the registration expenses of the selling stockholders (other
than underwriting commissions, brokerage fees and transfer taxes applicable to
the shares sold by such stockholders or the fees and expenses of any accountants
or other representatives retained by a selling stockholder). The Registration
Rights Agreement is attached hereto as Exhibit 10.9 and the terms of the
Registration Rights Agreement are incorporated herein by reference.

     In June 2001, Berkshire Hathaway Inc. ("Berkshire") purchased shares of
preferred stock and Class C Common Stock of the Company from Court Square and
shares of preferred stock and Class B Common Stock of the Company from World
Equity Partners, L.P. In November 2001, Dresdner Kleinwort Capital Partners 2001
LP ("Dresdner") purchased shares of preferred stock and Class C Common Stock of
the Company from Court Square. In connection with these transactions, the
Securities Holders Agreement, the Preferred Stockholders Agreement and the
Registration Rights Agreement were amended to make Berkshire and Dresdner
parties to those agreements pursuant to the terms specified in such amendments.
Also in connection with these transactions, Court Square agreed to vote its
shares in favor of electing a designee of Dresdner to the Company's Board of
Directors until December 1, 2002, provided that the designee resigns from the
Board of Directors at such time. The amendments are attached hereto as Exhibits
10.27 through 10.32 and the terms thereof are incorporated herein by reference.

     In connection with the separation from GM in July 1994, Thomas J. Snyder,
President, Chief Executive Officer and a director, received a loan from the
Company to purchase old Class A Common Stock of the Company. The outstanding
balance of the loan and accrued interest was about $89,000 and was fully repaid
in March 2001.

     Court Square provided advisory services to the Company. Pursuant to the
terms of the advisory agreement, Court Square was paid about $300,000 upon
consummation of the offering of senor subordinated notes by the Company in
April 2001.

     An investment fund administered by an affiliate of Court Square acquired
an aggregate principal amount of $15 million of the senior subordinated notes in
connection with the offering by the Company in April 2001.

                                       73
<PAGE>

                                    PART IV

ITEM 14    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents have been filed as a part of this report or, where
noted, incorporated by reference:

    1.       Financial Statements

             The Consolidated Financial Statements and related Notes thereto as
             set forth under Item 8 of this Report on Form 10-K are incorporated
             herein by reference.

    2.       Financial Statement Schedules

             Financial statement schedules have not been filed because they
             are not applicable or the required information is shown in the
             financial statements or the notes thereto.

    3.       Exhibits

             The following exhibits have been filed as part of this report
             in response to Item 14(c) of Form 10-K:

    (1)      2.1      Agreement and Plan of Merger dated as of February 7, 2001
                      by and among Court Square Capital Limited, DRI Acquisition
                      LLC and the Company

    (2)      2.2      Amendment No. 1 to Agreement and Plan of Merger

    (2)      3.1      Amended and Restated Certificate of Incorporation

    (2)      3.2      By-laws of the Company

    (6)      4.1      Indenture, dated as of August 1, 1996, among the Company,
                      certain of the Company's subsidiaries signatories thereto
                      and National City Bank of Indiana, as trustee

    (7)      4.2      Indenture governing 8 5/8% Senior Notes Due 2007 among
                      the Company, the Subsidiary Guarantors and United States
                      Trust Company of New York, as trustee, dated
                      December 22, 1997

    (14)     4.3      Indenture governing 11% Senior Subordinated Notes Due
                      2009 among the Company, the Subsidiary Guarantors and
                      First Union National Bank, as trustee, dated
                      April 26, 2001

    (6)*     10.1     Light Duty Starter Motor Supply Agreement, dated July 31,
                      1994, by and between Delco Remy America, Inc. ("DRA") and
                      General Motors Corporation ("GM")

    (6)      10.2     Heavy Duty Component Supply Agreement, dated
                      July 31, 1994, by and between DRA and GM

    (6)      10.3     Distribution and Supply Agreement, dated July 31, 1994,
                      by and between DRA and GM

    (3)      10.4     Trademark License, dated July 31, 1994, by and among DRA,
                      DR International, Inc. and GM

    (3)      10.5     Tradename License Agreement, dated July 31, 1994, by and
                      among DRA, DR International, Inc. and GM

    (3)      10.6     Partnership Agreement of Delco Remy Mexico
                      S. de R.L. de C.V., dated April 17, 1997

    (4)      10.7     Joint Venture Agreement, dated, by and between Remy
                      Korea Holdings, Inc. and S.C. Kim

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<PAGE>

    (2)      10.8     Securities Transfer, Recapitalization and Holders
                      Agreement dated March 14, 2001 by and among the Company,
                      DRI Acquisition Corporation, Court Square Capital Limited,
                      World Equity Partners, L.P., DRI Group LLC and the
                      Continuing Investors named therein

    (2)      10.9     Registration Rights Agreement for Common Stock dated March
                      14, 2001 by and among the Company, Court Square Capital
                      Limited, World Equity Partners, L.P., DRI Group LLC and
                      the Continuing Investors named therein

    (5)      10.10    Employment Agreement, dated July 31, 1994, by and
                      between Delco Remy International, Inc. and
                      Thomas J. Snyder

    (6)      10.11    Form of Fourth Amended and Restated Financing Agreement,
                      dated as of December 16, 1997, among the Company, certain
                      of the Company's subsidiaries signatories thereto and Bank
                      One, Indianapolis, National Association and The CIT
                      Group/Business Credit, Inc.

    (4)      10.15    Lease by and between ANDRA L.L.C. and DRA, dated
                      February 9, 1995

    (4)      10.16    Lease by and between Eagle I L.L.C. and DRA, dated
                      August 11, 1995

    (8)      10.20    Starter Motor Pricing Agreement, dated March 17, 1999, by
                      and between DRA and GM.

    (2)      10.21    Preferred Stockholders Agreement dated March 14, 2001 by
                      and among Court Square Capital Limited, World Equity
                      Partners, L.P., DRI Group LLC and the Continuing
                      Investors named therein

    (2)      10.22    Stock Purchase Warrant dated March 14, 2001 issued by the
                      Company to World Equity Partners, L.P.

    (10)     10.23    Letter Agreement by and between the Company and
                      Thomas J. Snyder, dated as of February 6, 2001

    (11)     10.24    Form of Letter Agreement by and between the Company and
                      each of J. Timothy Gargaro, Joseph P. Felicelli, Richard
                      L. Stanley, Susan E. Goldy, Roderick English and Patrick
                      Mobouck, each dated as of February 6, 2001

    (12)     10.25    Amendment Number Two to the Delco Remy International, Inc.
                      Supplemental Executive Retirement Plan, dated as of
                      February 6, 2001

    (13)     10.26    Form of Amendment Number Two to the Collateral Assignment
                      Split- Dollar Insurance Agreement by and between the
                      Company and each of Thomas J. Snyder, J. Timothy Gargaro,
                      Joseph P. Felicelli, Richard L. Stanley, Susan E. Goldy
                      and Roderick English

    (15)     10.27    Amendment No. 1 to the Securities Transfer,
                      Recapitalization and Holders Agreement, dated June 27,
                      2001, by and among the Company, Court Square Capital
                      Limited, DRI Group LLC, the Individual Investors named
                      therein and Berkshire Hathaway Inc.

    (15)     10.28    Amendment No. 1 to the Registration Rights Agreement,
                      dated June 27, 2001, by and among the Company, Court
                      Square Capital Limited, DRI Group LLC, the Individual
                      Investors named therein and Berkshire Hathaway Inc.

    (15)     10.29    Amendment No. 1 to the Preferred Stockholders Agreement,
                      dated June 27, 2001, by and among the Company, Court
                      Square Capital Limited, DRI Group LLC, the Individual
                      Investors named therein and Berkshire Hathaway Inc.

             10.30    Amendment No. 2 to the Securities Transfer,
                      Recapitalization and Holders Agreement, dated November 29,
                      2001, by and among the Company, Court Square Capital
                      Limited, DRI Group LLC, the Individual Investors named
                      therein, Berkshire Hathaway Inc. and Dresdner Kleinwort
                      Capital Partners 2001 LP

             10.31    Amendment No. 2 to the Registration Rights Agreement,
                      dated November 29, 2001, by and among the Company, Court
                      Square Capital Limited, DRI Group LLC, the Individual
                      Investors named therein, Berkshire Hathaway Inc. and
                      Dresdner Kleinwort Capital Partners 2001 LP

             10.32    Amendment No. 2 to the Preferred Stockholders Agreement,
                      dated November 29, 2001, by and among the Company, Court
                      Square Capital Limited, DRI Group LLC, the Individual
                      Investors named therein, Berkshire Hathawway Inc. and
                      Dresdner Kleinwort Capital Partners 2001 LP

             21       Subsidiaries of the Registrant

    (9)      99.1     Supplement to the Offer to Purchase

    *                 Portions of this exhibit have been omitted pursuant to a
                      request for confidential treatment.

    (1)               Incorporated by reference to Exhibit (a)(8) to Amendment
                      No. 1 to the Solicitation/Recommendation Statement on
                      Schedule 14D-9 filed by the Company on February 9, 2001

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<PAGE>

    (2)               Incorporated by reference to the Exhibit of the same
                      number to the Company's Form 10-K for the transition
                      period from August 1, 2000 to December 31, 2000 filed by
                      the Company on March 30, 2001

    (3)               Incorporated by reference to the Exhibit of the same
                      number to the Registration Statement on Form S-1
                      previously filed by the Company on October 10, 1997,
                      registering the issuance of the Company's Class A Common
                      Stock, par value $.01 per share (the "Equity Registration
                      Statement")

    (4)               Incorporated by reference to the Exhibit of the same
                      number to Amendment No. 1 to the Equity Registration
                      Statement which was filed by the Company on
                      October 22, 1997

    (5)               Incorporated by reference to the Exhibit of the same
                      number to Amendment No. 2 to the Equity Registration
                      Statement which was filed by the Company on
                      November 21, 1997

    (6)               Incorporated by reference to the Exhibit of the same
                      number to Amendment No. 3 to the Equity Registration
                      Statement which was filed by the Company on
                      November 26, 1997

    (7)               Incorporated by reference to Exhibit 4.1 to the Company's
                      Form 10-Q for the quarter ended January 31, 1998

    (8)               Incorporated by reference to Exhibit 10.20 to the
                      Company's Form 10-K for the year ended July 13, 1999

    (9)               Incorporated by reference to Exhibit  (a)(1)(I) to
                      Amendment No. 3 to Transition Statement filed on Schedule
                      13E-3 on February 9, 2001

    (10)              Incorporated by reference to Exhibit (e)(4) to Amendment
                      No. 1 to the Solicitation/Recommendation Statement on
                      Schedule  14D-9 filed by the Company on February 9, 2001

    (11)              Incorporated by reference to Exhibit (e)(5) to Amendment
                      No. 1 to the Solicitation/Recommendation Statement on
                      Schedule  14D-9 filed by the Company on February 9, 2001

    (12)              Incorporated by reference to Exhibit (e)(6) to Amendment
                      No. 1 to the Solicitation/Recommendation Statement on
                      Schedule 14D-9 filed by the Company on February 9, 2001

    (13)              Incorporated by reference to Exhibit (e)(7) to Amendment
                      No. 1 to the Solicitation/Recommendation Statement on
                      Schedule  14D-9 filed by the Company on February 9, 2001

    (14)              Incorporated by reference to the Exhibit of the same
                      number to the Registration Statement on Form S-4
                      previously filed by the Company on July 20, 2001

    (15)              Incorporated by reference to the Exhibit of the same
                      number to Amendment No. 1 to the Registration Statement on
                      Form S-4 filed by the Company on July 31, 2001

(a) Reports on Form 8-K:

                  1.  Press release dated January 19, 2001 regarding the
                      Company's earnings expectations.

                  2.  Press release dated February 26, 2001 regarding completion
                      of the tender offer for the Company's Class A Common
                      Stock.

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<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                           DELCO REMY INTERNATIONAL, INC.

                                          By: /S/ Thomas J. Snyder
                                              --------------------------------
                                              Thomas J. Snyder President,
                                              Chief Executive Officer and
                                              Director

                                              Date: March 28, 2002

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

By:                                       By: /S/ Thomas J. Snyder
    --------------------------------          --------------------------------
    Harold K. Sperlich                        Thomas J. Snyder
    Chairman of the Board                     President, Chief Executive Officer
                                              and Director
                                              (Principal Executive Officer)

By: /S/ David E. Stoll                    By: /S/ Richard L. Reinhart
    --------------------------------          --------------------------------
    David E. Stoll                            Richard L. Reinhart
    Vice President                            Vice President and Controller
    and Chief Financial Officer               (Principal Accounting Officer)
    (Principal Financial Officer)

By: /S/ E.H. Billig
    --------------------------------
    E.H. Billig
    Vice Chairman of the
    Board of Directors                          Date: March 29, 2002

By: /S/ Richard M. Cashin, Jr.
    --------------------------------
    Richard M. Cashin, Jr.
    Director

By: /S/ Alexander P. Coleman
    --------------------------------
    Alexander P. Coleman
    Director

By: /S/ Michael A. Delaney
    --------------------------------
    Michael A. Delaney
    Director

By: /S/ James R. Gerrity
    --------------------------------
    James R. Gerrity
    Director

By: /S/ Robert J. Schultz
    --------------------------------
    Robert J. Schultz
    Director

By: /S/ Joseph M. Silvestri
    --------------------------------
    Joseph M. Silvestri
    Director

                                       77
<PAGE>

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE EXCHANGE ACT.

     (a) (1) No annual report is provided to the noteholders other than copies
             of Registrant's Annual Report on Form 10-K.

     (a) (2) No proxy statement, form of proxy or other proxy soliciting
     material has been sent to more than 10 of the Registrant's security holders
     with respect to any annual or other meeting of Registrant's security
     holders.

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