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|     |  |                                                                                    |  |     
|---- |  | ---------------------------------------------------------------------------------- |  | ----
|LOGO |  | UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-K |  | LOGO



FOR ANNUAL AND
TRANSITION REPORTS

PURSUANT TO SECTION 13 OR 15(d) of the

SECURITIES EXCHANGE ACT OF 1934



|xANNUAL | REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|------- | -----------------------------------------------------------------------------

For the Fiscal Year Ended December 31, 2005

or

| ̈TRANSITION | REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----------- | -----------------------------------------------------------------------------

For the Transition Period from  to
.

Commission File Number
1-13683



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)         



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 IF THE REGISTRANT IS A WELL-KNOWN SEASONED ISSUER AS DEFINED IN RULE 405 OF THE SECURITIES ACT.

YES ̈NO x



INDICATE BY CHECK MARK IF THE REGISTRANT IS NOT REQUIRED TO FILE REPORTS
PURSUANT TO SECTION 13 OR SECTION 15(D) OF THE ACT.

YES ̈NO x



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



INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, OR A NON- ACCELERATED FILER. SEE DEFINITION OF ACCELERATED FILER AND LARGE ACCELERATED FILER IN RULE
12B-2 OF THE EXCHANGE ACT. (CHECK ONE)



 ̈LARGE ACCELERATED FILER ̈ACCELERATED FILER         x NON- ACCELERATED FILER



INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).

YES ̈NO x



STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON
EQUITY HELD BY NON-AFFILIATES COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE COMMON EQUITY WAS LAST SOLD, OR THE AVERAGE BID AND ASKED PRICE OF SUCH COMMON EQUITY, AS OF THE LAST BUSINESS DAY OF THE REGISTRANTS MOST RECENTLY COMPLETED SECOND
FISCAL QUARTER. 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 ofMarch 15, 2006
|Common Stock  Class B |  | 2,503,024.48                   



DOCUMENTS INCORPORATED BY
REFERENCE: None.



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REMY INTERNATIONAL, INC.

FORM 10-K

DECEMBER 31, 2005



TABLE OF CONTENTS



|            |  |                                                                                       |  |   
|----------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I Page
|            |  |                                                                                      
|Item 1.     |  | Business                                                                              |  | 3 
|Item 1A.    |  | Risk Factors                                                                          |  | 11
|Item 1B.    |  | Unresolved Staff Comments                                                             |  | 18
|Item 2.     |  | Properties                                                                            |  | 19
|Item 3.     |  | Legal Proceedings                                                                     |  | 20
|Item 4.     |  | Submission of Matters to a Vote of Security Holders                                   |  | 21
|            |  |                                                                                       |  |   
|PART II    
|            |  |                                                                                      
|Item 5.     |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 22
|Item 6.     |  | Selected Financial Data                                                               |  | 22
|Item 7.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 23
|Item 7A.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 36
|Item 8.     |  | Financial Statements and Supplementary Data                                           |  | 37
|Item 9.     |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure  |  | 82
|Item 9A.    |  | Controls and Procedures                                                               |  | 82
|Item 9B.    |  | Other Information                                                                     |  | 82
|            |  |                                                                                       |  |   
|PART III   
|            |  |                                                                                      
|Item 10.    |  | Directors and Executive Officers of the Registrant                                    |  | 83
|Item 11.    |  | Executive Compensation                                                                |  | 85
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 89
|Item 13.    |  | Certain Relationships and Related Transactions                                        |  | 92
|Item 14.    |  | Principal Accountant Fees and Services                                                |  | 92
|            |  |                                                                                       |  |   
|PART IV    
|            |  |                                                                                      
|Item 15.    |  | Exhibits and Financial Statement Schedules                                            |  | 93
|            |  |                                                                                      
|            |  | SIGNATURES                                                                            |  | 99







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PART I



CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING INFORMATION



From time to time, Remy
International, Inc. (the Company or we) makes oral and written statements that may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which we refer to as the
Act, or by the Securities and Exchange Commission, which we refer to as the SEC, in its rules, regulations and releases. We desire 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 our future performance 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 us with regard to our expectations as to financial
results and other aspects of our business may constitute forward-looking statements. These statements relate to our future plans, objectives, expectations and intentions and may be identified by words like believe, expect,
may, will, should, seek, or anticipate, and similar expressions.



We caution readers that any such forward-looking statements are based on assumptions that we believe 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 and liquidity, the incremental liquidity provided by the term loan is subject to borrowing base and other limitations on the Companys
ability to borrow under its revolving credit facilities or otherwise, dispositions, acquisitions and integration costs, additional financing requirements, development of new products and services, the effect of competitive products or pricing,
costs and difficulties related to integration of acquired businesses, pending and future legal proceedings, including environmental regulatory matters, reliance upon or loss of a major customer, international operating and supply risks, weather
conditions, including their impact on demand for our aftermarket products, commodity, raw material and energy costs, including the cost and availability of steel, environmental regulatory matters, foreign exchange rate changes, transportation and
related fuel costs, effectiveness of restructuring and cost saving initiatives, labor relations, the ability to obtain and maintain adequate prices for our products, our substantial indebtedness and limitations under debt agreements, costs for
pension and post retirement benefit plans, the effect of economic conditions and other uncertainties. Due to these uncertainties, we cannot assure readers that any forward-looking statements will prove to have been correct and we do not intend to
review or update any particular forward-looking statement in light of future events.



|ITEM 1 |  | BUSINESS
|------ |  | --------

---



We are a leading global manufacturer and remanufacturer of aftermarket and original equipment electrical components and aftermarket powertrain components
for automobiles, light trucks, hybrid propulsion systems, heavy-duty trucks, industrial, construction and agricultural applications and other heavy-duty applications. We sell our products worldwide primarily under the Remy brand name,
first used in 1896, the Delco Remy brand name, first used in 1918, the World Wide Automotive brand name, first used in 1986, and our customers widely recognized private label brand names. Our products include starters,
alternators, engines, turbo chargers, locomotive power assemblies and fuel systems. We also provide exchange services for used components, commonly known as cores, for remanufacturers. In 2005, approximately 58% of our sales were to the aftermarket
and approximately 42% were to the original equipment market. We supply our highly engineered products to customers, principally in North America, Europe, South America, Latin America and Asia.



We believe we are North Americas largest producer of remanufactured
starters and alternators for the aftermarket. Remanufacturing is a process through which cores are disassembled into their sub-components, cleaned, inspected, combined with new subcomponents, reassembled into finished products and tested to original
equipment specifications. We believe remanufactured products can be produced at a lower cost than a traditionally manufactured product, and with higher quality than an individually repaired product. Our aftermarket business benefits from the
non-deferrable nature of the repairs for which many of our products are used. We believe we are North Americas largest supplier of original equipment starters for automobiles and light trucks and starters and alternators for heavy-duty
vehicles.



At the time of our separation from GM in August
1994, we were predominantly a North American original equipment manufacturer, with over 56% of our fiscal year 1995 sales derived from GM. Through strategic capital investments, acquisitions, organic growth and facility and workforce
rationalization, we have become a low cost, global manufacturer



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and remanufacturer with a business and product mix between the aftermarket and original equipment market. Since fiscal year 1995, we have increased our
sales, broadened our product line, expanded our manufacturing and remanufacturing capabilities, diversified our customer base and end markets, lowered our cost base and extended our participation in international markets.



Industry Overview



Our business is influenced by the underlying trends in the automobile, light
truck, heavy-duty truck, construction and industrial markets. However, we believe that we have been able to balance the cyclical nature of our businesses with the diversity of original equipment manufacturing, which we refer to as OEM, markets
between the automotive, heavy duty truck and industrial markets, as well as by focusing on our remanufacturing capabilities and our aftermarket business.



Aftermarket



The aftermarket produces and sells new and remanufactured parts used in the maintenance and repair of automobiles, trucks and other vehicles.



Aftermarket parts are supplied principally through three distribution
channels:



| |  |  | car and truck dealers that obtain parts through their OEM parts organizations (e.g., GM Service Parts Operations, which we refer to as GM SPO, Ford Parts and Service Division,
Freightliner, Caterpillar Service Parts, and International Truck Parts Organization) or directly from an OEM-authorized remanufacturer;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | retail automotive parts chains and mass merchandisers; and
| | - |  | ----------------------------------------------------------



| |  |  | independent warehouse distributors and jobbers who supply independent service stations, installers, specialty and general repair shops, farm equipment dealers, car dealers and small
retailers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe that the aftermarket and
our 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 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;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the increasing service lives of automotive parts;
| | - |  | -------------------------------------------------



| |  |  | the increasing demands by customers to have the supplier offer vendor managed inventory and related financing; and
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the increasing competition from Asia.
| | - |  | -------------------------------------



Recently, several large retail automotive parts chains offering a broad range of new and remanufactured products have experienced growth at the expense of
small, independent retail and wholesale stores as they implement strategies to take advantage of their economies of scale in addressing the needs of the traditional/commercial market. We believe retail chains generally prefer to deal with large,
national suppliers capable of meeting their cost, quality, volume and service requirements.



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##### Table of Contents

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, hybrid propulsion system, marine and industrial manufacturers; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | heavy-duty truck and engine manufacturers and other heavy-duty vehicle manufacturers.
| | - |  | -------------------------------------------------------------------------------------



The OEM market has been impacted by 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 and component costs. OEMs are 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 has been the norm. China and India sourcing is anticipated to continue to have an effect on the global OEM market and the related components industry in both regional and global markets. OEMs continue to outsource component manufacturing
in response to competitive pressures on OEMs to improve quality and reduce capital outlays, production costs, overhead and inventory levels.



Business Strategy



Focus on Operating Efficiency and Reinvestment for Growth



We will drive productivity while reinvesting for sustained future growth. In 2003, we closed six manufacturing facilities and transferred production to
lower cost facilities primarily in Mexico, South Korea, China, Poland, Brazil and Hungary. We are using lean manufacturing principles and global purchasing initiatives to improve our operating cash flow. We have invested in regional technical
centers in the United States, Europe and Asia. These centers include a broad range of on-site engineering, purchasing, supplier development and product testing operations designed to provide quick-to-market, leading-edge products and stronger
customer relationships for Remy, Delco Remy and World Wide Automotive branded products.



Enhance our Share in the Electrical Remanufacturing Market



In 2005, we increased our share of the electrical remanufacturing market through our acquisition of Unit Parts Company, which we refer to as UPC. The use of remanufactured components for warranty and extended service
repairs is common practice as OEMs have sought to reduce warranty and extended service costs by using remanufactured components. These components 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.



Increase our Share in the Global Original Equipment Market



Following the 2003 acquisition of Delphi Corporations light vehicle alternator business, we have significantly increased our share in the original
equipment market, particularly in the European and Asian light vehicle markets, where



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customers increasingly look for suppliers with both starter and alternator technology. We are in the process of developing and expanding our infrastructure
in Europe and Asia to support additional business. We also expect to benefit from anticipated growth in Latin America, Eastern Europe and Asia Pacific, where demand for light vehicles is expected to increase.



We have formed a wholly foreign-owned enterprise, Remy Electricals (China)
Company Limited, in Shajing in the Guangdong Province of China, to expand our manufacturing capabilities in China. The new facility began operations in the second quarter of 2005 and is designed to meet new business demand in Chinas emerging
markets. We are investing in China to transfer our new global technologies, equipment and best-in-class quality for the OEM vehicle platforms in Asia.



Existing facilities in China include an alternator operation, Remy Electricals Hubei Company, Ltd., in Jingzhou, Hubei Province, which we acquired from
Delphi Corporation in March 2003. We established a Shanghai Representative Office in March 2003 that is the base for our domestic sales and purchasing activity.



Capitalize on Growth in the Heavy Duty Truck Market



We intend to capitalize on the robust original equipment market and aftermarket for heavy-duty truck components. Heavy Duty OEM sales increased in 2005
due to strong industry demand from North American Class 5-8 customers. Demand in North America is expected to remain strong in 2006. This demand is expected to decline in 2007, due to a change in engine requirements, but is anticipated to return to
positive volume trends in 2008 and 2009. We believe that the demand for original equipment heavy-duty truck replacement components is expected to grow over the next few years.



We are also investing in the heavy-duty production capacity in China in response to the expanding demand for components used
by trucks, construction, agriculture and off-road vehicles resulting from a growing economy. As the largest supplier of original equipment and aftermarket starters and alternators to the North American heavy-duty truck market, we believe we are well
positioned to benefit from these positive trends.



Technologically Advanced
Products



We continue to produce technologically advanced
products by regularly enhancing our technology and product line.



We have developed several new high technology products for hybrid electric vehicles and have secured production programs for these products. We are a supplier of electrical components for Hybrid Electric Vehicles, which we refer to as HEVs.
HEVs use a combustion engine (diesel or gas) along with electric motor(s) for a variety of functions. HEVs never need to be plugged into an electrical outlet and are not limited by range like an electric vehicle. HEVs can provide improved fuel
economy, increased vehicle acceleration and reduced exhaust emissions. The growing demand for HEVs increases the requirements for power generation and motor propulsion, our core competencies.



We are the current supplier for the Allison Hybrid Bus Motors, which have
been in production since November of 2003. The 250 GM hybrid buses equipped with these units in Seattle, Washington save the equivalent of 750,000 gallons of fuel each year. We are scheduled to launch an automotive hybrid program by the end of 2006
and another significant hybrid program in 2007.



We are also in
various stages of development and introduction on a number of other new products including:



| |  |  | a new family of gear reduction starters for the heavy duty truck and industrial markets;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | a new line of alternators specifically tailored to the requirements of the latest heavy-duty engine technology; and
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | a new family of light duty passenger car / light truck alternators.
| | - |  | -------------------------------------------------------------------



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Products



Our product line includes a diverse range of manufactured and remanufactured products for the aftermarket and OEM markets, which we sell under the
Delco Remy brand name, the World Wide Automotive brand name, the Remy brand name or under our customers private-label brand names. We also provide core acquisition services for third party aftermarket
remanufacturers as well as our own subsidiaries. Our product line is classified into five product categories: automotive OEM, heavy-duty OEM, electrical aftermarket, powertrain, and core services.



The following table sets forth the approximate composition by product
category of our revenues for the fiscal years ended December 31, 2005, 2004 and 2003:



|                       |  |                        |   |  |       |   |  |       |  
|---------------------- |  | ---------------------- | - |  | ----- | - |  | ----- | -
|                       |  | Year Ended December 31 |  
|Product Categories     |  | 2005                   |   |  | 2004  |   |  | 2003  |  
|Automotive OEM         |  | 26.2                   | % |  | 29.1  | % |  | 27.2  | %
|Heavy-duty OEM         |  | 16.1                   |   |  | 17.2  |   |  | 15.0  |  
|Electrical aftermarket |  | 41.3                   |   |  | 38.9  |   |  | 43.8  |  
|Powertrain             |  | 11.8                   |   |  | 9.2   |   |  | 7.3   |  
|Core services          |  | 4.6                    |   |  | 5.6   |   |  | 6.7   |  
|Total                  |  | 100.0                  | % |  | 100.0 | % |  | 100.0 | %



Products within the
automotive OEM and heavy-duty OEM categories include manufactured starters and alternators. Our starters and alternators are used in automobiles, light trucks, heavy-duty trucks, industrial, construction and agricultural applications and other
heavy-duty applications by OEMs globally and are also used in marine and industrial applications.



Products within the electrical aftermarket include remanufactured and new starters and alternators. Products within the powertrain category include
primarily remanufactured diesel engines, fuel injectors, injection pumps, fuel pumps, fuel valves, turbo chargers and locomotive power assemblies and engine components. Products within the core services category include core acquisition services.



Research and Development



Our engineering staff works both 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 our engineering efforts, we have formed technical alliances with engineering and technology firms to identify
long-term engineering opportunities. We will be launching our first application of a family of belt driven alternator starters, which we refer to as BAS, for hybrid gas applications.



We won business with Allison Electric Drive, a unit of GM Powertrain, for the electric machine integral to the development
of the transmission used in hybrid vehicles and have been in production since November 2003. We have plans to expand this product line to include similar products for higher volume automotive applications.



Consistent with our strategy to introduce technologically advanced and
improved products, we spent approximately $23.3 million in 2005, $19.3 million in 2004, and $15.9 million in 2003 on research and development activities including program engineering.



Customer funded R&D expenses were approximately $2.0 million, $1.8 million and $1.3 million for the years
December 31, 2005, 2004, and 2003, respectively.



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Customers



Our principal customers include automotive and heavy-duty OEMs, OEM dealer networks, leading automotive parts retail chains and warehouse distributors.
Our major customers include Advance Auto Parts, AutoZone, Canadian Tire, Caterpillar, CSK Automotive, Cummins, DaimlerChrysler, Freightliner, GM, Hyundai, International Truck and Engine Corporation, Kia Motors, OReillys Auto Parts,
PACCAR, Pep Boys and Volvo/Mack Trucks.



We have long-term
agreements, with terms typically ranging from three to five years, to supply products to GM, DaimlerChrysler Commercial Trucks, Volvo/Mack Trucks and several aftermarket customers. In 2005, total sales to GM and related affiliates accounted for
approximately 22% of our sales and International Truck and Engine accounted for approximately 12% of our sales. No other customer accounted for more than 10% of consolidated net sales.



In connection with our separation from GM in July 1994, GM entered into long-term contracts with us 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 our automotive starters and heavy-duty starters and alternators under these agreements are subject to those products remaining competitive as to price, technology and design. In 1999, we extended the terms of these
agreements with GM for us to supply automotive starters to July 31, 2008. In April 2002, we reduced our prices in accordance with the competitive clause of the original agreement. Subsequently, further price reductions have been negotiated
consistent with the agreement. The supply agreement relating to heavy-duty products terminated on July 31, 2000, although we continue to supply GM with heavy-duty products.



In 1994, GM also entered into a long-term contract with us to distribute exclusively our automotive aftermarket products. In
April 2002, we reduced our prices in accordance with the competitive clause of the original agreement. This agreement terminates on July 31, 2008.



Distribution



We have an extensive distribution and logistics network which reflects our global manufacturing footprint.



We employ a direct sales force, which develops and maintains sales
relationships with major North American truck fleet operators as well as our OEM, retail, warehouse, distributor and aftermarket customers.



Competition



The automotive components market is highly competitive. Competition is based primarily on quality of products, service, delivery, technical support and
price. Most OEMs and aftermarket distributors source parts from more than one supplier and we compete with a number of companies who supply automobile manufacturers throughout the world. In the automotive market, our principal competitors include
BBB, Bosch, Denso, Hitachi, Mitsubishi, Motorcar Parts of America, Rayloc, Valeo and Visteon. In the heavy-duty truck market, our competitors include Bosch, Denso, Mitsubishi and Prestolite. In the powertrain category, our principal competitors
include Cummins, Caterpillar and Jasper Engine.



Patents,
Trademarks and Licenses



Pursuant to a Trademark License
Agreement between us and GM, GM granted us 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
our option upon payment of a fixed $0.1 million annual licensing fee to GM. We have 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 us that, upon our request, GM will register the trademarks in any jurisdiction where they are not currently registered.



As part of our acquisition of Delphi Corporations light duty alternator
business, we and Delphi Technologies, Inc., which we refer to as Delphi Technologies, entered into a license agreement dated November 30, 2002, by which we licensed from Delphi Technologies certain patents and technical information used in the
manufacture and remanufacture of belt-driven automotive generators and alternators.



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In 2004, we signed an exclusive technology license with Visteon. The technology is applicable to high
efficiency/ power density alternators that are extremely quiet.



We own and/or have obtained licenses to various domestic and foreign patents and patent applications related to our products and processes. The patents expire at various times over the next 17 years. While these patents and patent
applications in the aggregate are important to our competitive position, no single patent or patent application is material to us.



Purchased Materials



Our global sourcing strategy will identify and develop a global supply base that delivers best in class quality, cost and technology for our products and
services. This strategy will achieve an appropriate balance of global and regional suppliers. The strategy drives the focus to point-of-use sourcing, utilizing value stream principles and developing standardized processes to arrive at
decisions that result in the lowest total cost in materials, freight and logistics for our global locations.



Principal purchased materials for our business include: aluminum castings, gray and ductile iron castings, armatures, solenoids, copper wire, injectors,
electronics, steel shafts, forgings, bearings, commutators, pumps and carbon brushes. All materials are readily available from multiple suppliers. We do not currently foresee difficulty in obtaining adequate inventory supplies. We generally follow
the North American industry practice of passing on to our original equipment customers the costs or benefits of fluctuation in copper and aluminum prices on a monthly, annual or semi-annual basis. In some cases, steel price fluctuations are not
passed on to our customers. Over the last 12-18 months, the industry has been significantly affected by increasing commodity costs brought on by the high demand of emerging economies in countries such as China and India.



Due to the existing mix of our manufacturing and vendor base, we have been
negatively impacted by the weakening US dollar, primarily against the Korean Won. The impact was mitigated by the implementation of the point-of-use sourcing strategy but not to the extent necessary to keep pace with the degree of change
during 2005.



Employees



As of December 31, 2005, Remy employed 7,971 people, of which 1,622 were
salaried and administrative employees and 6,349 were hourly employees. Approximately 2,485 of our employees are based in the United States. A total of 3,920 of our employees globally are primarily represented by required works councils.



As of December 31, 2005, approximately 272 of our hourly
employees at Remy Hungary are affiliated with the Hungarian Vasas Workers Union or Fuggetlen Szakszervezetek Demokratikus Ligaja. The collective bargaining agreement has not yet been finalized.



As of December 31, 2005, approximately 280 of our hourly workers at our
Polish facilities are affiliated with the Intercompany Trade Union or the Intercompany Union Organization NSZZ Solidarity Union. Agreements with these unions were signed on August 23, 2000 and are perpetual.



As of December 31, 2005, approximately 950 of our hourly employees at
Remy Remanufacturing de Mexico are affiliated with the Confederacion Regional Obrera Mexicana. Agreements with this union expire on January 31, 2007.



As of December 31, 2005, approximately 1,386 hourly employees at Remy Componentes S de R.L. de C.V. are affiliated with the Confederacion Regional
Obrera Mexicana. These employees are contracted from another wholly owned service company that has union agreements expiring on January 31, 2007.



As of December 31, 2005, approximately 375 of our hourly workers at the Piedras Negras facility are affiliated with Confederacion Revolucionaria de
Obreros y Campesinos, lo. de Mayo. Agreements with this Union renew annually in March.



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As of December 31, 2005, approximately 294 of our hourly workers at our Guadalajara facility are
affiliated with the Syndicate of Workers in the Repair and Construction of Tools of Metal and Wood. Agreements with this union are renewed annually in January.



As of December 31, 2005, approximately 363 of our hourly workers in Oklahoma are affiliated with the United Food and Commercial Workers Union,
Local 1000, Dallas. Agreements with this union expire March 1, 2009.



We are not aware of any current efforts to organize the employees in our other facilities. There can be no assurance that there will not be any labor union efforts to organize at facilities that are not currently
unionized. We believe that our relations with our employees are satisfactory.



Foreign Operations



Information about
our foreign operations is set forth in tables relating to geographic information in Note 19 to our consolidated financial statements, Business Segments and Geographic Area Information in Item 8.



Environmental Regulation



Our 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, which we refer to as
environmental laws. Our 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, which we refer to as employee
safety laws. We believe that we and our 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 our results of operations, business or financial condition. The nature of our and our subsidiaries operations, however, exposes us 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.



We believe that the future cost of compliance with existing environmental laws (or liability for known environmental claims)
will not have a material adverse effect on our business, financial condition or results of operations. However, future events, such as changes in existing environmental laws or their interpretation or the discovery of presently unknown conditions,
may give rise to additional compliance costs or liabilities for the subsidiaries that could have a material adverse effect on our business, financial condition or results of operations.



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 substances. Because of their operations, the long history of industrial uses at some of our 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, our subsidiaries are affected by such liability provisions of environmental laws. Various of our 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.



For example, Franklin Power Products, Inc. (our subsidiary) in Franklin, Indiana has been undergoing a Resource Conservation
and Recovery Act (RCRA) site investigation and clean-up of volatile organic compounds in the soil and groundwater pursuant to an Environmental Protection Agency Administrative Order on Consent, which we refer to as the EPA order, issued to both
Franklin Power Products 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 our experience to date and the indemnities from Amphenol and the sellers of Franklin Power Products to us, we
believe that future costs associated with this site will not have a material adverse effect on our results of operations, business or financial condition.



In September 2000, one of Franklin Power Products, Inc.s 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. has installed wastewater treatment equipment and is in compliance with the terms of the



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order and has eliminated the discharge. In July 2004, we and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on
behalf of the EPA, which tolled the statute of limitations on the EPAs potential claim for penalties. Since that time, we have been cooperating with the EPA by providing additional information and entered into settlement negotiations with the
EPA and the Department of Justice. For more information see Note 18 to our consolidated financial statements.



Backlog



The majority of our products are not on a backlog status.



Seasonality



Our business is seasonal, as our major North American OEM customers historically have one to two week shutdowns of operations during July and December.
Our sales results in the third and fourth quarters reflect the effects of these shutdowns. Our working capital requirements also are affected by seasonality, as we build inventory for the summer sales months in the aftermarket. Typically our working
capital requirements are highest from April through August and the change from the highest month to the lowest month (typically December) for accounts receivable, inventory and accounts payable has averaged $45.9 million over the past three years.
Refer to Note 22 to our consolidated financial statements in Item 8, which presents certain quarterly (unaudited) financial information.



Acquisitions



On March 18, 2005, the Company acquired substantially all of the assets and assumed certain liabilities of UPC. UPC is a major supplier to the
automotive aftermarket for new and remanufactured starters and alternators, offering custom branding, packaging and logistics solutions as well as complete engineering and support services. For more information see Note 3 to our consolidated
financial statements in Item 8.



In the third quarter of
2005, the Company made additional cash payments totaling $0.3 million relative to the acquisition of Delphi Corporations (Delphi) light vehicle alternator business.



In the second quarter of 2005, the Company made a final cash earn-out payment of approximately $0.4 million relative to the
2000 acquisition of M&M Knopf Auto Parts, L.L.C. (Knopf).



Discontinued Operations



In the second
quarter of 2005, we completed the sale of substantially all assets and the assignment of certain liabilities of our automatic transmission remanufacturing business, AutoMatic Transmission International A/S (AMT), based in Soborg,
Denmark, for approximately $0.2 million in cash. The estimated loss on disposal of $2.2 million recorded in 2004 was reduced by $0.4 million in the second quarter of 2005 as a result of the sale. The cash proceeds and loss on disposal are subject to
future adjustment. This business was classified as a discontinued operation in the Companys consolidated financial statements effective in the third quarter of 2004 upon completion of the plan of disposal.



During the fourth quarter of 2005, the Company completed the closure of its
Powrbilt Products operations in Mansfield, Texas.



|ITEM 1A    RISK |  | FACTORS
|--------------- |  | -------

---



Our substantial indebtedness could adversely affect our financial position, limit our available cash and our access to additional capital and
prevent us from growing our business.



We have a
substantial amount of indebtedness. As of December 31, 2005, we had total debt (consisting of the aggregate amounts outstanding under our senior secured credit facility, 2nd lien floating rate notes, senior notes, senior subordinated notes,
notes payable, capital leases, and other indebtedness) of approximately $741.7 million, $234.2 million of which was first-lien and second-lien secured debt and effectively senior to our $145.0 million senior notes and our $314.1 million senior
subordinated notes. Also included in the total debt as of December 31, 2005, were capital lease obligations of approximately $8.1 million and additional domestic and international debt obligations of approximately $40.3 million, some of which
is secured by the collateral of some of our international subsidiaries.



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The level of our indebtedness could have important consequences, including:



| |  |  | requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the availability of our cash flow to fund working capital,
capital expenditures, research and development efforts and other general corporate purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increasing the amount of interest expense that we have to pay, because certain of our borrowings are at variable rates of interest, which, if interest rates increase, could result
in higher interest expense;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increasing our vulnerability to adverse general economic or industry conditions;
| | - |  | --------------------------------------------------------------------------------



| |  |  | limiting our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | impairing our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, general corporate purposes or
other purposes;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | preventing us from raising the funds necessary to repurchase all notes tendered to us upon the occurrence of changes of control in our ownership, which would constitute a default
under the indentures governing our notes; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | placing us at a competitive disadvantage compared to our competitors that have less debt.
| | - |  | -----------------------------------------------------------------------------------------



To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on
many factors beyond our control. An inability to service our indebtedness could lead to a default under our senior secured credit facility and our indentures, which may result in an acceleration of our indebtedness.



To service our indebtedness, we will require a significant amount of cash.
For the year ended December 31, 2006, we estimate that we will need approximately $78 million of cash to pay the interest. Our ability to pay interest and principal on our indebtedness (including the obligations under the senior secured credit
facility, the floating rate notes, the senior notes and the senior subordinated notes) and to satisfy our other debt obligations will depend upon our future operating performance and the availability of refinancing indebtedness, which will be
affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control.



Our future cash flow may not be sufficient to meet our obligations and commitments. If we are unable to generate sufficient cash flow from operations in
the future to service our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material non-core assets or operations or seeking to
raise additional debt or equity capital. These actions may not be effected on a timely basis or on satisfactory terms or at all, and these actions may not enable us to continue to satisfy our capital requirements. In addition, our existing or future
debt agreements, including the indentures governing the floating rate notes, the senior notes and senior subordinated notes and the senior secured credit facility may contain restrictive covenants prohibiting us from adopting any of these
alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness. See Managements Discussion and Analysis of Financial
Condition and Results of OperationsLiquidity and Capital Resources.



Our business is cyclical in nature and downturns in our primary markets could reduce the net sales and cash flow of our business.



In 2005, 33% of our sales were derived from the OEM market in North America. The demand for our original equipment products
is dependent on the production of automobiles, light trucks and heavy duty vehicles in North America. The automotive industry is highly cyclical, as new vehicle demand is dependent on consumer spending and is tied closely to the overall strength of
the North American economy. In addition, automotive production can be affected by inventory levels, interest rates, labor relations issues, strikes, regulatory requirements, trade agreements and other factors. The volume of automotive production in
North America has fluctuated, sometimes significantly, from year to year, and such fluctuations give rise to fluctuations in the demand for our products. Any decline in the demand for new automobiles, particularly in the United States, could have a
material adverse impact on our cash flow, financial condition and results of operations. Seasonality experienced by the automobile industry also impacts our operations, and historically we have

reported lower levels of sales for July and December due to model changeovers and plant idling by the automobile and light truck OEMs. Historically, the heavy duty truck
industry has been more cyclical than the automotive industry. New demand in the heavy duty truck industry is largely dependent upon the overall strength of the North American economy. In addition, heavy duty truck production can be affected by
interest rates, government regulations, labor relations, strikes, new product introductions and other factors. There can be no assurance that the heavy duty truck industry supplied by us



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will not experience downturns in the future. A significant decrease in overall demand for heavy duty trucks could have a material adverse effect on us.



The loss of a major customer or the deteriorating
financial condition of certain customers could reduce our net sales, cash flow and profitability.



The majority of our sales are to automotive and heavy-duty OEMs, OEM dealer networks, leading automotive parts retail chains and warehouse distributors.
There can be no assurance that any of our top customers will continue to require all of the products or services currently provided by us or that any of our top customers will not develop alternative sources, including their own in-house operations,
for the products or services they currently purchase. In addition, certain customers are facing structural issues, potential disruption of their supply chain due to bankruptcy and labor issues and negative industry trends resulting in deteriorating
financial conditions. Some of these customers are addressing these problems through restructuring, which may include significant capacity reductions or reorganization under bankruptcy laws. The loss of any of our major customers, reduction in their
demand for our products or the substantial restructuring activities by our major customers, could reduce our net sales, cash flow and profitability.



Longer product life of parts may reduce aftermarket demand for some of our products.



In 2005, approximately 58% of our sales were to the aftermarket. The average
useful life of original equipment parts has been steadily increasing in recent years due to improved quality and innovations in products and technologies. The longer product lives allow vehicle owners to replace parts of their vehicles less often.
Additional increases in the average useful life of automotive parts are likely to adversely affect the demand for our aftermarket products.



The uncertain conditions in the automotive industry may adversely affect our financial position.



The revenues of our Original Equipment, which we refer to as OE, operations
are closely tied to global OE automobile sales and production levels. The OE market is characterized by short-term volatility, with overall expected long-term growth in global vehicle sales and production. Automotive production in the local markets
served by us can be affected by macro-economic factors such as interest rates, fuel prices, consumer confidence, employment trends, regulatory requirements and trade agreements. A variation in the level of automobile production would affect not only
sales to OE customers, but, depending on the reasons for the change, could impact demand from aftermarket customers. If we fail to respond in a timely and appropriate manner to changes in the demand for our products, then our results of operations,
cash flow and financial condition could be adversely affected.



Our business is very competitive, and increased competition could reduce our revenues.



The motor vehicle parts industry in which we operate is highly competitive. Some of our OEM competitors are divisions or subsidiaries of companies that
are larger and have substantially greater resources than we do. Certain of these competitors are domiciled in areas that we are targeting for growth. We cannot be sure that we will be able to compete successfully with our competitors.



Furthermore, the trend towards consolidation among automotive parts suppliers
is resulting in fewer, larger suppliers who benefit from purchasing and distribution economies of scale. If we cannot achieve cost savings and operational improvements sufficient to allow us to compete favorably in the future with these larger
companies, our financial condition and results of operations could be adversely affected due to a reduction of, or inability to increase, sales sufficient to offset other price increases.



We depend heavily on GM. If GM develops alternative sources or otherwise decreases its need for the products we
currently supply, our net sales, cash flow and profitability may decrease.



GM and GM SPO, together accounted for approximately 22% of our aggregate net sales in 2005. The loss of GM as a customer for OEM or aftermarket products, the default by GM on its obligations to act as a distributor or
to purchase our OEM or aftermarket products, a substantial decrease in demand for GMs automobile models containing our products or our failure to obtain supply orders for our products used in GMs new automobile models could have a
material adverse effect on our business, cash flow, financial condition and results of operations. In addition, the potential disruption of GMs supply chain, strikes and work stoppages affecting GMs operations may postpone GMs need
for components produced by us, which could have a material adverse effect on our business, cash flow, financial condition and results of operations.



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In connection with our separation from GM in July 1994, GM entered into long-term contracts to purchase
from us 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. GMs obligation to purchase automotive starters from
us terminates on August 31, 2008. GMs obligation to purchase heavy-duty starters and alternators from us terminated on July 31, 2000. GMs commitments to purchase products from us in the future are subject to those products
remaining competitive as to price, technology and design. We cannot be sure that GM will not develop alternative sources for components currently produced by us and purchase some or all of its requirements for starters and alternators from these
alternative sources.



In addition, GM SPO is the exclusive
distributor of a significant number of our automotive products and is a distributor of our heavy-duty aftermarket products. Our exclusive distribution arrangement with GM SPO for our automotive aftermarket products terminates on July 31, 2009.
Our distribution arrangement with GM SPO is continuously renewable on an annual basis for our heavy-duty aftermarket products.



The prices that we can charge GM and some of our other customers are predetermined, and we bear the risk of costs in excess of our estimates.



Our supply agreements with GM and some of our other
customers require us to provide our products at predetermined prices. In some cases, these prices decline over the course of the contract. The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates.
Unanticipated cost increases may occur as a result of several factors, including increases in the costs of labor, components or materials. Although in some cases we are permitted to pass on to our customers the cost increases associated with
specific materials, cost increases that we cannot pass on to our customers would adversely affect our cash flow, financial condition and results of operations.



We may not realize sales represented by awarded business.



We base our growth projections, in part, on commitments made by our customers. These commitments generally renew yearly
during a program life cycle. If actual production orders from our customers do not approximate such commitments, it could have a material adverse effect on our growth and financial performance.



Consolidation among our customers could make it more difficult for us
to compete successfully.



In both the original
equipment market and aftermarket, the customer base is consolidating. As a result, we are competing for business from fewer customers. Even if we successfully attract this business, we would become more reliant on major customers, which would
exacerbate the risks described above. Due to the cost and capital focus of these major customers, we have been, and expect to continue to be, required to reduce prices. If we are not able to generate cost savings and operational improvements in the
future that would be sufficient to offset price reductions required by existing customers or as otherwise necessary to attract new business, these price reductions could adversely affect our cash flow, results of operations and financial condition.



Work stoppages or other labor issues at the facilities
of our customers or other suppliers could adversely affect our operations.



Difficult conditions in the automotive industry and actions taken by our customers and other suppliers to address negative industry conditions may affect our business. If any of our customers experience a significant
work stoppage, that customer may halt or limit the purchase of our products. Similarly, a work stoppage at another supplier could interrupt production at our customer which would have the same effect. This could cause us to shut down production
facilities relating to those products, which could have a material adverse effect on our business, cash flow, results of operations and financial condition.



Customer requirements for vendor owned inventory may have an adverse impact on our financial condition, liquidity and cash flow.



Certain aftermarket customers, including both large retail customers and
smaller warehouse distributors, require the vendor of record to provide financial assistance to offset the customer investment in inventory held for sale. Such assistance may be in the form of extended payment terms, vendor owned inventory or supply
of inventory without a core deposit. Participation in such initiatives requires us to invest our financial resources in accounts receivable, or product



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residing on the customer shelf prior to its sale to the end user. As such demands increase in number and dollar volume, our financial condition, liquidity
and cash flow may be adversely impacted.



Unexpected
changes in our core liability or the market value of cores may have an adverse effect on our financial condition.



We record a liability for core returns based on cores expected to be returned. The liability represents the difference between the core deposit value to
be credited to the customer and the core inventory value for the core being returned. Core inventory values decline over the expected remaining life of the core family. Core inventory values decline on the basis of several economic factors,
including market availability, seasonality and demand. If estimated returns and/or core market value differ from managements estimates, revisions to the estimated core liability may be required and may have an adverse impact on our financial
results.



Our products are subject to changing
technology, which could place us at a competitive disadvantage, relative to alternate products introduced by our competitors.



Some of our products are subject to changing technology. For example, hybrid vehicles use more advanced technology than found in traditional starters and
alternators. We cannot assure you that we will be able to achieve the technological advances or introduce new products that may be necessary to remain competitive within our business. We may require significant ongoing and recurring additional
capital expenditures and investment in research and development, manufacturing and other areas to remain competitive. Further, we cannot assure you that any technological development by us can be adequately protected such that we can maintain a
sustainable competitive advantage.



We are dependent on
the availability of raw materials and component parts.



We purchase substantial amounts of raw materials and some component parts from outside sources. Our principal purchased materials include aluminum castings, gray and ductile iron castings, armatures, solenoids, copper wire, injectors,
electronics, steel shafts, forgings, bearings, commutators, pumps and carbon brushes. The availability and prices of raw materials and component parts may be subject to curtailment or change due to, among other things, new laws or regulations,
suppliers allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and worldwide price levels. Any change in the supply of, or price for, these materials could materially affect our operating
results. A significant increase in the prices of these materials could increase our operating costs and our inability to pass these price increases on to our customers could have an adverse effect on our profit margins.



We are subject to risk due to an extensive global supply chain and may
incur additional costs that could negatively impact our operations, cash flow and profitability.



Weather, strikes and seasonal fluctuations are all potential obstacles to obtaining the supply of components and products that our customers require.
Although some supply items are dual sourced (from more than one geographic area), any disruption in the supply chain from weather, strikes or government port intervention or excessive demand would cause us to incur premium alternative freight costs
or cause temporary shortages to customers, thereby negatively impacting our business, cash flow and financial results.



The adverse industry environment may require us to pay suppliers in advance or on short credit terms. This may impact our liquidity negatively and may
lead to interruptions in production.



Our lean
manufacturing and other cost saving plans may not be effective.



Our operations strategy includes goals such as improvement of inventory management, customer delivery, plant and distribution facility consolidation and the integration of back office functions across our businesses. While we believe that
the successful implementation of these and other cost saving plans could result in reducing our expenses, there can be no assurance that these results can be achieved. If we are unable to realize these anticipated synergies, our operating results
and financial condition may be adversely affected. Moreover, the implementation of cost saving plans and facilities integration may disrupt our operations and financial performance.



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We may incur material losses and costs as a result of product liability and warranty and recall
claims that may be brought against us.



We may be
exposed to product liability and warranty claims in the event that our products actually or allegedly fail to perform as expected or the use of our products results, or is alleged to result, in bodily injury and/or property damage. Accordingly, we
could experience material warranty or product liability losses in the future and incur significant costs to defend these claims.



In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of that product. Depending on the
terms under which we supply products, we may be held responsible for some or all of the repair or replacement costs of our products when the product supplied did not perform as represented. Our costs associated with providing product warranties
could be material. Product liability, warranty and recall costs may have a material adverse effect on our financial condition.



We have recorded a significant amount of goodwill and other identifiable intangible assets, which may become impaired in the future.



We have recorded a significant amount of goodwill and
other identifiable intangible assets, including customer relationships, trademarks and developed technologies. Goodwill and other identifiable intangible assets, net were approximately $176.6 million as of December 31, 2005, or 20% of our total
assets. Goodwill, which represents the excess of cost over the fair value of the net assets of the businesses acquired, was approximately $156.7 million as of December 31, 2005, or 18% of our total assets.



Impairment of goodwill and other identifiable intangible assets may result
from, among other things, deterioration in our performance, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products sold by our business, and a variety of
other factors. The amount of any quantified impairment must be expensed immediately as a charge that is included in operating income. We are subject to financial statement risk in the event that goodwill or other identifiable intangible assets
become impaired.



A limited number of persons indirectly
control us and may exercise their control in an adverse manner to others.



Court Square Capital Limited, or Court Square, Citicorp Venture Capital Equity Partners, L.P., CVC Executive Fund LLC, CVC/SSB Employee Fund, L.P., Berkshire Hathaway Inc. and Annex Holdings I L.P. together
beneficially own, indirectly through our parent company, Remy Worldwide Holdings, Inc., approximately 95% of our outstanding common stock. By virtue of their ownership, these persons have the power to direct our affairs and will be able to determine
the outcome of all matters required to be submitted to the stockholders for approval, including the election of a majority of our directors, the approval of mergers, consolidations and the sale of all or substantially all of our assets and the
amendment of our certificate of incorporation. These persons have the power to prevent or cause a change in control of our company. In addition, these persons may exercise such power in their own interests and not necessarily in the interests of the
holders of our notes.



We may not be able to integrate
our acquisitions into our business successfully.



We
have completed 18 acquisitions and entered into 6 joint ventures since our separation from GM. We also may consider acquisitions, business combinations and joint ventures in the future. Acquisitions and joint ventures involve a number of special
risks and challenges, including those relating to conforming the standards, processes, procedures and controls of the acquired business with those of our existing operations, coordinating new product and process development, the assumption of
unknown liabilities, integrating product technologies, increases in indebtedness and increasing the scope, geographic diversity and complexity of our operations. Our failure to integrate these businesses successfully into our existing businesses
could result in our incurring unanticipated expenses and losses.



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Our international operations subject us to risks not faced by domestic competitors, which include
unfavorable political, regulatory, labor and tax conditions in other countries.



Approximately 20% of our net sales in fiscal year 2005 were derived from net sales in foreign markets. We expect sales from international markets to represent an increasing portion of total sales. Risks inherent in
international operations include the following:



| |  |  | agreements may be difficult to enforce and receivables difficult to collect through a foreign countrys legal system;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | foreign customers may have longer payment cycles;
| | - |  | -------------------------------------------------



| |  |  | foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade or investment, including
exchange controls;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | U.S. export licenses may be difficult to obtain;
| | - |  | ------------------------------------------------



| |  |  | intellectual property rights may be more difficult to enforce in foreign countries;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | general economic conditions in the countries in which we operate could have an adverse effect on our earnings from operations in those countries;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unexpected adverse changes in foreign laws or regulatory requirements may occur;
| | - |  | --------------------------------------------------------------------------------



| |  |  | compliance with a variety of foreign laws and regulations may be difficult; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | overlap of different tax structures may subject us to additional taxes.
| | - |  | -----------------------------------------------------------------------



We cannot be sure that any of these factors will not have a material adverse effect on our business, financial condition and results of operations.



We are exposed to domestic and foreign currency
fluctuations that could adversely affect our reported net sales, results of operations and financial condition.



Our international sales are generally denominated in foreign currencies, and this revenue could be materially affected by currency fluctuations. Changes
in currency exchange rates could adversely affect our reported revenues and could require us to reduce our prices to remain competitive in foreign markets, which could also have a material adverse effect on our results of operations. Principal and
interest on the notes will be payable in U.S. dollars. Our ability to pay interest and principal on our notes and other principal indebtedness when due is dependent on the then current exchange rates between U.S. dollars, on the one hand, and the
Euro and other European as well as Asian currencies, on the other hand, which rates are and will be subject to fluctuation.



We source many of our parts, components and finished products from Mexico, Europe and Asia. The cost of these products could fluctuate depending on
foreign currency fluctuations.



Approximately 20% of our net
sales in fiscal year 2005 were derived from net sales in foreign markets. Fluctuations in exchange rates may affect product demand and may adversely affect the profitability in U.S. dollars of products and services provided by us in foreign markets
where payment for our products and services is made in the local currency.



Our ability to operate our company effectively could be impaired if we fail to attract and retain key personnel.



Our ability to operate our business and implement our strategies effectively depends, in part, on the efforts of our executive officers and other key
employees. In addition, our future success will depend on, among other factors, our ability to attract and retain other qualified personnel in key areas, including engineering, sales and marketing, operations, information technology, and finance.
The loss of the services of any of our key employees or the failure to attract or retain other qualified personnel could have a material adverse effect on our business.



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Environmental and health and safety liabilities and requirements could require us to incur material
costs.



We are subject to various U.S. and foreign laws
and regulations relating to environmental protection and worker health and safety, including those governing:



| |  |  | discharges of pollutants into the air and water;
| | - |  | ------------------------------------------------



| |  |  | the management and disposal of hazardous substances; and
| | - |  | --------------------------------------------------------



| |  |  | the cleanup of contaminated properties.
| | - |  | ---------------------------------------



The nature of our operations exposes us to the risk of liabilities and claims with respect to environmental matters, including on-site and off-site
disposal of hazardous waste. For example, there are ongoing investigation and remediation activities in connection with several of our properties, and we have been identified as a potentially responsible party at two off-site disposal sites.
Although virtually all of these matters are being handled by former owners of our various properties and businesses pursuant to indemnification and similar agreements, we could incur material costs in connection with these matters if these
indemnities become inapplicable or unavailable.



In addition,
future events could require us to make additional expenditures to modify or curtail our operations, install pollution control equipment or investigate and cleanup contaminated sites, such as:



| |  |  | the discovery of new information concerning past releases of hazardous substances;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the discovery or occurrence of compliance problems relating to our operations;
| | - |  | ------------------------------------------------------------------------------



| |  |  | changes in existing environmental laws or their interpretation; and
| | - |  | -------------------------------------------------------------------



| |  |  | more rigorous enforcement by regulatory authorities.
| | - |  | ----------------------------------------------------



Expenditures resulting from these events could have a material adverse effect on our business, financial condition and results of operation.



|ITEM 1B    UNRESOLVED |  | STAFF COMMENTS
|--------------------- |  | --------------

---



None.



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|ITEM 2 |  | PROPERTIES
|------ |  | ----------

---



Properties



Our world headquarters is located at 2902 Enterprise Drive, Anderson, Indiana 46013. We lease our headquarters. As of December 31, 2005 we have a total of
86 manufacturing and certain other facilities in 13 countries. The following table sets forth certain information regarding these facilities.



|                           |  |                    |  |                                |  |             
|-------------------------- |  | ------------------ |  | ------------------------------ |  | ------------
|Location                   |  | NumberOfFacilities |  | Use                            |  | Owned/Leased
|Anderson, IN               |  | 5                  |  | Office/Manufacturing/Testing   |  | Leased      
|Atlanta, GA                |  | 1                  |  | Warehouse/Office               |  | Leased      
|Brusque, Brazil            |  | 1                  |  | Manufacturing                  |  | Leased      
|Buffalo, NY                |  | 2                  |  | Office/Warehouse               |  | Leased      
|Burntwood, United Kingdom  |  | 1                  |  | Manufacturing/Office/Warehouse |  | Leased      
|Chantilly, VA              |  | 2                  |  | Manufacturing/Office/Warehouse |  | Leased      
|Coesfeld, Germany          |  | 1                  |  | Office                         |  | Leased      
|Detroit, MI                |  | 1                  |  | Office                         |  | Leased      
|Edmond, OK                 |  | 2                  |  | Manufacturing/Office/Warehouse |  | Leased/Owned
|Findlay, OH                |  | 1                  |  | Retail                         |  | Leased      
|Flint, MI                  |  | 1                  |  | Warehouse/Office               |  | Leased      
|Fort Wayne, IN             |  | 1                  |  | Manufacturing/Warehouse        |  | Leased      
|Franklin, IN               |  | 5                  |  | Manufacturing/Office/Warehouse |  | Leased/Owned
|Guadalajara, Mexico        |  | 1                  |  | Manufacturing/Office/Warehouse |  | Leased      
|Hancock, MD                |  | 1                  |  | Warehouse/Office               |  | Leased      
|Heverlee, Belgium          |  | 1                  |  | Office                         |  | Leased      
|Heist Op Den Berg, Belgium |  | 3                  |  | Office/Manufacturing/Warehouse |  | Leased      
|Jemmel, Tunisia            |  | 1                  |  | Manufacturing                  |  | Leased      
|Jingzhou, P.R. China       |  | 1                  |  | Manufacturing                  |  | Leased      
|Kaleva, MI                 |  | 1                  |  | Manufacturing                  |  | Leased      
|Kyoungnam, South Korea     |  | 1                  |  | Manufacturing/Warehouse        |  | Owned       
|Laredo, TX                 |  | 1                  |  | Warehouse                      |  | Leased      
|Mansfield, TX              |  | 1                  |  | Manufacturing                  |  | Leased      
|Marion, MI                 |  | 1                  |  | Manufacturing                  |  | Leased      
|Matehuala, Mexico          |  | 1                  |  | Manufacturing/Office           |  | Leased      
|Meridian, MS               |  | 2                  |  | Manufacturing/Office           |  | Leased      
|Mezokovesd, Hungary        |  | 1                  |  | Manufacturing                  |  | Owned       
|Miskolc, Hungary           |  | 2                  |  | Manufacturing/Warehouse        |  | Owned       
|Noida, India               |  | 1                  |  | Manufacturing/Office           |  | Owned       
|Pensnett, United Kingdom   |  | 1                  |  | Manufacturing/Office           |  | Leased      
|Peru, IN                   |  | 3                  |  | Office/Manufacturing/Warehouse |  | Leased      
|Philadelphia, PA           |  | 1                  |  | Office/Warehouse               |  | Leased      
|Piedras Negras, Mexico     |  | 2                  |  | Office/Manufacturing/Warehouse |  | Leased      
|Piscataway, NJ             |  | 1                  |  | Office/Warehouse               |  | Leased      
|Pondicherry, India         |  | 1                  |  | Manufacturing                  |  | Owned       
|Raleigh, MS                |  | 3                  |  | Manufacturing/Warehouse        |  | Leased      
|Reed City, MI              |  | 1                  |  | Office                         |  | Leased      
|San Luis Potosi, Mexico    |  | 6                  |  | Manufacturing/Office/Warehouse |  | Leased      
|Sao Paulo, Brazil          |  | 1                  |  | Office                         |  | Leased      
|Seoul, South Korea         |  | 1                  |  | Office                         |  | Leased      
|Shanghai, P.R. China       |  | 1                  |  | Office                         |  | Leased      
|Shenzen, P.R. China        |  | 1                  |  | Office                         |  | Leased      
|Spartanburg, SC            |  | 1                  |  | Warehouse/Office               |  | Leased      
|Swidnica, Poland           |  | 1                  |  | Manufacturing/Office/Warehouse |  | Owned       
|Taylorsville, MS           |  | 1                  |  | Manufacturing/Warehouse        |  | Leased      
|Toledo, OH                 |  | 1                  |  | Retail                         |  | Leased      
|Troy, MI                   |  | 1                  |  | Office                         |  | Leased      
|Winchester, VA             |  | 2                  |  | Office/Manufacturing/Warehouse |  | Leased      
|Winnepeg, Canada           |  | 2                  |  | Manufacturing/Warehouse        |  | Leased/Owned
|Wroclaw, Poland            |  | 1                  |  | Office/Testing                 |  | Leased      



19



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##### Table of Contents

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



|ITEM 3 |  | LEGAL PROCEEDINGS
|------ |  | -----------------

---



Legal Proceedings



From time to time, we are a party to various legal actions in the normal course of our business, including those related to commercial transactions,
product liability, safety, health, taxes, environmental and other matters.



HCSPay Litigation



On January 16, 2006, we
initiated litigation in the Circuit Court of Oakland County, Michigan against Hennessey Capital, LLC; HCSPay, LLC; and SurGen, LLC (we refer to the preceding three entities collectively as Hennessey) and against Surge Capital; Lancelot
Investors Fund LP; Lancelot Investment Management, LLC; AGM II, LLC; and John Maselli (we refer to the preceding five entities collectively as Surge). This litigation seeks the return of approximately $6.1 million that we believe is owed
to us under a factoring agreement that we entered into with Hennessey plus punitive damages and costs. We allege claims against Hennessey for breach of contract and breach of fiduciary duty. We allege claims against Surge for conversion, unjust
enrichment, declaratory judgment, and constructive trust and seek the return of our funds plus punitive damages. This matter is at the very earliest stage of litigation, and no discovery has taken place. We intend to pursue our claims vigorously. At
December 31, 2005, we had a receivable recorded of approximately $6.1 million related to this matter.



UAW Litigation



On
April 16, 2003, the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW) and its Local Union 662 filed suit against us and Remy, Inc. (RI), in Federal District Court in the
Southern District of Indiana, Indianapolis Division. The lawsuit was filed under Section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, seeking enforcement of an expired Supplemental Unemployment Benefits plan (SUB
plan). The plaintiffs alleged that the SUB plan provided supplemental unemployment benefits for 52 weeks and separation pay in an amount exceeding $20.0 million for employees who were terminated as a result of the closure of RIs
Anderson, Indiana production facilities at the end of March 2003. The plaintiffs also sought to enforce terminated provisions of a health care program, which the plaintiffs alleged provided the terminated employees with 25 months of continued
hospital, surgical, medical, hearing aid, prescription drug, mental health, substance abuse and vision insurance coverage. The terminated employees were represented by the UAW and its Local Union 662 under various agreements, which expired on
March 31, 2003. The lawsuit was filed shortly after the UAW membership failed to ratify RIs last, best and final offer for a Shutdown Agreement. The UAW filed an amended complaint on July 8, 2003 to which we filed an answer on
July 24, 2003. Motions for summary judgment filed by the parties were denied by the court in September 2005. On January 31, 2006, a final settlement agreement and release was entered into by the parties which fully resolved all of the
allegations of the complaint. Under the terms of the settlement agreement, us and RI agreed to contribute approximately $5.3 million to the SUB plan in return for a release of all claims alleged in the lawsuit, including any further obligations to
fund the SUB plan. The accompanying consolidated financial statements reflect a restructuring charge recorded in the 4th quarter of approximately $1.5 million related to this issue including $0.2 million for payroll taxes related to the settlement.
We paid the $5.3 million and associated payroll taxes of $0.3 million in 2006.



Prison Labor Matter



In January 2004, a class
action on behalf of all prisoners who worked in a South Carolina Department of Corrections (SCDC) Services Training Program at Lieber Correctional Institute was brought against the SCDC and our former subsidiary Williams Technologies,
Inc. (Williams), which was sold to Caterpillar, Inc., in September 2004. The Plaintiffs claim that (a) they should have been paid industry prevailing wages under a South Carolina prison industries authorization statute, (b) the
SCDC and Williams violated the Payment of Wages Act and (c) the SCDC and Williams committed a tort under the South Carolina Tort Claims Act. Under the terms of the sale, the Company retained liability and responsibility for this claim. The
Circuit Court for Dorchester County granted summary judgment to the Company on April 21, 2005, and decertified the Plaintiff class. On January 24, 2006 the Plaintiff filed an appellate brief and Williams



20



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##### Table of Contents

responded to this brief in March 2006. We continue to deny the material allegations of the complaint and any wrongdoing. We intend to defend ourselves
vigorously.



Import/Export Matters



We continue to expand globally to take advantage of global economic
conditions and related cost structures. We are subject to various duties and import/export taxes. We actively review our import/export processes in North America, Europe and Asia to verify the appropriate import duty classification, value and duty
rate, including import value added tax. As part of this review process, we identified a potential exposure related to customs duties in the United States. Upon resolution of these interpretations, duties due from us could range from $0 to $12.2
million. As of December 31, 2005, we have paid $1.0 million and accrued approximately $7.1 million related to this matter.



Franklin Power Products Facility



In September 2000, one of Franklin Power Products, Inc.s Indiana facilities received a Finding of Violation and Order for Compliance (the
Order) from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. installed wastewater treatment equipment and is in compliance with the terms of the Order and has
eliminated the discharge. In July 2004, we and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on behalf of the EPA, which tolled the statute of limitations on the EPAs potential claim for penalties.
Since that time, we have been cooperating with the EPA by providing additional information and have entered into settlement negotiations with the EPA and the Department of Justice. On resolution of these negotiations, the amount due from us will
range from $0.2 million to $2.4 million. The accompanying consolidated financial statements reflect a liability of approximately $1.1 million related to this issue.



|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, 2005.



21



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##### Table of Contents

PART II



|ITEM 5 |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------ |  | ---------------------------------------------------------------------

---



Market Information



There is currently no established public market for our outstanding common
equity.



Holders



We have one holder of our Class B common stock as of March 15, 2006.



Dividends



Our ability to pay dividends is restricted by certain covenants contained in
our senior credit facilities, as well as certain restrictions contained in our indentures relating to our floating rate notes, senior notes and our senior subordinated notes.



|ITEM 6 |  | SELECTED FINANCIAL DATA
|------ |  | -----------------------

---



The following table presents our selected consolidated financial data for the fiscal years ended December 31, 2005,
2004, 2003, 2002 and 2001 (dollars in thousands).



|                                                         |  |                         |           |   |      |   |           |  |   |          |   |  |             |         |   |  |   |         |  
|-------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- |  | - | -------- | - |  | ----------- | ------- | - |  | - | ------- | -
|                                                         |  | Years Ended December 31 |          
|                                                         |  | 2005                    |           |   | 2004 |   | 2003      |  |   | 2002     |   |  | 2001        |        
|                                                         |  |                         |           |   |      |   |           |  |   |          |   |  | (Unaudited) |        
|Net sales                                                |  | $                       | 1,228,950 |   |      | $ | 1,051,165 |  | $ | 972,794  |   |  | $           | 932,636 |   |  | $ | 877,296 |  
|Net (loss) income from continuing operations             |  |                         | (96,579   | ) |      |   | 11,359    |  |   | (180,926 | ) |  |             | (3,831  | ) |  |   | (44,992 | )
|Total assets                                             |  |                         | 871,175   |   |      |   | 756,018   |  |   | 723,976  |   |  |             | 852,819 |   |  |   | 947,231 |  
|Long-term debt, net                                      |  |                         | 714,181   |   |      |   | 610,330   |  |   | 593,003  |   |  |             | 596,282 |   |  |   | 593,178 |  
|Redeemable preferred stock                               |  |                         |          |   |      |   |          |  |   | 306,969  |   |  |             | 274,074 |   |  |   | 244,699 |  
|Cash dividends declared per common share                 |  |                         | NA        |   |      |   | NA        |  |   | NA       |   |  |             | NA      |   |  |   | NA      |  
|Other items:                                             |  |                         |           |   |      |   |           |  |   |          |   |  |             |         |   |  |   |         |  
|Restructuring charges (credits)                          |  |                         | 4,850     |   |      |   | 942       |  |   | 48,968   |   |  |             | (4,375  | ) |  |   | 30,098  |  
|Cumulative effect of change in accounting principle, net |  |                         |          |   |      |   |          |  |   |         |   |  |             | (74,176 | ) |  |   |        |  
|Special charges                                          |  |                         |          |   |      |   |          |  |   | 118,240  |   |  |             |        |   |  |   | 30,026  |  
|Impairment charges                                       |  | $                       | 13,917    |   |      | $ |          |  | $ |         |   |  | $           |        |   |  | $ |        |  



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##### Table of Contents

|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 our 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.



General



We are a leading global
vehicular parts designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment electrical components and aftermarket powertrain components for automobiles, light trucks, heavy-duty trucks and other vehicles.
We also provide core exchange services. We sell our products worldwide primarily under the Delco Remy brand name, the Remy brand name, the World Wide Automotive brand name and our customers widely recognized
private label brand names. Our products include starters, alternators, remanufactured engines, and fuel systems which are principally sold or distributed to original equipment manufacturers, which we refer to as OEMs for both original equipment
manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. We sell our products principally in North America, Europe, Latin America and Asia-Pacific.



We believe we are the largest producer in the world of remanufactured
starters and alternators for the aftermarket. Our remanufacturing operations obtain failed products, commonly known as cores, from our customers as returns. These cores are an essential material needed for the remanufacturing operations. We also
provide exchange services for cores for third party aftermarket remanufacturers. At the time of our separation from General Motors Corporation, which we refer to as GM, in August 1994, we were predominantly a North American OEM with a majority of
our 1995 sales derived from GM. Through strategic capital investments, acquisitions, divestitures and facility and workforce rationalization, we have become a low cost, global manufacturer and remanufacturer with a more balanced business and product
mix between the aftermarket and the original equipment market. Since fiscal year 1995 we have increased sales, broadened our product line, expanded manufacturing and remanufacturing capabilities, diversified our customer base and end markets,
lowered our cost base and extended our participation in international markets.



In general, we are influenced by the underlying trends in the automobile, light truck, heavy-duty truck, construction and industrial markets. However, we have been able to balance the cyclical nature of some of our
businesses with the diversity of OEM markets between the automotive, heavy duty truck and industrial markets, as well as by focusing on expanding our remanufacturing capabilities and our aftermarket business.



The automotive parts market is highly competitive. Competition is based
primarily on quality of products, service, delivery, technical support and price. Most OEMs and aftermarket distributors source parts from one or two suppliers and we compete with a number of companies who supply automobile manufacturers throughout
the world.



Our 2005 operating results were significantly below
2004. While net sales increased to $1,229.0 million in 2005, from $1,051.2 million in 2004 and $972.8 million in 2003, gross margin percentage (excluding the 2003 special charge for the change in estimate for core valuation and the Mexican
arbitration), decreased to approximately 12% in 2005 compared with approximately 19% in 2004 and 2003. This decrease in gross margin percentage, coupled with impairment and restructuring charges in 2005 led to an operating loss of $10.7 million and
a net loss (from continuing operations) of $96.6 million. The decrease in gross margin percentage was driven by decreasing sales prices, including negotiated reductions with GM, commodity price increases, start up and product launch costs in
transferring certain manufacturing and remanufacturing production to Mexico and unfavorable foreign currency exchange fluctuations (primarily in the US dollar vs. the Korean Won).



Cash outflows from operating and investing activities in 2005 totaled $88.3 million. Excluding the cash outflow related to
acquisitions of $57.6 million and the cash inflow of $10.7 million from the net proceeds on sale of businesses and assets, we used $46.9 million of cash for operating activities and $41.4 million of cash for capital expenditures. In December 2005,
we obtained an additional $80 million term loan. The net proceeds ($77.6 million after original issue discount) from this incremental borrowing enabled us to end 2005 with $100.8 million of domestic liquidity (cash on hand in the United States and
availability under the Revolving Credit Facility). However, if cash used from operations during 2006 were to continue at 2005s level it would result in significant strains on liquidity during 2006. We expect higher cash interest payments in
2006 due to the additional borrowing coupled with anticipated higher interest rates on the $125 million floating rate notes and borrowings under the variable interest rate revolving credit facility. Finally, we have $27.5



23



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##### Table of Contents

million of current maturities of long term debt at December 31, 2005. In March 2005 we eliminated the earnings before interest, taxes, depreciation and
amortization (EBITDA) and Fixed Charge covenants from our senior credit facility. Our debt also renders us subject to restrictive covenants, which include, among other things: (i) limitations on additional borrowings and
encumbrances; (ii) limitations on cash dividends paid; (iii) limitations on investments and capital expenditures; (iv) limitations on leases and sales of assets; and (v) requirements for minimum liquidity. This item is addressed
more completely in Note 11of our consolidated financial statements. These covenants coupled with the cash required to service our substantial indebtedness place significant demands on our liquidity.



In order to improve our 2006 cash flow from operations as well as our overall
liquidity, we have taken specific action to improve our margins and overall cost structure. These actions include certain customer price increases, supplier price reductions, headcount reductions and price reductions on freight. Further, we plan to
complete the integration of the acquisition of UPC in 2006.



Our $145 million, 8 5/8% Senior Notes are due December 15, 2007. In anticipation of this due date and in consideration of the Companys substantial indebtedness, we are exploring various strategic alternatives, including, but not
limited to, refinancing some or all of our debt. In addition, the Board of Directors has authorized management to explore restructuring alternatives including the engagement of investment bankers to advise us and analyze the disposition of certain
non-core businesses.



We believe that the actions discussed
above provide the foundation for improved operating performance in 2006 and future periods and that our expected future operating results and liquidity are sufficient to allow us to satisfy our operating and liquidity requirements during 2006.
Management is prepared to take actions to maintain sufficient liquidity in the event of any unforeseen downturns or other circumstances.



Results of Operations



The following table sets forth selected statements of operations data expressed as a percentage of sales:



|                                             |  |                        |    |  |       |   |  |       |   
|-------------------------------------------- |  | ---------------------- | -- |  | ----- | - |  | ----- | --
|                                             |  | Year Ended December 31 |   
|                                             |  | 2005                   |    |  | 2004  |   |  | 2003  |   
|Net sales                                    |  | 100.0                  | %  |  | 100.0 | % |  | 100.0 | % 
|Cost of goods sold                           |  | 88.0                   |    |  | 80.9  |   |  | 81.3  |   
|Special charges                              |  |                       |    |  |      |   |  | 12.2  |   
|Gross profit                                 |  | 12.0                   |    |  | 19.1  |   |  | 6.5   |   
|Selling, general and administrative expenses |  | 11.3                   |    |  | 10.8  |   |  | 9.9   |   
|Impairment charges                           |  | 1.2                    |    |  |      |   |  |      |   
|Restructuring charges                        |  | 0.4                    |    |  | 0.1   |   |  | 5.1   |   
|Operating (loss) income                      |  | (0.9                   | )  |  | 8.2   |   |  | (8.5  | ) 
|Interest expense, net                        |  | 5.6                    |    |  | 6.3   |   |  | 5.7   |   
|Income tax expense                           |  | 1.1                    |    |  | 0.5   |   |  | 3.8   |   
|Minority interest                            |  | 0.3                    |    |  | 0.3   |   |  |      |   
|Loss from unconsolidated subsidiaries        |  |                       |    |  | 0.1   |   |  | 0.7   |   
|Discontinued operations                      |  |                       |    |  | 4.3   |   |  | (0.6  | ) 
|                                             |  |                        |    |  |       |   |  |       |   
|Net (loss) income                            |  | (7.9                   | )% |  | 5.4   | % |  | (19.2 | )%
|                                             |  |                        |    |  |       |   |  |       |   



Year Ended
December 31, 2005 Compared To Year Ended December 31, 2004



Net Sales



|                       |  |      |         |      |   |                      |  |   |         |   |  |      |  
|---------------------- |  | ---- | ------- | ---- | - | -------------------- |  | - | ------- | - |  | ---- | -
|Product Categories     |  | 2005 |         | 2004 |   | Increase/ (Decrease) |  |   | %Change |  
|Automotive OEM         |  | $    | 322.3   |      | $ | 305.9                |  | $ | 16.4    |   |  | 5.4  | %
|Heavy duty OEM         |  |      | 197.3   |      |   | 181.0                |  |   | 16.3    |   |  | 9.0  |  
|Electrical aftermarket |  |      | 508.1   |      |   | 409.1                |  |   | 99.0    |   |  | 24.2 |  
|Powertrain             |  |      | 145.3   |      |   | 96.4                 |  |   | 48.9    |   |  | 50.7 |  
|Core services          |  |      | 56.0    |      |   | 58.8                 |  |   | (2.8    | ) |  | (4.8 | )
|Total Net Sales        |  | $    | 1,229.0 |      | $ | 1,051.2              |  | $ | 177.8   |   |  | 16.9 | %



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##### Table of Contents

Automotive OEM net sales increased due to the ramp up of the alternator business and the impact of new
business awards received in 2004, offset in part by price reductions and lower customer demand as a result of reduced production levels, primarily in North America. Heavy-duty OEM sales increased due to continued strong demand from Class 5  8
truck customers. OEM sales were also favorably impacted by the weak U.S. dollar. Electrical aftermarket sales increased as a result of the acquisition of UPC on March 18, 2005 as well as volume growth in Europe and favorable foreign exchange,
partially offset by the loss of a U.S. retail customer in mid 2004, soft market conditions and lower volume from GM SPO. Powertrain sales increased due to higher diesel engine, parts and locomotive product volume. Third party sales in the core
services business declined primarily relating to softening demand in the market for cores.



Gross Profit



Gross profit of $147.2 million in 2005 compares with gross profit of $200.5 million in 2004, which is a decline of $53.3 million, or 26.6%. Gross profit as a percentage of net sales was 12.0% in 2005 compared with 19.1% in 2004. Automotive
OEM gross profit declined $44.0 million due to lower customer demand, price reductions, higher material and fuel costs and adverse currency impact, partially offset by the ramp up of the alternator business and the impact of new business awards
received in 2004. Heavy-duty OEM gross profit declined $8.8 million due to higher material and fuel costs, partially offset by increased sales volume. OEM gross profit was also negatively impacted by start up and launch costs associated with initial
insourcing of components from Korean suppliers to our Mexican operations. Electrical aftermarket gross profit decreased $1.1 million due to a charge of $6.0 million recorded in the second quarter of 2005 relative to a probable underpayment of U.S.
duties on remanufactured starters and alternators imported into the U.S. in the years 2000 to 2004, added start-up costs associated with the relocation of certain UPC assembly operations to Mexico, the impact of soft market conditions and the
additional cost of integrating the UPC acquisition, partially offset by higher sales and cost saving synergies as a result of the UPC acquisition. Powertrain gross profit increased $3.5 million primarily as a result of higher sales and cost
improvements, partially offset by unfavorable product mix. Gross profit on core services decreased $2.9 million due to lower sales, loss on sale, write down of slow moving inventory and unfavorable pricing.



Selling, General and Administrative Expense



Selling, general and administrative, which we refer to as SG&A, expenses
increased $25.9 million, to $139.2 million in 2005, compared to $113.3 million in 2004. As a percentage of net sales, SG&A expenses were 11.3% in 2005 compared with 10.8% in 2004. The year over year increase was mainly due to the addition of UPC
in 2005, higher expenditures for systems, marketing initiatives and product engineering, in part required to support future business including developing samples for the new hybrid technology and expansion in China. The change also reflects an
increase in the provision for bad debt expense, an increase in non recourse accounts receivable factoring costs, non restructuring related severance and organizational realignment costs.



We expect to continue our investment in resources necessary to support our global expansion and new product development.



Impairment Charges



We recorded an impairment charge of $13.9 million in 2005. This relates to a
write off of the entire goodwill balance at Knopf, our core service provider, due to lower demand in the core market. See Note 5 to our consolidated financial statements.



Restructuring Charges



We recorded a net restructuring charge of $4.8 million in 2005 relative to (i) a reduction in force at our headquarters in Anderson, Indiana, which
was initiated in the third quarter of 2005; (ii) the 2003 closure of our starter and alternator manufacturing operations in Anderson, Indiana; (iii) the closure and consolidation of our electrical aftermarket remanufacturing and
distribution facilities in Reed City, Michigan; (iv) the consolidation of certain operations in Europe; (v) a reduction in force subsequent to the ramp up of the in sourcing activities combined with the continued implementation of lean
manufacturing initiatives at our OEM operations in Mexico; (vi) the closure of two distribution centers in our core services operations; and (vii) the closure of our Powrbilt Products diesel engine remanufacturing operation in Mansfield,
Texas. The charge consisted of termination benefits totaling $7.0 million, asset and leasehold improvement impairment charges $0.5 million and other costs of $0.3 million, offset by a $3.0 million credit (including the extinguishment of $2.7 million
of a liability for maintenance agreements) on the sale of production facilities in Anderson, Indiana which were written down in 2003.



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##### Table of Contents

In 2004, we recorded a net restructuring charge of $0.9 million in 2004 primarily related to the actions
taken in prior years as outlined above. The 2004 charge consisted of employee termination benefits of $1.3 million and $1.4 million of other costs, partially offset by a $1.8 million reduction in the reserve established in 2003 for the impairment of
operating leases, as we reached an agreement to transfer our lease obligation for an Anderson-based facility to a third party.



Operating (Loss) Income



An operating loss of $10.7 million in 2005 compares with operating income of $86.3 million in 2004. The loss in 2005 was impacted by the impairment charge
of $13.9 million and $4.9 million of net restructuring charges discussed above. The remaining $78.2 million year over year decrease in operating income was due to the decrease in gross profit and the increase in SG&A expenses discussed above.



Interest Expense, Net



Interest expense, net of $69.4 million in 2005 increased $11.2 million from
$58.2 million in 2004. This increase reflected $4.5 million of interest expense charged to discontinued operations in 2004, imputed interest of approximately $2.6 million associated with our customer obligation liabilities, primarily related to the
acquisition of UPC in March 2005, the impact of interest rate increases on our $125.0 million Second Priority Senior Secured Floating Rate Notes and increased borrowings on our senior credit facility. Interest expense on our senior credit facility
also reflects the acquisition of UPC. These items were partially offset by the retirement of our $140.0 million Senior Subordinated Notes in the second quarter of 2004.



Loss on Early Extinguishment of Debt



In connection with our refinancing actions during 2004 (discussed below in our liquidity section), we recorded a loss on the
early extinguishment of debt totaling $7.9 million. This loss consisted of: (i) a call premium of $2.5 million and write off of deferred financing costs of $1.4 million on redemption of the 10 5/8% Senior Subordinated Notes; (ii) a
prepayment penalty of $1.8 million and write off of deferred financing costs of $0.7 million on prepayment of the term loan; and (iii) a write off of deferred financing costs of $1.2 million and other fees of $0.3 million.



Income Taxes



Income tax expense on continuing operations of $13.2 million in 2005 included
a $8.0 million provision for U.S. federal and state deferred taxes, provisions for domestic state and local taxes of $0.9 million and taxes in various foreign jurisdictions of $4.3 million. Income tax expense on continuing operations of $5.4 million
in 2004 consisted of provisions for domestic and state local taxes of $0.4 million and in foreign jurisdictions of $5.0 million.



In the fourth quarter of 2003, in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, which we refer to as SFAS
No. 109, we recorded a charge of $28.3 million for a deferred valuation allowance for substantially all unreserved domestic income tax assets established prior to 2003. In 2005, we recorded a charge of $6.7 million for a deferred tax valuation
allowance for the remaining unreserved domestic income tax assets.



Our consolidated effective income tax rate of (16.5%) in 2005 and 26.7% in 2004 reflects the above matters.



Minority Interest



Minority interest of $3.4 million in 2005 consisted of minority shareholders interests in the earnings of our joint venture with International Truck
and Engine Corporation and the earnings of Remy Electricals Hubei Company Ltd., (fka, Hubei Delphi Automotive Generators Company, Ltd.,) which we refer to as Hubei. Minority interest in 2004 of $2.8 million included minority shareholders
interests in the earnings of our joint venture with International Truck and Engine Corporation and earnings of Hubei and Remy Automotive Mexico, S. de R.L. de C.V., which we refer to as RM. We purchased the remaining minority shareholders
interest in RM effective in the second quarter of 2004 after finalization of the Mexico arbitration that same year.



Loss (Income) from Unconsolidated Subsidiaries



The income from unconsolidated subsidiaries of $0.2 million in 2005 consisted of our share of income recorded by Sahney Paris Rhone Ltd., which we refer
to as SPR. The loss from unconsolidated subsidiaries of $0.6 million in 2004



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consisted of our share of losses recorded by Hitachi Remy Automotive GmbH, which we refer to as Hitachi, and iPower Technologies, L.L.C., which we refer to
as iPower, partially offset by income recorded by SPR. Our share of losses for Hitachi and iPower recorded in 2004 reduced the carrying value of these investments to zero. Accordingly, we discontinued recognition of losses related to this
unconsolidated subsidiary effective in the fourth quarter of 2004 and the venture was terminated in January 2006. The business operations of iPower were assumed by our former partner in 2004.



Discontinued Operations



In 2005, the loss from discontinued operations of $1.3 million consisted of
operating results recorded by our remanufactured transmission and contract and retail gas engine businesses. Income from discontinued operations of $1.2 million in 2004, related primarily to the remanufactured transmission business, reflects
operating income of $5.7 million, net of restructuring charges of $0.4 million, and interest expense of $4.5 million.



In 2005, we recorded an additional gain of $0.5 million relative to the sale of Tractech, Inc., which we refer to as Tractech, and Kraftube, Inc., which
we refer to as Kraftube, and in 2005 recorded a gain on the sale of AutoMatic Transmission International A/S, which we refer to as AMT, of $0.4 million. In 2004, we recorded a $45.1 million gain, net of income taxes and deal-related costs, on the
sale of Williams Technologies, Inc., which we refer to as Williams, and JAX Reman, L.L.C., which we refer to as JAX, to Caterpillar, Inc., which we refer to as CAT. An estimated loss of $2.2 million was recorded in 2004 in connection with the
commitment to dispose of AMT. An additional net gain of $1.0 million was recorded in 2004 on the sale of Tractech, Kraftube and the contract remanufacturing and retail aftermarket gas engine businesses.



Year Ended December 31, 2004 Compared To Year Ended December 31,
2003



Net Sales



|                       |  |      |         |      |   |                      |  |   |         |   |  |      |  
|---------------------- |  | ---- | ------- | ---- | - | -------------------- |  | - | ------- | - |  | ---- | -
|Product Categories     |  | 2004 |         | 2003 |   | Increase/ (Decrease) |  |   | %Change |  
|Automotive OEM         |  | $    | 305.9   |      | $ | 263.8                |  | $ | 42.1    |   |  | 16.0 | %
|Heavy duty OEM         |  |      | 181.0   |      |   | 145.8                |  |   | 35.2    |   |  | 24.1 |  
|Electrical aftermarket |  |      | 409.2   |      |   | 426.5                |  |   | (17.3   | ) |  | (4.1 | )
|Powertrain             |  |      | 96.3    |      |   | 71.5                 |  |   | 24.8    |   |  | 34.7 |  
|Core services          |  |      | 58.8    |      |   | 65.2                 |  |   | (6.4    | ) |  | (9.8 | )
|Total Net Sales        |  | $    | 1,051.2 |      | $ | 972.8                |  | $ | 78.4    |   |  | 8.1  | %



Automotive OEM sales
increased due primarily to higher automotive volume, including new business awards, which were partially offset by customer price reductions. Heavy-duty OEM sales increased due to strong demand from Class 5  8 truck customers. OEM
sales were also favorably impacted by currency exchange rates in Europe and Korea. Electrical aftermarket sales were down due to soft market conditions during 2004 and the loss of a U.S. retail customer, partially offset by favorable currency
exchange rates in Europe. Powertrain sales increased due to increased diesel engine and parts volume and strong sales of locomotive power assemblies. Third party sales in the core services business decreased due to general market conditions.



Gross Profit



Gross profit of $200.5 million in 2004 compares with gross profit of
$63.2 million in 2003. Gross profit in 2003 reflected the special charges totaling $118.2 million, consisting of the $103.9 million charge for the change in estimate of the valuation of our core inventory and the $14.3 million charge relative to the
Mexico arbitration settlement. Excluding the special charges in 2003, gross profit and gross profit as a percentage of net sales improved in 2004 compared with 2003. Total OEM gross profit increased $22.5 million in 2004 compared with 2003. OEM
gross profit in 2003 was negatively impacted by the $14.3 million arbitration settlement, which is excluded in the following discussion. Automotive OEM gross profit decreased $8.1 million in 2004 due to costs associated with new alternator product
lines, higher material costs and price reductions, partially offset by higher sales volume and the benefits of restructuring and cost reduction actions. Heavy-duty OEM gross profit increased $16.3 million in 2004 due to sales volume growth and the
benefits of restructuring and cost reduction actions, partially offset by higher material costs. Higher material costs reflect increased prices for metals. Electrical aftermarket gross profit, excluding the impact of the $88.7 million special core
valuation charge in 2003, increased $9.5 million in 2004. This improvement reflected cost benefits associated with



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restructuring actions and improved material and warranty costs, partially offset by lower sales. Powertrain gross profit, excluding the impact of the $15.3
million special core valuation charge in 2003, increased $7.3 million in 2004. This improvement reflected higher sales and cost benefits associated with restructuring actions and improved factory efficiencies. Gross profit on core services decreased
$6.0 million due to sales volume and product mix. Gross profit on aftermarket products was negatively impacted in 2004 by an $8.2 million charge for the decline in the value of its core inventory. Freight surcharges reflecting escalating fuel
prices, primarily during the third and fourth quarters of 2004, negatively affected profitability in all product categories.



Selling, General and Administrative Expenses



Selling, general and administrative, which we refer to as SG&A, expenses increased $16.5 million, to $113.3 million in 2004, compared to $96.8 million
in 2003. As a percentage of net sales, SG&A expenses were 10.8% in 2004 compared with 9.9% in 2003. The year over year increase in SG&A expenses primarily reflects higher expenditures on product engineering, systems and marketing programs,
in part related to our new alternator product lines and new sales awards, principally in the OEM sector. We expect to continue our investment in resources necessary to support our global expansion and new product development.



Restructuring Charges



We recorded a net restructuring charge of $0.9 million in 2004 primarily
related to the actions taken in prior years discussed below. The 2004 charge consisted of employee termination benefits of $1.3 million and $1.4 million of other costs, partially offset by a $1.8 million reduction in the reserve established in 2003
for the impairment of operating leases, as we reached an agreement to transfer our lease obligation for an Anderson-based facility to a third party.



In 2003, we recorded restructuring charges totaling $49.0 million related to: (i) the closure of our starter and alternator manufacturing operations
in Anderson, Indiana; (ii) the closure of our electrical aftermarket remanufacturing and distribution facilities in Reed City, Michigan; (iii) the consolidation of two of our remanufacturing operations in Mississippi; and (iv) the
consolidation of certain of our operations in Europe. The charges consisted of employee separation programs of $14.4 million, an asset impairment charge of $29.2 million, operating lease impairment charges of $9.1 million, a pension plan curtailment
charge of $1.8 million and other costs of $1.7 million. These charges were offset by a post-employment benefit plan curtailment gain of $7.2 million.



Operating Income (Loss)



Operating income of $86.3 million in 2004 compares with an operating loss of $82.5 million in 2003. The loss in 2003 was impacted by the special ($118.2
million) and restructuring ($49.0 million) charges discussed below. The remaining $2.5 million year over year increase was due to the increase in gross profit offset by the increase in SG&A expense discussed above.



Interest Expense, Net



Interest expense, net, increased $2.7 million to $58.2 million in 2004
compared to $55.5 million in 2003. This increase reflects approximately $3.4 million of interest expense charged to continuing operations in 2004 that was charged to discontinued operations in 2003, additional interest expense for the period between
the call and redemption dates of $1.3 million relative to redemption of the 10 5/8% Senior Subordinated Notes recorded in 2004 and interest expense associated with the Second Priority Senior Secured Floating Rate Notes issued in 2004, partially
offset by lower interest expense on our senior credit facility and other borrowings. Our senior credit facility was paid down on September 1, 2004 with proceeds received from the sale of Williams and JAX.



Loss on Early Extinguishment of Debt



In connection with our refinancing actions during 2004 (discussed below), we
recorded a loss on the early extinguishment of debt totaling $7.9 million. This loss consisted of: (i) a call premium of $2.5 million and write off of deferred financing costs of $1.4 million on redemption of the 10 5/8% Senior Subordinated
Notes; (ii) a prepayment penalty of $1.8 million and write off of deferred financing costs of $0.7 million on prepayment of the term loan; and (iii) a write off of deferred financing costs of $1.2 million and other fees of $0.3 million.



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Income Taxes



The income tax provision of $5.4 million in 2004 consisted of taxes in various foreign jurisdictions totaling $5.0 million
and provisions for domestic state and local taxes of $0.4 million. In accordance with SFAS No. 109, we established a valuation allowance for domestic U.S. deferred tax assets in 2003, which resulted in no domestic U.S. tax provision on 2004
domestic income. The income tax provision of $36.7 million in 2003 consisted of the $24.7 million increase to the valuation allowance, a $2.9 million provision related to withholding taxes on intercompany dividends declared in 2003 and provisions in
various foreign jurisdictions totaling $9.1 million. Our consolidated effective income tax rate of 26.7% in 2004 and (26.6%) in 2003 reflects the above issues.



Minority Interest in Income or Loss of Subsidiaries



Minority interest in income of subsidiaries of $2.8 million in 2004 compares with a $0.1 million credit in 2003. Minority
interest in 2004 included minority shareholders interests in the earnings of Hubei, RM, and our venture with International Truck and Engine Corporation. The $0.1 million credit in 2003 includes minority shareholders interests in the
earnings of Hubei, RM, World Wide Automotive, L.L.C., which we refer to as World Wide, Power Investments, Inc., which we refer to as Power, and our venture with International Truck and Engine Corporation. A $2.5 million credit was recorded in 2003
related to minority shareholders share of the $103.9 million charge for the change in estimate in the valuation of core inventory. We purchased the remaining minority shareholders interests in World Wide and Power under contractual put
agreements in 2003 and the remaining interest in RM in 2004 in connection with finalization of the Mexico arbitration.



Loss from Unconsolidated Subsidiaries



The loss from unconsolidated subsidiaries of $0.6 million in 2004 compares with a loss of $6.4 million in 2003. The loss in 2004 consisted of losses
recognized related to additional capital contributions we made into iPower, and losses recorded by Hitachi, partially offset by earnings recorded by Sahney Paris Rhone Ltd. Our share of losses related to Hitachi Remy Automotive GmbH in 2004 reduced
the carrying value to zero. Accordingly, we have discontinued recognition of losses related to this investment. The loss in 2003 consisted of the write off of our investment in iPower and losses recorded by Hitachi, partially offset by earnings
recorded by Sahney Paris Rhone Ltd.



Discontinued Operations



Income from discontinued operations of $1.2 million in
2004, related primarily to the remanufactured transmission business, reflects operating income of $5.7 million, net of restructuring charges of $0.4 million, and interest expense of $4.5 million. The loss from discontinued operations of $8.0 million
in 2003 reflects restructuring charges of $0.9 million and interest expense of $7.8 million. The loss from discontinued operations in 2003 includes the results of the remanufactured transmission business, Tractech, Kraftube and the contract
remanufacturing and retail aftermarket gas engine businesses.



We recorded a $45.1 million gain, net of income taxes and deal-related costs, on the sale of Williams Technologies, Inc., which we refer to as Williams, and JAX Reman, L.L.C., which we refer to as JAX, to Caterpillar, Inc., which we refer
to as CAT, in 2004. An estimated loss of $2.2 million was recorded in 2004 in connection with the commitment to dispose of a related business. An additional net gain of $1.0 million was recorded in 2004 on the sale of Tractech, Kraftube and the gas
engine businesses. An initial gain of $2.3 million was recorded in 2003 on the sale of Tractech and Kraftube.



Liquidity and Capital Resources



Our short-term liquidity needs include required debt service (including capital lease payments), day-to-day operating expenses, working capital requirements, the payment of customer obligations and the funding of
capital expenditures and restructuring actions. Cash interest payments are expected to approximate $78 million in 2006. Our contractual obligations are provided in the table under the section Contractual Obligations and Contingent Liabilities
and Commitments. Our principal payments on long-term lease obligations are presented in Note 11 to our consolidated financial statements. Also, see Item 8, Note 1 to our consolidated financial statements for a description of the business,
industry and general economic conditions.



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On June 28, 2002, we entered into a $250 million secured, asset based, revolving credit facility
(the Senior Credit Facility) with a syndicate of banks led by Wachovia Bank, National Association and its subsidiary Congress Financial Corporation. The Senior Credit Facility replaced our then-existing $200 million secured revolving
credit facility, which was due to expire on March 31, 2003. The interest is payable at the end of each month.



The Senior Credit Facility is collateralized by liens on substantially all assets of the Company and its domestic and certain foreign subsidiaries and by
the capital stock of such subsidiaries.



On October 3,
2003, we amended and restated our Senior Credit Facility. The $250 million amended and restated facility consists of a $190 million secured, asset-based, revolving facility, and a $60 million term loan facility. Proceeds from the new term loan were
used to reduce outstanding debt under our asset-based revolving credit facility, thereby increasing our total borrowing capacity under the Senior Credit Facility by approximately $60 million. The interest rate on the term loan facility is Wachovia
Banks prime rate plus 4.5% subject to a minimum interest rate of 8.5%. The applicable interest rate on the amount borrowed under the revolving credit facility remains unchanged and floats at rates above Wachovia Banks prime rate and/or
Eurodollar rates.



On April 23, 2004, we issued $125
million principal amount of Second Priority Senior Secured Floating Rate Notes due 2009 (the Floating Rate Notes), bearing an interest rate of LIBOR plus 4.00%, and $150 million principal amount of 9 3/8% Senior Subordinated Notes due
2012 (the 9 3/8% Senior Subordinated Notes). The net proceeds from the issuance of these notes were to pay down existing indebtedness under our Senior Credit Facilities, including repayment of $60 million term loan and relevant
prepayment premium, and to finance the redemption price of 101.777% of their face amount plus accrued but unpaid interest up to, but not including, the redemption date of May 24, 2004.



In the second quarter of 2004, in connection with the above mentioned debt
redemption, repayment and amendment, we recorded a loss on early extinguishment of debt of $7.9 million. This charge consisted of: (i) a call premium of $2.5 million and the write off of deferred financing costs of $1.4 million on redemption of
the 10 5/8% Senior Subordinated Notes; (ii) a prepayment penalty of $1.8 million and the write off of deferred financing costs of $0.7 million on repayment of the term load; and (iii) a write off of deferred financing costs of $1.2 million
and an amendment fee of $0.3 million on the amendment and pay down of the Senior Credit Facility. Also during the second quarter of 2004, we recorded additional interest for the period between the call and redemption dates of $1.281 million relative
to redemption of the 10 5/8% Senior Subordinated Notes.



On
September 1, 2004, we amended our Senior Credit Facility to change certain definitions and to adjust certain financial covenants to reflect the sale of Williams and JAX. The revised covenant calculation for the maintenance of a minimum level of
EBITDA was lowered from $108 million to $99 million for the rolling twelve-month period ending December 31, 2005, reflecting the sale of the transmission business.



In March 2005, we entered into Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement
(Amendment) to reflect, among other matters, the acquisition of substantially all of the assets and the assumption of certain liabilities of UPC. Additionally, the Amendment increased the maximum draw available (subject to a borrowing
base calculation) under the asset based Senior Credit Facility from $120 million to $145 million, eliminated the EBITDA and Fixed Charge covenants from the facility and extended the maturity of the facility to June 30, 2008 with provisions for
annual extensions thereafter.



On December 27, 2005, we
amended our Senior Credit Facility by entering into the Third Amended and Restated Loan and Security Agreement to reflect, among other matters, the issuance of an $80 million term loan within the Facility. As a result of the addition of the term
loan, the maximum draw available under the Senior Credit Facility (subject to a borrowing base calculation and existing restrictions under our indentures) was increased to $225 million, including the $80 million term loan and the $160 million
revolving loans less reserves of $15 million. The term loan was issued at a discount of 3% or $2.4 million. Proceeds from the new term loan were used to reduce outstanding debt under our revolving credit facility, thereby increasing our total
liquidity. The interest rate on the term loan is the greater of Wachovia Banks prime rate plus a spread of 5% or the Federal Funds Effective Rate plus 0.5% plus a spread of 5%, or at our option, a 1, 2, 3 or 6 month Eurodollar Rate plus a
spread of 6%.



At December 31, 2005, borrowings under the
Senior Credit Facility were $31.6 million and utilization of letters of credit totaled $7.0 million. Based on the collateral supporting the Senior Credit Facility at December 31, 2005, $99.8



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million was available under the Facility. The interest rate on borrowings outstanding under the revolving credit facility at December 31, 2005 was
7.25%. At December 31, 2005, borrowings outstanding under the term loan of the Senior Credit Facility were $80 million, reflected on the balance sheet net of the unamortized portion of the original issue discount of $2.4 million. The interest
rate on borrowings outstanding under the term loan portion of the credit facility at December 31, 2005 was 10.52%.



The Senior Credit Facility contains various restrictive covenants, which include, among other things: (i) limitations on additional borrowings and
encumbrances; (ii) limitations on cash dividends paid; (iii) limitations on investments and capital expenditures; (iv) limitations on leases and sales of assets; and (v) requirements for minimum liquidity.



In 2003, certain of our Mexican subsidiaries entered into a series of
machinery and equipment sale-leaseback financing transactions with GE Mexico. Under the terms of this agreement, the relevant subsidiaries must maintain certain net worth, EBIDTA and sales levels, in addition to other requirements normally
associated with this type of financing. Net cash proceeds from these transactions in 2003 were $10.3 million, net of security deposits totaling $5.4 million. We have accounted for these transactions as financing transactions in accordance with SFAS
No. 66 and SFAS No. 98. Accordingly, an obligation of $15.7 million was recorded relative to these transactions. The obligation at December 31, 2005 and 2004 was $9.4 million and $12.2 million, respectively.



Our 8 5/8% Senior Notes for $145 million are due on December 15, 2007.
For further information see Note 11 to our consolidated financial statements for other maturities.



In November, 2005, we entered into a purchase sale-partial-leaseback real estate transaction. We purchased five real estate parcels that we had been
leasing under long term capital leases and simultaneously sold all five properties. At the closing, we entered into new long term leases for three of the properties we sold. The purchase price of the properties was $17.0 million. $12.5 million was
paid in cash and $4.5 million was paid in the form of a 10 year unsecured note bearing interest at 8.0%. The sale price was approximately $10.0 million. This transaction resulted in a gain of $3.0 million (including the extinguishment of a liability
for previous maintenance agreements) reflected in restructuring and a deferred gain of $4.1 million that will be amortized over the term of the leased assets.



We participate in programs that accelerate the collection of accounts receivable. Under these programs, we sell the accounts of two of our aftermarket
customers to a bank, on a non-recourse basis, at a discount. At December 31, 2005, the increase in receivables that would occur if these programs are discontinued would be approximately $47.2 million.



We believe that cash generated from operations, together with the amounts
available under the senior credit facilities and other borrowings, will be adequate to meet our debt service, capital expenditure, restructuring and working capital requirements for at least the next twelve months, although no assurance can be given
in this regard.



Year Ended December 31, 2005



Cash used in operating activities of continuing operations
in 2005 of $46.9 million is driven primarily due to lower earnings and includes cash restructuring payments of $7.5 million. Accounts receivable increased $20.0 million in 2005 due primarily to stronger automotive OEM and diesel engine shipments and
a loss of a non recourse factoring program specific to one of our customers. Days of sales outstanding were down slightly year over year. Inventories decreased $9.5 million in 2005 due to actions taken to reduce inventory in the supply chain,
partially offset by the impact of lower electrical aftermarket sales. Accounts payable increased $9.0 million in 2005 primarily as a result of the timing of inventory receipts and payments. Other current assets and liabilities, net, decreased $1.4
million year over year due primarily to a reduction in accrued expenses, including product warranty, employee salaries and benefits and interest. Cash restructuring payments consisted of employee termination benefits, leases and other costs.



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Cash used in investing activities of continuing operations in 2005 of $88.3 million included acquisition
payments totaling $57.6 million consisting primarily of payments for the acquisition of UPC. In 2005, we recorded cash proceeds of $10 million for the sale of the five real estate parcels discussed above, cash of $0.2 million on the sale of AMT and
cash proceeds on the sale of Tractech and Kraftube of $0.5 million. Capital expenditures in both 2005 and 2004 were primarily for production, engineering and distribution equipment and a new global Enterprise Resource Planning system. These
expenditures include investments associated with the launch of new products, recently awarded business wins and establishment of new technology centers in Europe and Asia.



Cash provided by financing activities of continuing operations in 2005 of $94.2 million included proceeds from the issuance
of $80.0 million term loan and borrowings under our Senior Credit Facility. We also made a $2.5 million payment to CVC Management LLC in 2004 relative to services provided in connection with the refinancing of our senior credit facility in 2002. Net
repayments of other debt included the pay down of our senior credit facility with proceeds from the sale of Williams and JAX. In addition, cash dividends of $2.4 million were paid to the minority shareholders of Magnum Power Products L.L.C.



Cash outflows of discontinued operations of $1.2 million in
2005, primarily related to the remanufactured transmission business, reflects an operating loss of $0.8 million and payment of certain retained liabilities and other items of $0.4 million.



Year Ended December 31, 2004



Cash used in operating activities of continuing operations in 2004 of $9.4
million includes cash restructuring payments of $9.0 million and a litigation payment of $13.6 million. Accounts receivable increased $10.8 million in 2004 due primarily to stronger Automotive and Heavy-Duty OEM and Powertrain sales, in addition to
a decrease in accelerated collections under the receivables programs discussed above. Days of sales outstanding were essentially unchanged year over year. Inventories increased $19.5 million in 2004 due primarily to builds in support of higher
future Heavy-Duty OEM sales, builds for the launch of an additional remanufactured diesel engine and the impact of foreign currency exchange rates. Accounts payable increased $15.3 million in 2004 primarily as a result of the inventory builds
discussed above. Other current assets and liabilities, net, increased $22.2 million year over year due primarily to a reduction in accrued expenses, including product warranty, employee salaries and benefits, interest and the payment of certain
transaction fees. Cash restructuring payments consisted of employee termination benefits, leases and other costs. The litigation payment of $13.6 million (including value added tax of $1.8 million) was made in connection with the settlement of the
services agreement component of the arbitration with the former minority shareholders of RM.



Cash provided by investing activities of continuing operations in 2004 of $53.8 million included acquisition payments totaling $25.5 million, consisting of earn-out payments relative to the 2000 acquisition of M&M
Knopf Auto Parts, L.L.C. ($13.4 million), the final cash payment on notes issued in 2002 in connection with the acquisition of the remaining shares from the minority shareholders of Remy Korea Limited ($4.8 million), purchase of the remaining shares
from the minority shareholders of the Mexico consolidated subsidiary ($5.5 million) and payments made in connection with the acquisition of Delphi Corporations light vehicle alternator business ($1.8 million). In 2004 we recorded proceeds on
the sale of Williams and JAX of $104.3 million, net of income taxes and deal-related costs, and proceeds on the sale of Tractech and Kraftube of $0.4 million. Capital expenditures of $25.3 million in 2004 consisted primarily of production,
engineering and distribution equipment and systems. We have planned capital expenditures of approximately $35.0 million to $40.0 million in 2005. Capital expenditures are expected to increase in 2005 as a result of expenditures for the launch of new
products and the establishment of new technology centers in Europe and Asia.



Cash used in financing activities of continuing operations in 2004 of $3.7 million included proceeds from the issuance of long-term debt ($275.0 million), payments for the retirement of long-term debt ($200.0 million)
and payment of related financing costs ($12.5 million). We also made a $2.5 million payment to CVC Management LLC in 2004 relative to services provided in connection with the refinancing of our senior credit facility in 2002. Net repayments of other
debt included the pay down of our senior credit facility with proceeds from the sale of Williams and JAX. In addition, cash dividends of $1.0 million were paid to the minority shareholders of Hubei.



Cash outflows of discontinued operations of $0.9 million in 2004, primarily
related to the remanufactured transmission business, reflects operating income excluding restructuring charges of $6.0 million, an increase in net working capital and other assets and liabilities of $5.4 million, cash restructuring payments of $1.0
million and capital expenditures of $0.5 million.



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Year Ended December 31, 2003



Cash provided by operating activities of continuing operations in 2003 of $25.1 million reflected net income from continuing
operations, excluding non-cash and other reconciling items, of $31.9 million, a reduction in net working capital, excluding the effect of acquisitions and the change in estimate for core inventory valuation, of $8.5 million and cash restructuring
payments of $15.3 million. Accounts receivable increased by $8.6 million, primarily due to increased sales volume in the OEM markets in the fourth quarter of 2003 and extended terms with certain customers in the core services business. Days of sales
outstanding improved year over year. Inventories increased $28.3 million, excluding the change in estimate for core inventory valuation, reflecting launch of the new light-duty alternator product line, higher core returns from our customers and the
exchange impact of the weaker dollar. Inventory turns improved year over year. Accounts payable increased by $24.5 million in 2003 due primarily to strong fourth quarter sales and the resulting increased inventory purchases, and changes in terms
with certain foreign vendors. A $20.9 million decrease in other net current assets and liabilities primarily reflects increases in accrued wages, interest, warranty and other accrued liabilities. Cash restructuring payments consisted of employee
termination benefits and lease termination costs.



Cash used in
investing activities of continuing operations of $5.3 million included acquisition payments totaling $18.9 million, consisting of payments under contractual put agreements for World Wide ($5.9 million), Remy Korea Limited ($5.3 million) and Power
($5.2 million), and the acquisition of Delphi Corporations light vehicle alternator business ($6.1 million, including $3.6 million of cash acquired). In the fourth quarter of 2003, we recorded an estimated contingent earn-out liability of
$13.5 million related to the acquisition of Knopf (as discussed above). The liability was based on the achievement of certain earnings goals by Knopf during the period August 2000 to December 2003 and was paid in 2004. This adjustment to the
purchase price of Knopf resulted in a $13.5 million increase in goodwill. In the fourth quarter of 2003, we reversed an estimated contingent earn-out liability and recorded a corresponding reduction in goodwill in the amount of $4.3 million, which
had been established relating to the acquisition of Mazda NA. We determined that it was unlikely that Mazda NA would achieve certain sales goals during the period June 2001 to December 2005. Net proceeds of $30.1 million were recorded on the sale of
Tractech and Kraftube. Capital expenditures of $16.3 million consisted primarily of production, engineering and distribution equipment.



Cash used in financing activities of continuing operations was $4.2 million in 2003. Net proceeds of $10.3 million were recorded in connection with the
sale-leaseback financing transaction with GE Mexico. These proceeds were used to reduce borrowings under the revolving line of credit. Net borrowings under the revolving line of credit and other debt instruments of $12.5 million were used to fund
investing activities and discontinued operations. Cash payments of $2.0 million were made in connection with the amendments to the senior credit facilities as discussed above.



Cash outflows of discontinued operations of $7.7 million in 2003 primarily reflected capital expenditures in the
remanufactured transmission business of $3.7 million and cash restructuring payments of $2.6 million.



Contractual Obligations, Contingent Liabilities and Commitments



Our contractual obligations as of December 31, 2005 are provided in the following table (dollars in millions):



|                                       |  |                        |     |                 |   |    |            |  |            |     |                  |   |    |  |   |    
|-------------------------------------- |  | ---------------------- | --- | --------------- | - | -- | ---------- |  | ---------- | --- | ---------------- | - | -- |  | - | ---
|                                       |  | Payments Due by Period
|Contractual Obligations                |  | Total                  |     | Less than1 year |   |    | 1  3years |  | 4  5years |     | More than5 Years
|Long-Term Debt(1)                      |  | $                      | 737 |                 | $ | 27 | (2)        |  | $          | 556 |                  | $ | 4  |  | $ | 150
|Customer Obligations                   |  |                        | 57  |                 |   | 14 |            |  |            | 26  |                  |   | 12 |  |   | 5  
|Capital Lease Obligations              |  |                        | 8   |                 |   |   |            |  |            | 1   |                  |   | 1  |  |   | 6  
|Operating Leases                       |  |                        | 49  |                 |   | 10 |            |  |            | 22  |                  |   | 8  |  |   | 9  
|Pension Funding(3)                     |  |                        | 4   |                 |   | 4  |            |  |            |    |                  |   |   |  |   |   
|Other Post Retirement Benefits Funding |  |                        | 11  |                 |   | 1  |            |  |            | 3   |                  |   | 2  |  |   | 5  
|Acquisition Payments(4)                |  |                        | 3   |                 |   | 3  |            |  |            |    |                  |   |   |  |   |   
|Employee Termination Benefits          |  |                        | 11  |                 |   | 11 |            |  |            |    |                  |   |   |  |   |   
|Other                                  |  |                        | 5   |                 |   | 2  |            |  |            | 2   |                  |   |   |  |   | 1  
|Total Contractual Cash Obligations     |  | $                      | 885 |                 | $ | 72 |            |  | $          | 610 |                  | $ | 27 |  | $ | 176

|(1) | These amounts include indebtedness outstanding under our senior notes, senior subordinated notes, senior secured floating rate notes and other debt.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes $22 million related to foreign revolving credit agreements which will be renewed in 2006 with maturity dates of one year.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(3) | Amounts beyond 2006 are not currently estimable.
|--- | ------------------------------------------------

|(4) | Payments in connection with the acquisition of Delphi Corporations light vehicle alternator business, including purchasing its machinery and equipment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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In addition to the contractual obligations disclosed above, we have a variety of other contractual
agreements related to the procurement of materials and other commitments. With respect to these agreements, we are not subject to any contracts that commit us to significant non-cancelable commitments. With respect to agreements related to the
procurement of inventory used in our manufacturing and remanufacturing processes, we had approximately $70 million to $90 million of open purchase orders at December 31, 2005.



Contingencies



We are a 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. For more information, see Business  Legal Proceedings, and Note 18 to our financial statements in Item 8.



Off-Balance Sheet Arrangements



We have no Off-Balance Sheet arrangements as of December 31, 2005
and 2004 as defined in Item 303(a)(4)(ii) of Regulation S-K.



Seasonality



Our business is seasonal,
as our major OEM customers historically have one to two week shutdowns of operations during July and December. Our sales results in the third and fourth quarters reflect the effects of these shutdowns. Our working capital requirements also are
affected by seasonality, as we build inventory for the summer sales months in the aftermarket. Typically our working capital requirements, exclusive of interest payments, are highest from April through August and the change from the highest month to
the lowest month (typically December) for accounts receivable, inventory and accounts payable has averaged $45.9 million over the past three years. Refer to Note 22 to our consolidated financial statements, which pertains to quarterly (unaudited)
financial information.



Effects of Inflation



We believe that the relatively moderate inflation over the last few years
has not had a significant impact on our revenues or profitability and that we have been able to offset the effects of inflation by realizing improvements in operating efficiency. We have commodity price risk with respect to purchases of certain raw
materials. However, we have provisions in many of our contracts, which provide for the pass through of fluctuations in the price of certain raw materials, such as copper and aluminum.



Foreign Sales



Approximately 20%, 20% and 19% of our net sales from continuing operations in 2005, 2004 and 2003, respectively, were derived from sales made to customers
in foreign countries. Because of these foreign sales, our 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 us, see Note 2 to our consolidated financial statements in Item 8.



Critical Accounting Policies



Our accounting policies, including those described below, require management to make significant estimates and assumptions using information available at the time the estimates are made. Actual amounts could differ significantly from these
estimates. See Note 2 to our consolidated financial statements in Item 8 for a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. We believe the following are some of the
more critical accounting policies that currently affect the consolidated financial position and results of operations.



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Core Liability and Core Inventory Value



We record a liability for core returns based on cores expected to be
returned. The liability represents the difference between the core deposit value to be credited to the customer and the core inventory value for the core being returned. Core inventory values decline over the expected remaining life of the core
family. Core inventory values decline on the basis of several economic factors, including market availability, seasonality and demand. If estimated returns and/or core market value differ from managements estimates, revisions to the estimated
core liability may be required.



Inventory



Inventories are valued at the lower of cost or market determined by the
first-in, first-out (FIFO) method. Estimates of lower of cost or market value of inventory are determined at the operating unit level and are based upon the inventory at that location taken as a whole. In the fourth quarter of 2003, we changed our
estimate for the valuation of core inventory from primarily customer acquisition cost to primarily core broker prices and recorded a special charge of $103.9 million. Of this charge $94.8 million related to the write down of the core component of
inventory and $9.1 million related to the establishment of an estimated liability for core returns. Effective in 2004, the value of cores is estimated to decline over the expected remaining life of the core family, which is considered and evaluated
on an ongoing basis by comparing the estimate to broker prices.



We evaluate inventories on a regular basis to identify inventory on hand that may be obsolete or in excess of current and future projected market demand. For inventory deemed to be obsolete, we provide a reserve for this inventory.
Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates the estimate of future demand.



Goodwill and Other Intangible Assets



The annual impairment tests for goodwill and indefinite-lived intangibles under SFAS No. 142 require us to make certain assumptions in determining
fair value, including assumptions about the future cash flow of our businesses. Additionally, the fair values are significantly impacted by macro-economic factors, including market conditions at the time the impairment tests are performed.
Accordingly, we may incur additional impairment charges in future periods under SFAS No. 142 to the extent we do not achieve our expected cash flow growth rates, or to the extent that market values decrease.



Valuation of Long-Lived Assets



Under SFAS No. 144 the Company is required to evaluate long-lived assets
for impairment if indicators of impairment are present. When required, these evaluations require significant estimates and assumptions about the future cash flows that will be generated by those assets.



Warranty



The Company provides an allowance for the estimated future cost of product warranties and other defective product returns
based on managements estimate of product failure rates and customer eligibility. If these factors differ from managements estimates, revisions to the estimated warranty liability may be required.



Employee Benefit Plans



We provide a range of benefits to our employees and retired employees,
including pensions and post-retirement healthcare. We record annual amounts relating to these plans based on calculations specified by U.S. Generally Accepted Accounting Principles, which we refer to as U.S. GAAP, which include various actuarial
assumptions such as discount rates, assumed rates of return, compensation increases, turnover rates and healthcare cost trend rates. The expected return on plan assets is based on our expectation of the long-term average rate of return on assets in
the pension funds, which is reflective of the current and projected asset mix of the funds and considers the historical returns earned on the funds. We review our actuarial assumptions on an annual basis and make modifications to the assumptions
based on current rates and trends when appropriate. As required by U.S. GAAP, the effects of the modifications are recorded currently or amortized over future periods. Based on information provided by our independent actuaries and other relevant
sources, we believe that the assumptions used are reasonable.



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##### Table of Contents

Income Taxes



We account for income taxes in accordance with SFAS No. 109. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We record a valuation allowance that represents operating loss carryforwards for
which utilization is uncertain. Managements judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against our net deferred tax assets. The valuation
allowance would need to be adjusted in the event future taxable income is materially different than amounts estimated.



Revenue Recognition



Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, ownership has transferred,
the sellers price to the buyer is fixed and determinable and collectability is reasonably assured.



|ITEM 7A    QUANTITATIVE |  | AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|----------------------- |  | ---------------------------------------------

---



In the normal course of business, our operations 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, we address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments.
Our objective is to reduce earnings and cash flow volatility associated with these fluctuations. Our 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. We do not enter into any derivative transactions for speculative purposes. For further information on these matters see Note 2 to our consolidated financial statements in Item 8.



Our primary interest rate risk exposure results from changes in short-term
U.S. dollar interest rates. In an effort to manage interest rate exposures, we strive 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,
we maintain a significant percentage of fixed rate debt (65% at December 31, 2005). However, we are exposed to U.S. changes in interest rates on the senior credit facilities (revolving line of credit and term loan) and the Floating Rate Notes.
A 100 basis point increase in U.S. market interest rates on the amounts outstanding at December 31, 2005 under the senior credit facilities and floating rate notes would result in an increase in our annual interest expense of approximately $2.3
million.



Our foreign currency risk exposure results from
fluctuating currency exchange rates, primarily changes in the U.S. dollar against the South Korean Won and certain European currencies. We face transactional currency exposures that arise when our foreign subsidiaries (or ourselves) enter into
transactions, generally on an intercompany basis, denominated in currencies other than their local currency. We also face currency exposure that arises from translating the results of our 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, we enter into exchange agreements to manage our exposure arising from fluctuating exchange rates related to specific transactions. A hypothetical 10 percent weakening in the exchange rates of foreign currencies over a one-year
period would increase earnings by approximately $1.1 million. A hypothetical 10 percent weakening in exchange rates of foreign currencies would reduce the carrying value of our net investment in our foreign subsidiaries at December 31, 2005 by
approximately $8.2 million.



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##### Table of Contents

|ITEM 8 |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------ |  | -------------------------------------------

---



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                      |  |     
|----------------------------------------------------------------------------------------------------- |  | ----
|Financial Statements of Remy International, Inc.:                                                     |  | Page
|                                                                                                      | 
|Report of Independent Registered Public Accounting Firm                                               |  | 38  
|                                                                                                      | 
|Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003            |  | 39  
|                                                                                                      | 
|Consolidated Balance Sheets at December 31, 2005 and 2004                                             |  | 40  
|                                                                                                      | 
|Consolidated Statements of Stockholders Deficit for the years ended December 31, 2005, 2004 and 2003 |  | 41  
|                                                                                                      | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003            |  | 42  
|                                                                                                      | 
|Notes to Consolidated Financial Statements                                                            |  | 43  



37



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholders and

Board of Directors of

Remy
International, Inc.



We have audited the accompanying
consolidated balance sheets of Remy International, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders deficit, and cash flows for each of the three years in the
period ended December 31, 2005. 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 the standards of the Public
Company Accounting Oversight Board (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. We were not engaged to perform an
audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.



In our opinion, the financial statements
referred to above present fairly, in all material respects, the consolidated financial position of Remy International, Inc. and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.



/S/ ERNST & YOUNG LLP



Indianapolis, Indiana

March 24, 2006



38



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                                                                   |  |      |           |   |      |   |           |  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- |  | - | -------- | -
|IN THOUSANDS, Years ended December 31,                                                                                             |  | 2005 |           |   | 2004 |   | 2003      | 
|NET SALES                                                                                                                          |  | $    | 1,228,950 |   |      | $ | 1,051,165 |  | $ | 972,794  |  
|Cost of goods sold                                                                                                                 |  |      | 1,081,743 |   |      |   | 850,672   |  |   | 791,322  |  
|Cost of goods soldspecial charges:                                                                                                |  |      |           |   |      |   |           |  |   |          |  
|Core inventory valuation                                                                                                           |  |      |          |   |      |   |          |  |   | 103,930  |  
|Mexican arbitration award                                                                                                          |  |      |          |   |      |   |          |  |   | 14,310   |  
|Gross profit                                                                                                                       |  |      | 147,207   |   |      |   | 200,493   |  |   | 63,232   |  
|                                                                                                                                   |  |      |          
|Selling, general and administrative expenses                                                                                       |  |      | 139,189   |   |      |   | 113,263   |  |   | 96,770   |  
|Impairment charges                                                                                                                 |  |      | 13,917    |   |      |   |          |  |   |         |  
|Restructuring charges                                                                                                              |  |      | 4,850     |   |      |   | 942       |  |   | 48,968   |  
|OPERATING (LOSS) INCOME                                                                                                            |  |      | (10,749   | ) |      |   | 86,288    |  |   | (82,506  | )
|                                                                                                                                   |  |      |          
|Interest expense                                                                                                                   |  |      | 69,409    |   |      |   | 58,237    |  |   | 55,454   |  
|Loss on early extinguishment of debt                                                                                               |  |      |          |   |      |   | 7,939     |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest and loss (income) from unconsolidated
subsidiaries |  |      | (80,158   | ) |      |   | 20,112    |  |   | (137,960 | )
|                                                                                                                                   |  |      |          
|Income tax expense                                                                                                                 |  |      | 13,187    |   |      |   | 5,367     |  |   | 36,682   |  
|Minority interest                                                                                                                  |  |      | 3,442     |   |      |   | 2,798     |  |   | (143     | )
|Loss (income) from unconsolidated subsidiaries                                                                                     |  |      | (208      | ) |      |   | 588       |  |   | 6,427    |  
|Net (loss) income from continuing operations                                                                                       |  |      | (96,579   | ) |      |   | 11,359    |  |   | (180,926 | )
|                                                                                                                                   |  |      |          
|Discontinued operations:                                                                                                           |  |      |           |   |      |   |           |  |   |          |  
|Income (loss) from discontinued operations, net of tax                                                                             |  |      | (1,331    | ) |      |   | 1,154     |  |   | (8,019   | )
|Gain on disposal of discontinued operations, net of tax                                                                            |  |      | 926       |   |      |   | 43,911    |  |   | 2,320    |  
|Net (loss) income from discontinued operations, net of tax                                                                         |  |      | (405      | ) |      |   | 45,065    |  |   | (5,699   | )
|                                                                                                                                   |  |      |          
|NET (LOSS) INCOME                                                                                                                  |  |      | (96,984   | ) |      |   | 56,424    |  |   | (186,625 | )
|                                                                                                                                   |  |      |          
|Accretion for redemption of preferred stock                                                                                        |  |      |          |   |      |   | 27,367    |  |   | 32,895   |  
|Net (loss) income attributable to common stockholders                                                                              |  | $    | (96,984   | ) |      | $ | 29,057    |  | $ | (219,520 | )



See notes to consolidated financial
statements.



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



|                                                                                      |  |      |          |   |      |   |          |  
|------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA, At December 31,                    |  | 2005 |          |   | 2004 |  
|ASSETS:                                                                               |  |      |          |   |      |   |          |  
|Current assets:                                                                       |  |      |          |   |      |   |          |  
|Cash and cash equivalents                                                             |  | $    | 20,022   |   |      | $ | 62,545   |  
|Trade accounts receivable (less allowance for doubtful accounts of $4,551 and $2,784) |  |      | 184,818  |   |      |   | 154,333  |  
|Other receivables                                                                     |  |      | 13,537   |   |      |   | 19,097   |  
|Inventories                                                                           |  |      | 261,821  |   |      |   | 217,912  |  
|Deferred income taxes                                                                 |  |      | 1,155    |   |      |   | 260      |  
|Assets of discontinued operations                                                     |  |      | 16       |   |      |   | 356      |  
|Other current assets                                                                  |  |      | 5,784    |   |      |   | 11,214   |  
|Total current assets                                                                  |  |      | 487,153  |   |      |   | 465,717  |  
|                                                                                      |  |     
|Property, plant and equipment                                                         |  |      | 364,841  |   |      |   | 329,637  |  
|Less accumulated depreciation                                                         |  |      | 190,310  |   |      |   | 192,344  |  
|Property, plant and equipment, net                                                    |  |      | 174,531  |   |      |   | 137,293  |  
|Deferred financing costs, net                                                         |  |      | 13,962   |   |      |   | 14,842   |  
|Goodwill, net                                                                         |  |      | 156,650  |   |      |   | 106,400  |  
|Investments in unconsolidated subsidiaries                                            |  |      | 5,917    |   |      |   | 5,706    |  
|Other assets                                                                          |  |      | 32,962   |   |      |   | 26,060   |  
|Total assets                                                                          |  | $    | 871,175  |   |      | $ | 756,018  |  
|LIABILITIES AND STOCKHOLDERS DEFICIT:                                                |  |      |          |   |      |   |          |  
|Current liabilities:                                                                  |  |      |          |   |      |   |          |  
|Accounts payable                                                                      |  | $    | 194,123  |   |      | $ | 170,776  |  
|Accrued interest                                                                      |  |      | 8,906    |   |      |   | 8,210    |  
|Accrued restructuring                                                                 |  |      | 12,669   |   |      |   | 6,451    |  
|Liabilities of discontinued operations                                                |  |      | 443      |   |      |   | 2,799    |  
|Other liabilities and accrued expenses                                                |  |      | 114,824  |   |      |   | 84,157   |  
|Current maturities of long-term debt                                                  |  |      | 27,501   |   |      |   | 22,890   |  
|Total current liabilities                                                             |  |      | 358,466  |   |      |   | 295,283  |  
|                                                                                      |  |     
|Long-term debt, net of current portion                                                |  |      | 714,181  |   |      |   | 610,330  |  
|Post-retirement benefits other than pensions                                          |  |      | 15,850   |   |      |   | 16,302   |  
|Accrued pension benefits                                                              |  |      | 13,140   |   |      |   | 13,511   |  
|Accrued restructuring                                                                 |  |      | 481      |   |      |   | 4,407    |  
|Deferred income taxes                                                                 |  |      | 10,390   |   |      |   | 3,325    |  
|Other non-current liabilities                                                         |  |      | 51,420   |   |      |   | 4,962    |  
|Commitments and contingencies (Note 18)                                               |  |      |          |   |      |   |          |  
|Minority interest                                                                     |  |      | 11,558   |   |      |   | 10,498   |  
|                                                                                      |  |     
|Stockholders deficit:                                                                |  |      |          |   |      |   |          |  
|Common stock:                                                                         |  |      |          |   |      |   |          |  
|Class B Shares par value $.001; authorized 6,000,000; issued 2,503,024.48             |  |      | 3        |   |      |   | 3        |  
|Paid-in capital (Note 14)                                                             |  |      | 334,336  |   |      |   | 334,336  |  
|Retained deficit                                                                      |  |      | (628,120 | ) |      |   | (531,136 | )
|Accumulated other comprehensive loss                                                  |  |      | (10,530  | ) |      |   | (5,803   | )
|Total stockholders deficit                                                           |  |      | (304,311 | ) |      |   | (202,600 | )
|Total liabilities and stockholders deficit                                           |  | $    | 871,175  |   |      | $ | 756,018  |  



See notes to consolidated financial
statements.



40



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT



|                                            |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   |          |  
|------------------------------------------- |  | ------------------ | - | --------------- | - | ------------------------- |  | - | ------------------------------------------ | - |  | ----- | ------- | - |  | - | -------- | -
|IN THOUSANDS                                |  | Class BCommonStock |   | Paid-in Capital |   | RetainedEarnings(Deficit) |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Total |        
|Balances at December 31, 2002               |  | $                  | 3 |                 | $ |                          |  | $ | (340,673                                   | ) |  | $     | (16,068 | ) |  | $ | (356,738 | )
|                                            |  |                    |   |                 |  
|Accretion for redemption of preferred stock |  |                    |  |                 |   |                          |  |   | (32,895                                    | ) |  |       |        |   |  |   | (32,895  | )
|Net loss                                    |  |                    |  |                 |   |                          |  |   | (186,625                                   | ) |  |       |        |   |  |   | (186,625 | )
|Foreign currency translation                |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | 2,593   |   |  |   | 2,593    |  
|Unrealized loss on derivative instruments   |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | (691    | ) |  |   | (691     | )
|Minimum pension liability                   |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | (1,638  | ) |  |   | (1,638   | )
|                                            |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   |          |  
|Total comprehensive loss                    |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   | (186,361 | )
|                                            |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   |          |  
|Balances at December 31, 2003               |  |                    | 3 |                 |   |                          |  |   | (560,193                                   | ) |  |       | (15,804 | ) |  |   | (575,994 | )
|                                            |  |                    |   |                 |  
|Recapitalization                            |  |                    |  |                 |   | 334,336                   |  |   |                                           |   |  |       |        |   |  |   | 334,336  |  
|Accretion for redemption of preferred stock |  |                    |  |                 |   |                          |  |   | (27,367                                    | ) |  |       |        |   |  |   | (27,367  | )
|Net income                                  |  |                    |  |                 |   |                          |  |   | 56,424                                     |   |  |       |        |   |  |   | 56,424   |  
|Foreign currency translation                |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | 9,840   |   |  |   | 9,840    |  
|Unrealized gains on derivative instruments  |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | 795     |   |  |   | 795      |  
|Minimum pension liability                   |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | (634    | ) |  |   | (634     | )
|                                            |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   |          |  
|Total comprehensive income                  |  |                    |  |                 |   |                          |  |   |                                           |   |  |       |         |   |  |   | 66,425   |  
|                                            |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   |          |  
|Balances at December 31, 2004               |  |                    | 3 |                 |   | 334,336                   |  |   | (531,136                                   | ) |  |       | (5,803  | ) |  |   | (202,600 | )
|                                            |  |                    |   |                 |  
|Net loss                                    |  |                    |  |                 |   |                          |  |   | (96,984                                    | ) |  |       |        |   |  |   | (96,984  | )
|Foreign currency translation                |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | (4,684  | ) |  |   | (4,684   | )
|Unrealized gains on derivative instruments  |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | 398     |   |  |   | 398      |  
|Minimum pension liability                   |  |                    |  |                 |   |                          |  |   |                                           |   |  |       | (441    | ) |  |   | (441     | )
|                                            |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   |          |  
|Total comprehensive loss                    |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   | (101,711 | )
|                                            |  |                    |   |                 |   |                           |  |   |                                            |   |  |       |         |   |  |   |          |  
|Balances at December 31, 2005               |  | $                  | 3 |                 | $ | 334,336                   |  | $ | (628,120                                   | ) |  | $     | (10,530 | ) |  | $ | (304,311 | )



See notes to consolidated financial
statements.



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                              |  |      |         |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, Years Ended December 31,                                                                        |  | 2005 |         |   | 2004 |   |          | 2003 | 
|Cash Flows from Operating Activities:                                                                         |  |      |         |   |      |   |          |      |  |   |          |  
|Net (loss) income attributable to common stockholders                                                         |  | $    | (96,984 | ) |      | $ | 29,057   |      |  | $ | (219,520 | )
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:            |  |      |         |   |      |   |          |      |  |   |          |  
|Discontinued operations                                                                                       |  |      | 405     |   |      |   | (45,065  | )    |  |   | 5,699    |  
|Depreciation and amortization                                                                                 |  |      | 30,086  |   |      |   | 23,046   |      |  |   | 22,581   |  
|Non-cash interest expense                                                                                     |  |      | 3,438   |   |      |   | 3,855    |      |  |   | 4,473    |  
|Loss on early extinguishment of debt                                                                          |  |      |        |   |      |   | 7,939    |      |  |   |         |  
|Accretion for redemption of preferred stock                                                                   |  |      |        |   |      |   | 27,367   |      |  |   | 32,895   |  
|Minority interest and unconsolidated subsidiaries, net                                                        |  |      | 3,234   |   |      |   | 3,386    |      |  |   | 6,284    |  
|Deferred income taxes                                                                                         |  |      | 6,203   |   |      |   | 2,592    |      |  |   | 28,085   |  
|Accrued pension and post-retirement benefits, net                                                             |  |      | (2,389  | ) |      |   | 308      |      |  |   | (8,476   | )
|Restructuring charges                                                                                         |  |      | 4,850   |   |      |   | 942      |      |  |   | 48,968   |  
|Cash payments for restructuring charges                                                                       |  |      | (7,457  | ) |      |   | (9,027   | )    |  |   | (15,333  | )
|Special charges                                                                                               |  |      |        |   |      |   |         |      |  |   | 118,240  |  
|Impairment charges                                                                                            |  |      | 13,917  |   |      |   |         |      |  |   |         |  
|Mexico arbitration settlement                                                                                 |  |      |        |   |      |   | (13,622  | )    |  |   |         |  
|Changes in operating assets and liabilities, net of acquisitions, restructuring and non-cash special charges: |  |      |         |   |      |   |          |      |  |   |          |  
|Accounts receivable                                                                                           |  |      | (20,010 | ) |      |   | (10,766  | )    |  |   | (8,581   | )
|Inventories                                                                                                   |  |      | 9,544   |   |      |   | (19,532  | )    |  |   | (28,278  | )
|Accounts payable                                                                                              |  |      | 9,034   |   |      |   | 15,312   |      |  |   | 24,538   |  
|Other current assets and liabilities                                                                          |  |      | 1,404   |   |      |   | (22,205  | )    |  |   | 20,839   |  
|Other non-current assets and liabilities, net                                                                 |  |      | (2,162  | ) |      |   | (2,938   | )    |  |   | (7,325   | )
|Net cash (used in) provided by operating activities of continuing operations                                  |  |      | (46,887 | ) |      |   | (9,351   | )    |  |   | 25,089   |  
|                                                                                                              |  |      |        
|Cash Flows from Investing Activities:                                                                         |  |      |         |   |      |   |          |      |  |   |          |  
|Acquisitions, net of cash acquired                                                                            |  |      | (57,641 | ) |      |   | (25,517  | )    |  |   | (18,919  | )
|Net proceeds on sale of assets and businesses                                                                 |  |      | 10,693  |   |      |   | 104,653  |      |  |   | 30,058   |  
|Purchases of property, plant and equipment                                                                    |  |      | (41,382 | ) |      |   | (25,347  | )    |  |   | (16,305  | )
|Investments in unconsolidated subsidiaries                                                                    |  |      |        |   |      |   |         |      |  |   | (115     | )
|Net cash (used in) provided by investing activities of continuing operations                                  |  |      | (88,330 | ) |      |   | 53,789   |      |  |   | (5,281   | )
|                                                                                                              |  |      |        
|Cash Flows from Financing Activities:                                                                         |  |      |         |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of long-term debt                                                                      |  |      | 77,600  |   |      |   | 275,000  |      |  |   | 10,297   |  
|Retirement of long-term debt                                                                                  |  |      | (12,500 | ) |      |   | (200,000 | )    |  |   |         |  
|Net borrowings (repayments) under revolving line of credit and other                                          |  |      | 33,986  |   |      |   | (62,654  | )    |  |   | (12,547  | )
|Deferred financing costs                                                                                      |  |      | (2,476  | ) |      |   | (15,032  | )    |  |   | (1,980   | )
|Distributions to minority interests                                                                           |  |      | (2,382  | ) |      |   | (1,010   | )    |  |   |         |  
|Net cash provided by (used in) financing activities of continuing operations                                  |  |      | 94,228  |   |      |   | (3,696   | )    |  |   | (4,230   | )
|                                                                                                              |  |      |        
|Effect of exchange rate changes on cash                                                                       |  |      | (367    | ) |      |   | 1,510    |      |  |   | 967      |  
|                                                                                                              |  |      |        
|Cash flows of discontinued operations                                                                         |  |      | (1,167  | ) |      |   | (914     | )    |  |   | (7,653   | )
|Net (decrease) increase in cash and cash equivalents                                                          |  |      | (42,523 | ) |      |   | 41,338   |      |  |   | 8,892    |  
|                                                                                                              |  |      |        
|Cash and cash equivalents at beginning of year                                                                |  |      | 62,545  |   |      |   | 21,207   |      |  |   | 12,315   |  
|Cash and cash equivalents at end of year                                                                      |  | $    | 20,022  |   |      | $ | 62,545   |      |  | $ | 21,207   |  



See notes to consolidated financial
statements.



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



REMY INTERNATIONAL, INC. AND SUBSIDIARIES



AMOUNTS IN THOUSANDS, EXCEPT AS INDICATED



Years Ended December 31, 2005, 2004 and 2003



1.    DESCRIPTION OF THE BUSINESS, INDUSTRY AND GENERAL ECONOMIC CONDITIONS

---



2004 Corporate Reorganization



Effective September 30, 2004, the stockholders of Remy International, Inc. (the Company or RII)
formed a new holding company, Remy Worldwide Holdings, Inc. (RWH), to own all of the outstanding stock of the Company. The Companys stockholders exchanged all of their stock for identical shares in RWH with the same number and
class of shares and percentage ownership of RWH and the same relative rights and preferences in the equity value of RWH, as they previously held in the Company. As a result, the Company is now a wholly owned subsidiary of RWH and the stockholders of
the Company became stockholders of RWH. The Company will continue to be the issuer of its outstanding notes and the reporting company with the Securities and Exchange Commission.



In conjunction with the formation of the new holding company, all of the outstanding shares of the Companys Series A
Preferred Stock were cancelled. The cancellation is reflected in the consolidated balance sheet as a reclassification of the Preferred Stock to Paid-in Capital, which increased stockholders equity by $334,336 and was the amount attributable to
the outstanding Series A Preferred Stock as of September 30, 2004. Since the Companys Series A Preferred Stock was cancelled effective October 1, 2004, the accretion of Preferred Stock dividends is no longer reflected in the
Companys financial statements and the Companys former stockholders now hold preferred stock in RWH that continues to accrete at 12.0%. RWH has no assets or operations other than its 100% ownership of the Company.



Business, Industry, General Economic Conditions and Liquidity



Remy International, Inc. is a leading global vehicular
parts designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment electrical components and aftermarket powertrain components for automobiles, light trucks, heavy-duty trucks and other vehicles. The Company
also provides core exchange services. The Company sells its products worldwide primarily under the Delco Remy brand name, the Remy brand name, the World Wide Automotive brand name and our customers widely
recognized private label brand names. The Companys products include starters, alternators, remanufactured engines, 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 it is the largest producer in the world of
remanufactured starters and alternators for the aftermarket. The Companys remanufacturing operations obtain failed products, commonly known as cores, from its customers as returns. These cores are an essential material needed for the
remanufacturing operations. The Company also provides exchange services for cores for third party aftermarket remanufacturers. At the time of the Companys separation from General Motors Corporation (GM) in August 1994, the Company
was predominantly a North American original equipment manufacturer with a majority of the 1995 sales derived from GM. Through strategic capital investments, acquisitions, divestitures and facility and workforce rationalization, the Company has
become a low cost, global manufacturer and remanufacturer with a more balanced business and product mix between the aftermarket and the original equipment market. Since fiscal year 1995 the Company has increased sales, broadened its product line,
expanded manufacturing and remanufacturing capabilities, diversified its customer base and end markets, lowered its cost base and extended its participation in international markets.



In general, the Companys business is influenced by the underlying trends in the automobile, light truck, and
heavy-duty truck, construction and industrial markets. However, the Company has been able to balance the cyclical nature of some of its businesses with the diversity of original equipment manufacturing markets between the automotive, heavy duty
truck and industrial markets by focusing on its remanufacturing capabilities and its aftermarket business.



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The automotive parts market is highly competitive. Competition is based primarily on quality of products,
service, delivery, technical support and price. Most OEMs and aftermarket distributors source parts from one or two suppliers and the Company competes with a number of companies who supply automobile manufacturers throughout the world.



The Companys operating results for 2005 were significantly below
2004. While net sales increased to $1,228,950 in 2005 from $1,051,165 in 2004 and $972,794 in 2003, gross margin percentage (excluding the 2003 special charge for the change in estimate for core valuation and the Mexican arbitration) decreased to
approximately 12% in 2005 compared with approximately 19% in 2004 and 2003. This decrease in gross margin percentage, coupled with impairment and restructuring charges in 2005 led to an operating loss of $10,749 and a net loss (from continuing
operations) of $96,579. The decrease in gross margin percentage was driven by decreasing sales prices, commodity price increases, start up and launch costs in transferring certain manufacturing and remanufacturing production to Mexico and
unfavorable foreign currency exchange fluctuations (primarily in the US dollar vs. the Korean Won).



Cash outflows from operating and investing activities in 2005 totaled $88,269, excluding the cash outflow related to acquisitions of $57,641 and the cash
inflow of $10,693 from the net proceeds on sale of businesses and assets. The Company used $46,887 of cash for operating activities and $41,382 of cash for capital expenditures. In December 2005, the Company obtained an additional $80,000 term loan.
The net proceeds ($77,600 after original issue discount) from this incremental borrowing enabled the Company to end 2005 with $100,800 of domestic liquidity (cash on hand in the United States and availability under the Senior Credit Facility).
However, if cash used from operations during 2006 were to continue at the 2005 level it would result in significant strains on liquidity during 2006. The Company expects higher cash interest payments in 2006 due to the additional borrowing coupled
with anticipated higher interest rates on the $125,000 floating rate notes and borrowings under the variable interest rate Senior Credit Facility. Finally, the Company has $27,501 of current maturities of long term debt at December 31, 2005. In
March 2005 the Company eliminated the earnings before interest, taxes, depreciation and amortization (EBITDA) and fixed charge covenants from its Senior Credit Facility. The Companys debt also renders it subject to restrictive
covenants, which include, among other things: (i) limitations on additional borrowings and encumbrances; (ii) limitations on cash dividends paid; (iii) limitations on investments and capital expenditures; (iv) limitations on
leases and sales of assets; and (v) requirements for minimum liquidity. See note 11, Long-Term Debt for further discussion. These covenants coupled with the cash required to service the Companys substantial indebtedness place significant
demands on the Companys liquidity.



In order to improve
its 2006 cash flow from operations as well as its overall liquidity, the Company has taken specific actions to improve its margins and overall cost structure. These actions include certain customer price increases, supplier price concessions,
headcount reductions and price reductions on freight. Further, the Company plans to complete the integration of the acquisition of Unit Parts Company (UPC) in 2006.



The Companys $145,000, 8 5/8% Senior Notes are due December 15, 2007. In anticipation of this due date and in
consideration of the Companys substantial indebtedness, the Company is exploring various strategic alternatives, including, but not limited to, refinancing some or all of its debt. In addition, the Board of Directors has authorized management
to explore restructuring alternatives including the engagement of investment bankers to advise the Company and analyze the disposition of certain non-core businesses.



The Company believes that the actions discussed above provide the foundation for improved operating performance in 2006 and
future periods and that the Companys expected future operating results and liquidity are sufficient to satisfy its operating and liquidity requirements during 2006. The Company is prepared to take actions to maintain sufficient liquidity in
the event of any unforeseen downturns or other circumstances.



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

---



Basis of Presentation and Principles of Consolidation



The consolidated financial statements include the accounts of RII and its subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation. RII is a wholly owned subsidiary of Remy Worldwide Holdings, Inc. See Note 14 for further discussion.



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



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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 assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the year. Actual results could differ from those
estimates.



Revenue Recognition



Revenue is recognized when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, ownership has transferred, the sellers price to the buyer is fixed and determinable and collectability is reasonably assured. The Company adheres to Emerging Issues Task Force
(EITF) 00-10, Accounting for Shipping and Handling Fees and Costs. Accordingly, the Company classifies shipping and handling costs billed to customers in net sales and shipping and handling costs in cost of sales. When the Companys
remanufacturing operations sell remanufactured product, the customer is often charged a deposit for the core. The deposit charged to the customer is not included in revenue. Core deposits charged to customers and not included in revenue totaled
$346,960, $233,735 and $300,576 for the years ended December 31, 2005, 2004, and 2003, respectively. Upon receipt of a core the Company grants the customer a credit based on the core deposit value. The Company generally limits core returns
based on the number of similar cores previously sold to each customer.



Research and Development



The Company
incurs costs in connection with research and development programs that are expected to contribute to future earnings. Such costs are charged to selling, general and administrative expenses as incurred. The Company funded research and development
expenses were approximately $23,300, $19,300 and $15,900 for the years ended December 31, 2005, 2004 and 2003, respectively.



The customer funded research and development expenses were approximately $1,987, $1,835 and $1,340 for the years December 31, 2005, 2004, and 2003,
respectively.



Cash and Cash Equivalents



All cash balances and highly liquid investments with maturity of ninety days
or less when acquired are considered cash and cash equivalents. The carrying amount of cash equivalents approximates fair value.



Book overdrafts of $5,600 and $4,700 at December 31, 2005 and 2004, respectively, are reflected in accounts payable.



As of December 31, 2005, approximately $1,778 of cash at Remy Korea
Limited, a wholly owned non guarantor subsidiary, is being held in escrow until the bi-lateral advanced pricing agreement between Remy Korea Limited and Remy International, Inc. is resolved. The Company expects the United States and Korean
authorities to finalize this transfer pricing matter in 2006. This $1,778 is included in cash and cash equivalents on the accompanying consolidated balance sheets.



Concentrations of Credit Risk and Other Risks



Substantially all of the Companys trade 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. The allowance for doubtful accounts is developed based on several factors including customers credit quality, historical
write-off experience and any known specific issues or disputes which exist as of the balance sheet dates. 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 Company conducts a
significant amount of business with GM and International Truck and Engine Corporation. For more information, see Note 19.



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##### Table of Contents

The Company records a liability for core returns based on cores expected to be returned. This liability
is recorded in other liabilities and accrued expenses. The liability represents the difference between the core deposit value to be credited to the customer and core inventory value for the core being returned. Core inventory values decline over the
expected remaining life of the core family. Core inventory values decline on the basis of several economic factors, including market availability, seasonality and demand. If estimated returns and/or core value differ from managements
estimates, revisions to the estimated core liability may be required.



Inventories



Inventories are carried at
the lower of cost or market determined on the first-in, first-out (FIFO) method. The Company obtains cores, primarily from its customers, as returns, and by purchasing them from vendors (core brokers). Core inventory value is evaluated on an ongoing
basis by comparison to prices obtained from core brokers. The value of cores is estimated to decline over the expected remaining life of the core family. The Company evaluates inventories on a regular basis to identify inventory on hand that may be
obsolete or in excess of current and future projected market demand. For inventory deemed to be obsolete, the Company provides a reserve for this inventory. Inventory that is in excess of current and projected use is reduced by an allowance to a
level that approximates the estimate of future demand. The Company recorded a charge to cost of goods sold for a reduction in the value of its core inventory of $6,245 and $8,256 for the years ended December 31, 2005 and 2004, respectively.



For the Company, raw materials also include supplies and
repair parts, which consist of materials consumed in the manufacturing and remanufacturing process, but not directly incorporated into the finished products. Inventories consist of the following:



|                |  |      |         |      |   |        
|--------------- |  | ---- | ------- | ---- | - | -------
|                |  | 2005 |         | 2004
|Raw materials   |  | $    | 127,677 |      | $ | 116,807
|Work-in-process |  |      | 9,474   |      |   | 7,577  
|Finished goods  |  |      | 124,670 |      |   | 93,528 
|Total inventory |  | $    | 261,821 |      | $ | 217,912



Property and
Equipment



Property and equipment are stated at cost and
include certain expenditures for leased facilities. Major improvements that materially extend the useful life of property are capitalized. Expenditures for repairs and maintenance are expensed as incurred. Depreciation is calculated primarily using
the straight-line method over the estimated useful lives of the related assets, including leased facilities (15 to 40 years for buildings and 3 to 15 years for machinery and equipment). Capital leases and leasehold improvements are amortized over
the period of the lease or the life of the property, whichever is shorter.



Valuation of Long-Lived Assets



The
Company periodically evaluates the carrying value of long-lived assets to be held and used, including definite lived intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held and used
is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a write-down of the asset would be recorded through a charge to operations,
based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. For assets held for sale, such loss is further increased by costs to sell. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Long-lived assets to be disposed of other than by sale are considered held and used until disposal.



Asset Retirement Obligations



In accordance with Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations
and the Financial Accounting Standards Board (FASB) interpretation (FIN) 47, Accounting for Conditional Asset Retirement ObligationsAn Interpretation of SFAS No. 143, the Company recognizes liabilities
for asset retirement obligations primarily related to lease facilities. These recorded liabilities are not material. No Company assets are legally restricted for the purposes of settling asset retirement obligations.



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Tooling



Tooling, which is included in machinery and equipment in the accompanying consolidated balance sheets, represents the costs to design and develop
tools, dies, jigs and other items owned by the Company and used in the manufacture of customer components under long-term supply agreements. Tooling is amortized over the tools expected life. Tooling that involves new technology is expensed as
incurred. Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred.



Goodwill and Other Intangible Assets



Goodwill represents the excess of purchase price over fair value of the net assets acquired. In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets, goodwill and other intangible assets are not amortized, but are tested for impairment at least annually. The Company performs its annual impairment review in the fourth quarter of each fiscal year, unless circumstances
dictate more frequent assessments. The 2005 annual impairment review resulted in an impairment charge of $13,917. For more information, see Note 5.



The cost of other intangible assets with determinable useful lives is amortized on a straight-line basis to reflect the pattern of economic benefit
consumed, ranging from 5 to 20 years.



Foreign Currency
Translation



Each of the Companys foreign
subsidiaries functional currency is its local currency, with the exception of our subsidiaries in Mexico, for whom the U.S. dollar is the functional currency because substantially all of their purchases and sales are denominated in U.S.
dollars. Financial statements of foreign subsidiaries for which the functional currency is its local currency 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 other comprehensive income (loss) (OCI). For more information, see Note 15. For each
of the Companys foreign subsidiaries, gains and losses arising from transactions denominated in a currency other that the functional currency are included in income.



Derivative Financial Instruments



The Company reports all derivative instruments on the consolidated balance sheets at fair value and establishes criteria for
the designation and effectiveness of hedging relationships.



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 has historically used derivative financial instruments for the purpose of hedging currency and
interest rate exposures, which exist as a part of ongoing business operations. As a policy, the Company does not engage in speculative or leveraged transactions, nor does the Company hold or issue financial instruments for trading purposes.
Management routinely reviews the effectiveness of the use of derivative instruments.



Currency Rate Hedging



The
Company primarily utilizes forward exchange contracts with maturities generally within 18 months, some of which are designated as cash flow hedges. 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 currency forward contracts. Additionally, a European subsidiary, whose functional currency is the Euro,
entered into a series of forward contracts to purchase US dollars in order to hedge U.S. payments to suppliers. The critical terms of the hedges are the same as the underlying forecasted transactions, and the hedges are considered highly effective
to offset the changes in the fair value of the cash flows from the hedged transactions. At maturity, each contract is settled at the difference between fair value and contract value, with a corresponding charge to the consolidated statement of
operations. These derivative contracts are designated as cash flow hedges and, accordingly, changes in fair value prior to settlement of the underlying transaction are charged to OCI. Any derivative instrument designated but no longer effective as a
hedge or initially not effective as a hedge would be recorded



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##### Table of Contents

at fair value and the related gains and losses are recognized in earnings. However, all hedges were effective for all periods presented. Derivatives not
designated as hedges are adjusted to fair value through the consolidated statement of operations.



The Companys foreign exchange contracts are summarized as follows:



|         |  |                 |        |                 |   |                 |  |                 |        |  |   |      
|-------- |  | --------------- | ------ | --------------- | - | --------------- |  | --------------- | ------ |  | - | -----
|         |  | 2005            |        | 2004           
|         |  | Notional Amount |        | Fair Value Gain |   | Notional Amount |  | Fair Value Gain
|Forwards |  | $               | 66,157 |                 | $ | 1,328           |  | $               | 41,620 |  | $ | 1,248



Interest Rate
Hedging



The Company is exposed from time to time to
interest rate risk through its corporate borrowing activities. The Company currently has no interest rate hedges.



Net Investments Hedging



The Company may enter into foreign-denominated debt to be used as a non-derivative instrument to hedge the Companys net investment in foreign
subsidiaries. The changes in carrying amount of the foreign-denominated debt on the Companys books, attributable to changes in the spot foreign exchange rate, is a hedge of the net investment in its foreign subsidiaries and is reported in
other comprehensive income (loss).



Commodity
Purchases



The Company purchases certain commodities during
the normal course of business, which result in physical delivery and hence, are excluded from SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended.



Warranty



The Company provides an allowance for the estimated future cost of product warranties and other defective product returns based on managements
estimate of product failure rates and customer eligibility. If these factors differ from managements estimates, revisions to the estimated warranty liability may be required. The specific terms and conditions of the warranties vary depending
upon the customer and the product sold. Changes to the Companys warranty liability, excluding discontinued operations, are summarized as follows:



|                                         |  |      |         |   |      |   |         |      |  |   |         |  
|---------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                         |  | 2005 |         |   | 2004 |   |         | 2003 | 
|Balance at beginning of year             |  | $    | 17,633  |   |      | $ | 20,471  |      |  | $ | 15,261  |  
|Provision for warranty                   |  |      | 54,308  |   |      |   | 39,665  |      |  |   | 51,166  |  
|Payments and charges against the accrual |  |      | (55,285 | ) |      |   | (42,503 | )    |  |   | (48,383 | )
|Other (including acquisitions)           |  |      | 4,533   |   |      |   |        |      |  |   | 2,427   |  
|Balance at end of year                   |  | $    | 21,189  |   |      | $ | 17,633  |      |  | $ | 20,471  |  



Investments in
Unconsolidated Subsidiaries



Investments in companies in
which the Company holds an ownership interest of 20% to 50% over which the Company exercises significant influence and to which Financial Accounting Standard Board (FASB) Interpretation 46, Consolidation of Variable Interest Entities
(revised December 2003, FIN 46R) does not apply, are accounted for by the equity method. Currently, the Company accounts for all 20% to 50% owned entities under the equity method. Investments in companies in which the Company holds an
ownership interest of less than 20% are accounted for on the cost basis. At December 31, 2005, the Companys ownership interest and carrying value of such investments consisted of Sahney Paris Rhone Ltd., India (47.5%, $5,767) and Nikko
Electric Industry Co., Inc. (1%, $150).



At December 31,
2004, the Companys ownership interests and carrying value of these instruments consisted of Sahney Paris Rhone Ltd. (47.5%, $5,556) and Nikko Electric Industry Co., Inc. (1%, $150). In 2004, the Company reduced its ownership interest in
Hitachi Remy Automotive GmbH from 49% to 24.6%. The Companys share of losses



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related to this unconsolidated subsidiary in 2004 reduced the carrying value of that investment to zero. Accordingly, the Company has discontinued
recognition of losses related to Hitachi Remy Automotive GmbH. The investment was terminated in January 2006.



Income Taxes



The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (SFAS No. 109), 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
periodically evaluates 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. For more information, see Note 13.



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. For more information, see Note 12.



Earnings Per Share



The Companys common stock is not publicly traded. Accordingly, disclosure of earnings per share is not required.



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 debt in the table below was estimated using the closing market price of each security at December 31, 2005 and 2004. With the exception of our debt instruments included in the table below, the carrying
amounts of the other debt related instruments approximated their fair value at December 31, 2005 and 2004. The face value and estimated fair value of the Companys Senior Notes and Senior Subordinated Notes at December 31, 2005 and
2004 are as follows:



|                                   |  |           |         |      |   |         |  |   |        
|---------------------------------- |  | --------- | ------- | ---- | - | ------- |  | - | -------
|                                   |  | FaceValue |         | 2005 |   | 2004   
|Senior Secured Floating Rate Notes |  | $         | 125,000 |      | $ | 113,750 |  | $ | 127,031
|85/8%
Senior Notes                 |  |           | 145,000 |      |   | 110,200 |  |   | 147,175
|11% Senior Subordinated Notes      |  |           | 165,000 |      |   | 51,975  |  |   | 175,725
|93/8% Senior Subordinated Notes    |  |           | 150,000 |      |   | 51,000  |  |   | 153,750
|Total                              |  | $         | 585,000 |      | $ | 326,925 |  | $ | 603,681



Implementation of
New Financial Accounting Pronouncements



In May 2005, the
FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS No. 154). SFAS No. 154 replaces Accounts Principle Board Opinion (APB) No. 20, Accounting Changes, and SFAS No. 3, Reporting
Accounting Changes in Interim Financial Statements. Among the changes, this statement requires that a voluntary change



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in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is
impracticable to do so. This statement will be effective for the fiscal year beginning after December 15, 2005. The Company currently does not expect the adoption of the statement to have a material effect on its consolidated financial
statements.



In March 2005, FASB issued FIN 47. FIN 47 requires
an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liabilitys fair value can be reasonably estimated. This FASB interpretation was effective for fiscal years ending after
December 15, 2005. The adoption of this FASB interpretation did not have a material effect on the Companys consolidated financial statements.



In December 2004, the FASB issued SFAS No. 153, Exchange of Non-monetary Assets (SFAS No. 153). SFAS No. 153 amends the
guidance in Accounting Principles Board Opinions, (APB), Accounting for Nonmonetary Transactions (APB No. 29) to require measurement at fair value for exchanges of similar productive assets unless the exchange lacks
commercial substance. This statement will be effective for the Company in 2006 and is not expected to have a material effect on the Companys consolidated financial statements.



In November 2004, the FASB issued SFAS No. 151, Inventory Costs (SFAS No. 151). SFAS No. 151
amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those
items be recognized as current-period charges regardless of whether they meet the criterion of so abnormal. In addition, this Statement requires that allocation of fixed production overhead to the costs of conversion be based on the
normal capacity of the production facilities. This statement will be effective for the Company in 2006. The Company does not expect the adoption of the statement to have a material effect on its consolidated financial statements.



3.    ACQUISITIONS

---



2005 Acquisitions



On March 18, 2005, the Company acquired substantially all of the assets
and assumed certain liabilities of UPC. UPC is a major supplier to the automotive aftermarket for new and remanufactured starters and alternators, offering custom branding, packaging and logistics solutions as well as complete engineering and
support services. The purchase price consisted of $55,277 in cash, $1,627 in costs and the assumption of approximately $66,702 in liabilities (including an estimate of approximately $5,250 in exit costs and $61,452 in customer obligations).
Additionally, the purchase agreement contains a contingent earn-out to be paid over a four-year period if incremental financial performance objectives above the current performance of the combined electrical aftermarket business are attained.
Contingent consideration earned and paid will increase the purchase price and result in additional goodwill. The Company funded this acquisition with cash on hand and borrowings available under its existing revolving credit facility.



Customer obligations primarily relate to several customer contracts acquired
through the acquisition. These liabilities are reflected in Other liabilities and accrued expenses and Other non-current liabilities in the accompanying consolidated balance sheets. These contracts designate the Company as
the exclusive supplier to the respective customer and require the Company to issue credits to each respective customer over several years. The following table summarizes the net present value, as of December 31, 2005, of future payments due
over the next five years under the customer obligation contracts:



|           |  |   |       
|---------- |  | - | ------
|2006       |  | $ | 13,814
|2007       |  |   | 9,387 
|2008       |  |   | 8,439 
|2009       |  |   | 8,047 
|2010       |  |   | 6,825 
|Thereafter |  |   | 10,790
|Total      |  | $ | 57,302



In connection with
this acquisition the Company entered into Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement, described in Note 11.



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##### Table of Contents

UPCs results of operations are included in the Companys consolidated statement of operations
beginning March 18, 2005. The preliminary purchase price allocation is summarized as follows:



|                               |  |   |        
|------------------------------ |  | - | -------
|Current assets                 |  | $ | 63,092 
|Intangible assets and goodwill |  |   | 71,055 
|Other assets                   |  |   | 22,594 
|Total assets                   |  | $ | 156,741
|                               | 
|Total liabilities              |  | $ | 101,464
|Cash paid                      |  | $ | 55,277 



Other



In 2005, the Company made cash payments totaling $325
relative to the acquisition of Delphi Corporations (Delphi) light vehicle alternator business.



In the second quarter of 2005, the Company made a final cash earn-out payment of approximately $412 relative to the 2000 acquisition of M&M Knopf Auto
Parts, L.L.C. (Knopf) and recorded a corresponding increase in goodwill.



2004 Acquisitions



The Company
made cash earn-out payments totaling $13,454 in 2004 relative to the 2000 acquisition of Knopf, a provider of core acquisition services. These payments were based on the achievement of certain earnings goals by Knopf during the period August 2000 to
December 2003. In December 2003, $13,500 was accrued and recorded as an adjustment to the purchase price of Knopf, resulting in a corresponding increase in goodwill. The final earn out payment was made in 2005.



In connection with settlement of the arbitration between certain of the
Companys affiliates and its former partner at its operations in Mexico, the Company recorded the purchase of the remaining shares of the Mexico venture from the minority shareholders. For more information see Note 7. The net purchase portion
of the arbitration award of $5,488 in cash was paid in the third quarter of 2004 and resulted in a $5,101 increase in goodwill.



The Company made the final cash payment of $4,786 in 2004 on notes issued in 2002 in connection with the Companys acquisition of the remaining
shares from the minority shareholders of Remy Korea Limited (fka Delco Remy Korea Limited), which was acquired in 1999. Remy Korea Limited is a manufacturer of automotive starters and parts for the U.S. original equipment market, as well as
customers in Asian markets.



The Company made cash payments
totaling $1,789 in 2004 relative to the acquisition of Delphis automotive generator business.



2003 Acquisitions



The Company completed the acquisition of certain parts of the Delphi automotive generator business for cash payments totaling $6,061 in 2003, including cash acquired of $3,600. This acquisition included 51% of Hubei,
a manufacturer of automotive and heavy-duty generators for the original equipment market and aftermarket based in China ($3,600); Delphi Automotive Systems Poland ($1,461); and other items ($1,000). The purchase price was funded through proceeds
from the Companys Senior Credit Facility. The acquisition was accounted for as a purchase with no resulting goodwill. The amount by which the estimated fair value of the assets acquired exceeded the total purchase price, including expenses,
was applied as a ratable reduction in the value of non-current assets in accordance with SFAS No. 141, Business Combinations (SFAS No. 141).



The Company made cash payments totaling $5,923 in 2003 under contractual put agreements to purchase the remaining shares from the minority shareholders of
World Wide Automotive, L.L.C. (World Wide), an aftermarket remanufacturer and supplier of light duty starters which was acquired in 1997. Goodwill of $2,749 was recorded in connection with these payments and the Companys ownership
of World Wide increased from 94.0% to 100.0%.



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The Company made cash payments totaling $5,298 in 2003 on notes issued in 2002 in connection with the
Companys acquisition of the remaining shares from the minority shareholders of Remy Korea Limited.



Payments totaling $5,237 were made in 2003 under contractual put agreements to purchase the remaining shares from the minority shareholder of Power
Investments, Inc. (Power), primarily a remanufacturer of diesel engines which was acquired in 1996. Goodwill of $1,303 was recorded in connection with these payments and the Companys ownership percentage of Power increased from
93.4% to 100.0%.



4.    DISCONTINUED OPERATIONS

---



Over the
past three years, the Company has disposed of various non-core businesses, some of which were generating operating losses, to focus its resources on core operations.



In the second quarter of 2005, the Company completed the sale of substantially all of the assets and the assignment of
certain liabilities of its automatic transmission remanufacturing business, AutoMatic Transmission International A/S (AMT), based in Soborg, Denmark, for approximately $240 in cash. In the third quarter of 2004, the Company committed to
a plan to dispose of this business and the operating results, balance sheets and cash flows of this business were classified as discontinued operations effective in the third quarter of 2004 and all prior periods were reclassified accordingly. An
estimated loss on disposal of $2,246 was recorded in connection with this action. This loss was reduced by $448 in 2005 as a result of the sale.



In the third quarter of 2004, the Company completed the sale of its wholly owned remanufactured transmission subsidiaries, Williams Technologies, Inc.
(Williams) and JAX Reman, L.L.C. (JAX), to Caterpillar, Inc. (CAT) for $107,164 in cash. In 2004, the Company realized net cash proceeds of $104,270 and recorded a gain of $45,135, net of income taxes and
deal-related costs. As a result of the sale of Williams and JAX, the operating results, balance sheets and cash flows of these businesses were classified as discontinued operations effective in the third quarter of 2004 and all prior periods were
reclassified accordingly.



In the first quarter of 2003, the
Company completed the sale of Tractech Inc. and Kraftube Inc. These businesses manufactured traction control devices and components for the air-conditioning industry, respectively. In connection with the sale, the Company recorded net cash proceeds
of $30,058, $383 and $478 in 2003, 2004 and 2005, respectively, and a gain of $2,320, $383, $478 in 2003, 2004 and 2005, respectively, with no income tax effect. Additional gains may be recognized based on the financial performance of these
businesses in 2006 through 2008. The operating results, balance sheets and cash flows of these businesses were reported as discontinued operations beginning in the first quarter of 2003 and all prior periods were reclassified accordingly.



In the first quarter of 2003, the Company completed plans to
exit its contract remanufacturing operation for gas engines in Beaumont, Texas. A charge of $618 for the write down of assets and the cost of employee separation programs relative to the exit of this operation were charged to discontinued operations
in 2003. The operating results, balance sheets and cash flows of this business were reported as discontinued operations beginning in the first quarter of 2003 and all prior periods were reclassified accordingly.



In the second quarter of 2002, the Company completed plans to exit its retail
aftermarket gas engine business in Dallas, Texas, Kansas City, Missouri and Toronto, Canada. A charge of $28,248 was recorded in 2002 for the write down of the relevant assets to their estimated realizable value. This charge was reduced by $639 in
2004 as fully reserved receivables were collected.



Operating
results of discontinued operations are as follows:



|                         |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                         |  | 2005 |        |   | 2004 |   |        | 2003 | 
|Net sales                |  | $    | 973    |   |      | $ | 63,291 |      |  | $ | 90,171 |  
|Interest expense         |  |      | 5      |   |      |   | 4,473  |      |  |   | 7,880  |  
|Income (loss) before tax |  |      | (758   | ) |      |   | 1,214  |      |  |   | (7,888 | )
|Income tax expense       |  |      | (573   | ) |      |   | (60    | )    |  |   | (131   | )
|Net (loss) income        |  | $    | (1,331 | ) |      | $ | 1,154  |      |  | $ | (8,019 | )



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Assets and liabilities of discontinued operations are as follows:



|                                             |  |      |     |      |   |      
|-------------------------------------------- |  | ---- | --- | ---- | - | -----
|                                             |  | 2005 |     | 2004
|Current assets                               |  | $    | 16  |      | $ | 356  
|Property, plant and equipment, net           |  |      |    |      |   |     
|Other assets                                 |  |      |    |      |   |     
|Total assets of discontinued operations      |  | $    | 16  |      | $ | 356  
|                                             |  |     
|Current liabilities                          |  | $    | 443 |      | $ | 2,727
|Non-current liabilities                      |  |      |    |      |   | 72   
|Total liabilities of discontinued operations |  | $    | 443 |      | $ | 2,799



5.    GOODWILL
AND OTHER INTANGIBLE ASSETS

---



Goodwill



The Company performs
an impairment review on its goodwill and other intangible assets on an annual basis, or more frequently if impairment indicators arise. The Company completed its annual impairment test during the fourth quarter of 2003, 2004 and 2005 as required
under SFAS No. 142 and recorded a goodwill impairment charge of $13,917 in the fourth quarter of 2005 relating to the entire goodwill balance at Knopf, a provider of core acquisition services. The decline in the enterprise value of Knopf is
primarily a result of lower demand in the core market. The 2003 and 2004 annual impairment tests determined that goodwill was not impaired.



At December 31, 2005, the Company had goodwill of approximately $156,700. In 2005, the Company recorded additional goodwill of $64,200 for the
purchase of UPC and recorded an impairment of $13,900 discussed above.



At December 31, 2004, the Company had goodwill of approximately $106,400. In 2004, the Company recorded additional goodwill of $5,101 for the purchase of the remaining shares of the Mexico venture from the minority shareholders and
$404 in connection with the true up of the contingent earn-out liability relative to the acquisition of Knopf.



Other Intangible Assets



At December 31, 2005, the Company had other intangible assets of approximately $19,900, net of accumulated amortization. Intangibles net of accumulated amortization at December 31, 2005 included $4,900 for
customer contract intangibles acquired with the acquisition of UPC, $7,500 for customer inducements, $5,100 for intellectual property license agreements and $2,400 for a pension intangible and other intangibles. Customer contract intangibles and
intellectual property license agreements are amortized over the estimated useful life of the asset, which are 1 to 8 years, and recorded as amortization expense. Customer inducements are written down over the life of the contract, which are 3 to 13
years, and recorded as a reduction to gross profit.



At
December 31, 2004 the Company had other intangible assets of approximately $12,300, net of accumulated amortization. Intangibles net of accumulated amortization at December 31, 2004 included approximately $7,800 for customer inducements,
approximately $3,500 for an intellectual property license agreement and approximately $1,000 for a pension intangible.



Amortization expense from definite lived intangibles for the years ended December 31, 2005, 2004 and 2003 was $4,288, $2,676 and $1,477,
respectively. The following table presents the Companys estimate of amortization expense for each of the five succeeding fiscal years for definite lived intangibles recorded as of December 31, 2005:



|     |  |   |      
|---- |  | - | -----
|2006 |  | $ | 4,263
|2007 |  |   | 1,987
|2008 |  |   | 1,056
|2009 |  |   | 1,014
|2010 |  |   | 1,014



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6.    RESTRUCTURING

---



The Companys restructuring activities are accounted for in accordance
with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS No. 146) and Emerging Issues Task Force (EITF) Issue 95-03, Recognition of Liabilities in Connection with a Purchase Business
Combination (EITF 95-03).



Continuing Operations



Actions



In 2005, the Company completed plans for the following restructuring actions
in conjunction with its ongoing cost reduction initiatives:



| |  |  | A reduction in force, including early retirements and involuntary terminations, at its headquarters operations in Anderson, Indiana.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consolidation of certain electrical aftermarket remanufacturing operations in Michigan and Virginia.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | A reduction in force subsequent to the ramp up of in sourcing activities and continued implementation of lean manufacturing initiatives in its OEM operations in Mexico.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Closure of certain manufacturing facilities in Europe.
| | - |  | ------------------------------------------------------



| |  |  | Closure of two distribution centers in its core services operations.
| | - |  | --------------------------------------------------------------------



| |  |  | Closure of its Powrbilt Products diesel engine remanufacturing operation in Mansfield, Texas.
| | - |  | ---------------------------------------------------------------------------------------------



In connection with the acquisition of UPC in the first quarter of 2005, the Company developed a plan for the consolidation
and integration of the operations of UPC with the Companys then existing electrical aftermarket remanufacturing operations. This plan included provisions for various voluntary and involuntary employee termination programs. A liability of
$5,250, consisting entirely of employee termination benefits, was established in the opening balance sheet of UPC for the estimated cost of the plan.



In 2004, the Company completed plans for the closure and consolidation of certain manufacturing and distribution facilities in Mexico and Europe.



In 2003, the Company completed plans for the following
restructuring actions and transfers of production to lower-cost facilities:



| |  |  | Closure of its starter and alternator manufacturing operations in Anderson, Indiana.
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Consolidation of its alternator and starter remanufacturing operations in Mississippi.
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Closure of its aftermarket remanufacturing and distribution facilities in Reed City, Michigan.
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Consolidation of certain operations in Europe.
| | - |  | ----------------------------------------------



Net charges and payments



A total net charge of $4,850 was recorded in 2005 relative to the 2005, 2004 and 2003 actions. This charge consisted of termination benefits totaling
$7,043, asset and leasehold improvement impairment charges of $502 and other costs of $331, offset by a $3,026 credit (including the extinguishment of $2,700 of a liability for maintenance agreements) on the sale of production facilities in
Anderson, Indiana, which were written down in 2003. The employee termination benefit charge included $1,525 relative to the termination in 2003 of employees represented by the International Union, United Automobile, Aerospace and Agriculture
Implement Workers of America (the UAW). On January 31, 2006, the Company and the UAW reached a settlement of the lawsuit filed by the UAW and Local Union 662 in 2003 (see Note 17). Under the terms of the settlement which released
all claims alleged, the Company made payments totaling $5,565, including payroll related taxes, to the supplemental unemployment benefit plan in the first quarter of 2006.



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A total net charge of $942 was recorded in 2004 for the estimated cost of the 2004 and 2003 actions. This
charge consisted of $1,357 for the cost of voluntary and involuntary employee separation programs, $120 for the impairment of leasehold improvements and other miscellaneous costs of $1,247, partially offset by a $1,782 reduction in the reserve for
the impairment of operating leases, as the Company reached an agreement to transfer its lease obligation for an Anderson-based facility to a third party.



A total charge of $48,968 was recorded in 2003 for the estimated cost of the 2003 actions. This charge consisted of $14,381 for the estimated cost of
employee separation programs; $29,233 for the impairment of fixed assets and capital leases; $9,066 for the impairment of operating leases; a post-employment benefit curtailment gain of $7,216; a pension plan curtailment charge of $1,835; and other
miscellaneous costs of $1,669.



The Company expects to pay
approximately $11,400 (including $5,565 for the UAW settlement) in 2006 related to the employee termination programs.



The following table summarizes the activity in the restructuring accrual for continuing operations:



|                               |  |                     |         |   |                      |   |        |       |  |   |         |  
|------------------------------ |  | ------------------- | ------- | - | -------------------- | - | ------ | ----- |  | - | ------- | -
|                               |  | TerminationBenefits |         |   | Exit/ImpairmentCosts |   |        | Total | 
|Reserve at December 31, 2002   |  | $                   | 9,585   |   |                      | $ | 227    |       |  | $ | 9,812   |  
|Provision in 2003              |  |                     | 14,381  |   |                      |   | 9,066  |       |  |   | 23,447  |  
|Payments in 2003               |  |                     | (13,315 | ) |                      |   | (2,020 | )     |  |   | (15,335 | )
|Other                          |  |                     | 62      |   |                      |   | 1,217  |       |  |   | 1,279   |  
|Reserve at December 31, 2003   |  |                     | 10,713  |   |                      |   | 8,490  |       |  |   | 19,203  |  
|Provision in 2004              |  |                     | 1,357   |   |                      |   | (415   | )     |  |   | 942     |  
|Payments in 2004               |  |                     | (6,729  | ) |                      |   | (2,298 | )     |  |   | (9,027  | )
|Other                          |  |                     | (56     | ) |                      |   | (204   | )     |  |   | (260    | )
|Reserve at December 31, 2004   |  |                     | 5,285   |   |                      |   | 5,573  |       |  |   | 10,858  |  
|Provision in 2005              |  |                     | 7,043   |   |                      |   | 258    |       |  |   | 7,301   |  
|Payments in 2005               |  |                     | (5,858  | ) |                      |   | (1,599 | )     |  |   | (7,457  | )
|Other (including acquisitions) |  |                     | 5,148   |   |                      |   | (2,700 | )     |  |   | 2,448   |  
|Reserve at December 31, 2005   |  | $                   | 11,618  |   |                      | $ | 1,532  |       |  | $ | 13,150  |  



The following table
reconciles the restructuring provisions appearing in the above table with the total charges (credits) appearing in the consolidated statements of operations:



|                                              |  |      |        |   |      |   |      |  |   |        |  
|--------------------------------------------- |  | ---- | ------ | - | ---- | - | ---- |  | - | ------ | -
|                                              |  | 2005 |        |   | 2004 |   | 2003 | 
|Provision charged to accrual                  |  | $    | 7,301  |   |      | $ | 942  |  | $ | 23,447 |  
|Write-down of fixed assets and capital leases |  |      | 502    |   |      |   |     |  |   | 29,233 |  
|Gain on sale of fixed assets                  |  |      | (3,026 | ) |      |   |     |  |   |       |  
|Post-employment benefit curtailment gain      |  |      |       |   |      |   |     |  |   | (7,216 | )
|Pension plan curtailment charge               |  |      |       |   |      |   |     |  |   | 1,835  |  
|Other                                         |  |      | 73     |   |      |   |     |  |   | 1,669  |  
|Total provision                               |  | $    | 4,850  |   |      | $ | 942  |  | $ | 48,968 |  



Discontinued
Operations



The restructuring charges, payments and
liabilities relative to discontinued operations are classified as discontinued operations in the Companys consolidated financial statements. The restructuring liabilities of these operations are included in the Balance Sheet as liabilities of
discontinued operations. For additional information on discontinued operations, see Note 4.



The Company has substantially completed the following restructuring actions in its discontinued operations.



| |  |  | Closure of its aftermarket transmission remanufacturing facility in Jacksonville, Florida.
| | - |  | ------------------------------------------------------------------------------------------



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| |  |  | Closure of the manufacturing and administrative functions of its retail aftermarket gas engine business. This action was initiated in 2002.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



The following table summarizes the activity in the restructuring accrual for
discontinued operations:



|                             |  |                     |        |   |                      |   |        |       |  |   |        |  
|---------------------------- |  | ------------------- | ------ | - | -------------------- | - | ------ | ----- |  | - | ------ | -
|                             |  | TerminationBenefits |        |   | Exit/ImpairmentCosts |   |        | Total | 
|Reserve at December 31, 2002 |  | $                   | 1,067  |   |                      | $ | 2,766  |       |  | $ | 3,833  |  
|Provision in 2003            |  |                     | 646    |   |                      |   | 283    |       |  |   | 929    |  
|Payments in 2003             |  |                     | (1,012 | ) |                      |   | (1,542 | )     |  |   | (2,554 | )
|Other                        |  |                     | (277   | ) |                      |   | (1,149 | )     |  |   | (1,426 | )
|Reserve at December 31, 2003 |  |                     | 424    |   |                      |   | 358    |       |  |   | 782    |  
|Provision in 2004            |  |                     | 293    |   |                      |   | 75     |       |  |   | 368    |  
|Payments in 2004             |  |                     | (758   | ) |                      |   | (254   | )     |  |   | (1,012 | )
|Other                        |  |                     | 41     |   |                      |   | 115    |       |  |   | 156    |  
|Reserve at December 31, 2004 |  |                     |       |   |                      |   | 294    |       |  |   | 294    |  
|Provision in 2005            |  |                     |       |   |                      |   |       |       |  |   |       |  
|Payments in 2005             |  |                     |       |   |                      |   | (182   | )     |  |   | (182   | )
|Other                        |  |                     |       |   |                      |   | (112   | )     |  |   | (112   | )
|Reserve at December 31, 2005 |  | $                   |       |   |                      | $ |       |       |  | $ |       |  



7.    SPECIAL
CHARGES

---



In March 2004, prior to the issuance of the 2003 financial statements, the Company received an interim decision from the panel of arbitrators regarding the dispute with its Mexican minority shareholder, GCID Autopartes, S.A. de C.V.
(GCID). In the fourth quarter of 2003, the Company recorded a special charge to cost of sales for the estimated cost of the past service fee, other claims, interest and other costs totaling $14,310. The arbitration panel issued its final
award on June 25, 2004. In accordance with the final award, on July 6, 2004 GCID transferred its interest in Remy Mexico, S. de R.L. de C.V. (fka Delco Remy Mexico, S. de R.L. de C.V. (RM) to Remy Mexico Holdings, S. de R.L. de
C.V. (RMH), and RMH, RM and Remy Componentes, S. de R.L. de C.V. (RC) paid GCID and its affiliates approximately $17,300 for GCIDs minority interest, the award for past services fees for the period of 1997 through 2004,
and other claims, including interest. RMH, RM and RC also paid approximately $1,800 in value added tax as a result of these payments. The results of the final award did not affect the special charge recorded in the fourth quarter of 2003. For more
information, see Note 7.



In the fourth quarter of 2003, the
Company changed its estimate for the valuation of core inventory from primarily customer acquisition cost to primarily core broker prices and recorded a special charge of $103,930. Of this charge, $94,856 related to the write down of the core
component of inventory and $9,074 related to the establishment of an estimated liability for core returns.



8.    ALLOWANCE FOR DOUBTFUL ACCOUNTS

---



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



|                                                      |  |      |        |   |      |   |        |      |  |   |        |  
|----------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                      |  | 2005 |        |   | 2004 |   |        | 2003 | 
|Balance at beginning of period                        |  | $    | 2,784  |   |      | $ | 6,202  |      |  | $ | 4,871  |  
|Additions charged to costs and expenses               |  |      | 2,857  |   |      |   | 894    |      |  |   | 4,589  |  
|Uncollectible accounts written off, net of recoveries |  |      | (1,090 | ) |      |   | (4,312 | )    |  |   | (3,258 | )
|Balance at end of period                              |  | $    | 4,551  |   |      | $ | 2,784  |      |  | $ | 6,202  |  



The allowance does not
include amounts related to discontinued operations of $0, $0, and $800 for the years ending December 31, 2005, 2004 and 2003, respectively.



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9.    PROPERTY, PLANT AND EQUIPMENT

---



Property, plant and equipment consist of the following:



|                                    |  |      |         |      |   |        
|----------------------------------- |  | ---- | ------- | ---- | - | -------
|                                    |  | 2005 |         | 2004
|Land and buildings                  |  | $    | 41,556  |      | $ | 31,000 
|Buildings under capital leases      |  |      | 3,330   |      |   | 18,356 
|Leasehold improvements              |  |      | 15,347  |      |   | 8,728  
|Machinery and equipment             |  |      | 304,608 |      |   | 271,553
|Total property, plant and equipment |  | $    | 364,841 |      | $ | 329,637



10.    OTHER
LIABILITIES AND ACCRUED EXPENSES:

---



The other liabilities and accrued expenses consist of the following:



|                                |  |      |         |      |   |       
|------------------------------- |  | ---- | ------- | ---- | - | ------
|                                |  | 2005 |         | 2004
|Customer obligation             |  | $    | 13,814  |      | $ |      
|Accrued warranty                |  |      | 21,189  |      |   | 17,633
|Accrued core liability          |  |      | 17,322  |      |   | 14,397
|Accrued wages and benefits      |  |      | 17,189  |      |   | 18,154
|Other                           |  |      | 45,310  |      |   | 33,973
|Total other accrued liabilities |  | $    | 114,824 |      | $ | 84,157



11.    LONG-TERM DEBT

---



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



|                                                      |  |      |         |      |   |        
|----------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                      |  | 2005 |         | 2004
|Senior Credit FacilityDue June 30, 2008              |  | $    | 109,183 |      | $ |       
|Senior Secured Floating Rate NotesDue April 15, 2009 |  |      | 125,000 |      |   | 125,000
|85/8%
Senior NotesDue December 15, 2007              |  |      | 145,000 |      |   | 145,000
|11% Senior Subordinated NotesDue May 1, 2009         |  |      | 164,130 |      |   | 163,857
|93/8%
Senior Subordinated NotesDue April 15, 2012    |  |      | 150,000 |      |   | 150,000
|Other, including capital lease obligations            |  |      | 48,369  |      |   | 49,363 
|                                                      |  |      | 741,682 |      |   | 633,220
|Less current portion                                  |  |      | 27,501  |      |   | 22,890 
|Total long-term debt                                  |  | $    | 714,181 |      | $ | 610,330



Senior Credit
Facility



On June 28, 2002, the Company entered into a
$250,000 secured, asset based, revolving credit facility (the Senior Credit Facility) with a syndicate of banks led by Wachovia Bank, National Association and its subsidiary Congress Financial Corporation. The Senior Credit Facility
replaced the Companys then-existing $200,000 secured revolving credit facility, which was due to expire on March 31, 2003. The interest is payable at the end of each month.



The Senior Credit Facility is collateralized by liens on substantially all assets of the Company and its domestic and
certain foreign subsidiaries and by the capital stock of such subsidiaries.



On October 3, 2003, the Company amended and restated its Senior Credit Facility. The $250,000 amended and restated facility consists of a $190,000 secured, asset-based, revolving facility, and a $60,000 term loan
facility. Proceeds from the new term loan were used to reduce outstanding debt under the Companys asset-based revolving credit facility, thereby increasing the Companys total borrowing capacity under the Senior Credit Facility by
approximately $60,000. The interest rate on the term loan facility is Wachovia Banks prime rate plus 4.5% subject to a minimum interest rate of



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8.5%. The applicable interest rate on the amount borrowed under the revolving credit facility remains unchanged and floats at rates above Wachovia
Banks prime rate and/or Eurodollar rates.



On
April 23, 2004, the Company issued $125,000 principal amount of Second Priority Senior Secured Floating Rate Notes due 2009 (the Floating Rate Notes), bearing an interest rate of LIBOR plus 4.00%, and $150,000 principal amount of 9
3/8% Senior Subordinated Notes due 2012 (the 9 3/8% Senior Subordinated Notes). The net proceeds from the issuance of these notes were to pay down existing indebtedness under the Companys senior credit facilities, including
repayment of $60,000 term loan and relevant prepayment premium, and to finance the redemption price of 101.777% of their face amount plus accrued but unpaid interest up to, but not including, the redemption date of May 24, 2004.



In the second quarter of 2004, in connection with the above mentioned debt
redemption, repayment and amendment, the Company recorded a loss on early extinguishment of debt of $7,939. This charge consisted of: (i) a call premium of $2,479 and the write off of deferred financing costs of $1,391 on redemption of the 10
5/8% Senior Subordinated Notes: (ii) a prepayment penalty of $1,800 and the write off of deferred financing costs of $743 on repayment of the term loan: and (iii) write off of deferred financing costs of $1,226 and an amendment fee of $300
on the amendment and pay down of the senior credit facility. Also during the second quarter of 2004, the Company recorded additional interest for the period between the call and redemption dates of $1,281 relative to redemption of the 10 5/8% Senior
Subordinated Notes.



On September 1, 2004, the Company
amended its senior credit facility to change certain definitions and to adjust certain financial covenants to reflect the sale of Williams and JAX. The revised covenant calculation for the maintenance of a minimum level of EBITDA was lowered from
$108,000 to $99,000 for the rolling twelve-month period ending December 31, 2005, reflecting the sale of the transmission business.



In March 2005, the Company entered into Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement (Amendment) to
reflect, among other matters, the acquisition of substantially all of the assets and the assumption of certain liabilities of UPC. Additionally, the Amendment increased the maximum draw available (subject to a borrowing base calculation) under the
asset based Senior Credit Facility from $120,000 to $145,000, eliminated the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Fixed Charge covenants from the facility and extended the maturity of the facility
to June 30, 2008 with provisions for annual extensions thereafter.



On December 27, 2005, the Company amended its Senior Credit Facility by entering into the Third Amended and Restated Loan and Security Agreement to reflect, among other matters, the issuance of an $80,000 term loan within the Facility.
As a result of the addition of the Term Loan, the senior credit facility (subject to a borrowing base calculation and existing restrictions under the Companys indentures) was increased to $240,000 including the $80,000 Term Loan and the
$160,000 revolving commitment. The term loan was issued at a discount of 3% or $2,387. Proceeds from the new term loan were used to reduce outstanding debt under the revolving facility, thereby increasing the Companys total liquidity. The
interest rate on the term loan is the greater of Wachovia Banks prime rate plus a spread of 5% or the Federal Funds Effective Rate plus .5% plus a spread of 5%, or at the Companys option, a 1, 2, 3 or 6 month Eurodollar Rate plus a
spread of 6%.



At December 31, 2005, borrowings under the
Senior Credit Facility were $31,570 and utilization of letters of credit totaled $7,033. Based on the collateral supporting the Senior Credit Facility at December 31, 2005, $99,795 was available under the Facility. The interest rate on
borrowings outstanding under the credit facility at December 31, 2005 was 7.25%. At December 31, 2005, borrowings outstanding under the term loan portion of the Senior Credit Facility were $80,000, reflected on the balance sheet net of the
unamortized portion of the original issue discount of $2,387. The interest rate on borrowings outstanding under the term loan of the credit facility at December 31, 2005 was 10.52%.



The Senior Credit Facility contains various restrictive covenants, which include, among other things: (i) limitations
on additional borrowings and encumbrances; (ii) limitations on cash dividends paid; (iii) limitations on investments and capital expenditures; and (iv) limitations on leases and sales of assets; and (v) one of the most
restrictive requirements is to maintain Average Excess Availability of at least $35,000 to avoid specific actions that the Agent may take to protect its collateralized position. Average Excess Availability is defined as the simple
average of three months of Excess Availability which is computed at each month end as the lesser of $160,000 or our borrowing base, less amounts drawn under the revolving credit facility and letters of credit outstanding.



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Floating Rate Notes and 9 3/8% Senior Subordinated Notes



On April 23, 2004, the Company issued $125,000 principal amount of
Second Priority Senior Secured Floating Rate Notes due 2009 (the Floating Rate Notes), bearing an interest rate of LIBOR plus 4.00%, and $150,000 principal amount of 9 3/8% Senior Subordinated Notes due 2012 (the 9 3/8% Senior
Subordinated Notes). The net proceeds from the issuance of these notes were used to pay down existing indebtedness under the Companys senior credit facilities, including repayment of the $60,000 term loan discussed above and relevant
prepayment premium, and to finance the redemption of the Companys outstanding 10 5/8% senior subordinated notes due 2006 issued on August 1, 1996, including the call premium and accrued interest. The 10 5/8% notes were called for
redemption in their entirety on April 23, 2004 at a redemption price of 101.771% of their face amount plus accrued but unpaid interest up to, but not including, the redemption date of May 24, 2004.



The Floating Rate Notes mature on April 15, 2009. Interest is due each
January 15, April 15, July 15 and October 15 commencing July 15, 2004. The interest rate at December 31, 2005 and December 31, 2004 was 8.15% and 6.07%, respectively. The interest rate is reset quarterly
based on the three (3) month LIBOR plus 4% and is calculated on actual days lapsed and a 360 day year. The Floating Rate Notes are guaranteed by substantially all of the Companys domestic subsidiaries (the Guarantors). The
Floating Rate Notes and the related guarantees are senior obligations secured by a second-priority lien, subject to certain exceptions and permitted liens, on all of the Companys and the Guarantors existing and future property and assets
that secure the Companys obligations under its existing credit facilities. In the event of enforcement of the lien securing the Floating Rate Notes and the related guarantees, the proceeds thereof will first be applied to repay obligations
secured by the first-priority liens, including the Companys obligations under its senior credit facilities.



The 9 3/8% Senior Subordinated Notes mature on April 15, 2012. Interest is due each April 15 and October 15, commencing October 15,
2004. The 9 3/8% Senior Subordinated Notes are guaranteed by the Guarantors on a senior subordinated basis and, with the related guarantees, are unsecured senior subordinated obligations, ranking junior to all the Companys senior debt,
including borrowings under its credit facilities, the Floating Rate Notes and the Companys outstanding 8 5/8% Senior Notes due in 2007.



The indenture pursuant to which the 9 3/8% Senior Subordinated Notes and the Floating Rate 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.



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 of the Companys existing and future subordinated obligations. In addition, the Companys obligations
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 Companys option, 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.



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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 the capital stock (as defined) of the
Company or its restricted subsidiaries; (iii) sell the 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 then existing secured revolving 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 Companys option, 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, as defined, 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.



Sale-Leaseback Financing Transactions



In 2003, certain of the Companys Mexican subsidiaries entered into a series of machinery and equipment sale-leaseback financing transactions with GE Mexico. Under the terms of this agreement, the relevant subsidiaries must maintain
certain net worth, earnings before interest, taxes, depreciation and amortization (as defined) and sales levels, in addition to other requirements normally associated with this type of financing. Net cash proceeds from these transactions in 2003
were $10,297, net of security deposits totaling $5,425. The Company has accounted for these transactions as financing transactions in accordance with SFAS No. 66 and SFAS No. 98. Accordingly, an obligation of $15,722 was recorded relative
to these transactions. The obligation at December 31, 2005 and 2004 was $9,416 and $12,214, respectively.



In November, 2005, the Company entered into a purchase, sale and partial leaseback real estate transaction. The Company purchased five real estate parcels
that the Company had been leasing under long term capital leases and simultaneously sold all five properties. At the closing, the Company entered into new long term leases for three of the properties it sold. The purchase price of the properties was
$17,000. $12,500 was paid in cash and $4,500 was paid in the form of a 10 year unsecured note bearing interest at 8.0%. The sale price was $9,975. This transaction resulted in a gain of $3,026 reflected in restructuring and a deferred gain of $4,100
that will be amortized over the term of the leased assets.



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Capital Lease Obligations



Capital leases have been capitalized using nominal interest rates ranging from 10.6% to 15.1%. The net book value of assets
under capital leases was $2,751 and $3,805 at December 31, 2005 and 2004, respectively.



Other



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



|                         |  |   |        
|------------------------ |  | - | -------
|2006                     |  | $ | 27,501 
|2007                     |  |   | 148,861
|2008                     |  |   | 112,877
|2009                     |  |   | 292,254
|2010                     |  |   | 1,057  
|Thereafter               |  |   | 159,132
|Total principal payments |  | $ | 741,682



12.    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 Remy Inc. (RI) and GM. The allocation is primarily
determined upon years of service with RI and aggregate years of service with RI and GM. Effective August 1, 1994, RI 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



RI 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. RI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.



Remy Automotive UK Ltd., (RAUK) a non-guarantor subsidiary of RII has a defined benefit pension plan. This plan covers only employees who were
part of Lucas prior to RIIs acquisition of Lucas in 1998.



RI 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 RI 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
RIs policy to fund these benefits as claims are incurred.



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



|                                                                 |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------------------------------------------- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                                                                 |  | Pension Benefits |         |   | Post-Retirement Health Care and Life Insurance Plans |  
|                                                                 |  | 2005             |         |   | 2004                                                 |   |         | 2003 |  |   | 2005    |   |  | 2004 |         |   | 2003 |  
|Change in benefit obligations                                    |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Benefit obligation at beginning of year                          |  | $                | 53,272  |   |                                                      | $ | 46,896  |      |  | $ | 43,009  |   |  | $    | 19,016  |   |      | $ | 19,903  |   |  | $ | 36,069  |  
|Service cost                                                     |  |                  | 2,043   |   |                                                      |   | 1,770   |      |  |   | 1,682   |   |  |      | 351     |   |      |   | 308     |   |  |   | 374     |  
|Interest cost                                                    |  |                  | 2,939   |   |                                                      |   | 2,747   |      |  |   | 2,561   |   |  |      | 1,135   |   |      |   | 1,091   |   |  |   | 1,159   |  
|Amendments                                                       |  |                  |        |   |                                                      |   | 897     |      |  |   | 114     |   |  |      |        |   |      |   |        |   |  |   |        |  
|Actuarial loss                                                   |  |                  | 509     |   |                                                      |   | 2,882   |      |  |   | 4,870   |   |  |      | 1,083   |   |      |   | 639     |   |  |   | 2,283   |  
|Benefits paid                                                    |  |                  | (1,768  | ) |                                                      |   | (1,920  | )    |  |   | (2,100  | ) |  |      | (2,050  | ) |      |   | (1,566  | ) |  |   | (1,512  | )
|Medicare Prescription Drug Act of 2003 (gain)                    |  |                  | NA      |   |                                                      |   | NA      |      |  |   | NA      |   |  |      |        |   |      |   | (1,359  | ) |  |   | NA      |  
|Curtailment gains                                                |  |                  |        |   |                                                      |   |        |      |  |   | (3,240  | ) |  |      |        |   |      |   |        |   |  |   | (18,470 | )
|Benefit obligation at end of year                                |  | $                | 56,995  |   |                                                      | $ | 53,272  |      |  | $ | 46,896  |   |  | $    | 19,535  |   |      | $ | 19,016  |   |  | $ | 19,903  |  
|                                                                 |  |                  |         |   |                                                      |  
|Change in plan assets                                            |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Fair value of plan assets at beginning of year                   |  | $                | 33,049  |   |                                                      | $ | 28,851  |      |  | $ | 23,976  |   |  | $    |        |   |      | $ |        |   |  | $ |        |  
|Actual return on plan assets                                     |  |                  | 2,887   |   |                                                      |   | 3,051   |      |  |   | 4,486   |   |  |      |        |   |      |   |        |   |  |   |        |  
|Employer contributions                                           |  |                  | 3,795   |   |                                                      |   | 3,808   |      |  |   | 2,037   |   |  |      | 2,050   |   |      |   | 1,584   |   |  |   | 1,512   |  
|Benefits paid                                                    |  |                  | (1,768  | ) |                                                      |   | (1,920  | )    |  |   | (2,100  | ) |  |      | (2,050  | ) |      |   | (1,584  | ) |  |   | (1,512  | )
|Fair value of plan assets at end of year                         |  | $                | 37,963  |   |                                                      | $ | 33,790  |      |  | $ | 28,399  |   |  | $    |        |   |      | $ |        |   |  | $ |        |  
|                                                                 |  |                  |         |   |                                                      |  
|Funded status                                                    |  | $                | (19,031 | ) |                                                      | $ | (19,483 | )    |  | $ | (18,497 | ) |  | $    | (19,535 | ) |      | $ | (19,016 | ) |  | $ | (19,903 | )
|Unrecognized actuarial loss                                      |  |                  | 14,154  |   |                                                      |   | 13,899  |      |  |   | 12,801  |   |  |      | 3,685   |   |      |   | 2,714   |   |  |   | 3,472   |  
|Unrecognized prior service cost                                  |  |                  | 1,116   |   |                                                      |   | 1,339   |      |  |   | 539     |   |  |      |        |   |      |   |        |   |  |   |        |  
|Net amount recognized and accrued                                |  | $                | (3,761  | ) |                                                      | $ | (4,245  | )    |  | $ | (5,157  | ) |  | $    | (15,850 | ) |      | $ | (16,302 | ) |  | $ | (16,431 | )
|                                                                 |  |                  |         |   |                                                      |  
|Amounts recognized in the consolidated balance sheet consist of: |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Accrued benefit liability                                        |  | $                | (13,140 | ) |                                                      | $ | (13,511 | )    |  | $ | (13,073 | ) |  | $    | (15,850 | ) |      | $ | (16,302 | ) |  | $ | (16,431 | )
|Intangible asset                                                 |  |                  | 732     |   |                                                      |   | 1,060   |      |  |   | 344     |   |  |      |        |   |      |   |        |   |  |   |        |  
|Accumulated other comprehensive loss                             |  |                  | 8,647   |   |                                                      |   | 8,206   |      |  |   | 7,572   |   |  |      |        |   |      |   |        |   |  |   |        |  
|Net amount recognized and accrued                                |  | $                | (3,761  | ) |                                                      | $ | (4,245  | )    |  | $ | (5,157  | ) |  | $    | (15,850 | ) |      | $ | (16,302 | ) |  | $ | (16,431 | )
|                                                                 |  |                  |         |   |                                                      |  
|Components of expense                                            |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Service costs                                                    |  | $                | 2,043   |   |                                                      | $ | 1,770   |      |  | $ | 1,684   |   |  | $    | 351     |   |      | $ | 308     |   |  | $ | 374     |  
|Interest costs                                                   |  |                  | 2,939   |   |                                                      |   | 2,746   |      |  |   | 2,561   |   |  |      | 1,135   |   |      |   | 1,091   |   |  |   | 1,159   |  
|Expected return on plan assets                                   |  |                  | (2,332  | ) |                                                      |   | (2,156  | )    |  |   | (1,912  | ) |  |      |        |   |      |   |        |   |  |   |        |  
|Amortization of prior service cost                               |  |                  | 224     |   |                                                      |   | 96      |      |  |   | 96      |   |  |      |        |   |      |   |        |   |  |   |        |  
|Recognized net actuarial loss                                    |  |                  | 439     |   |                                                      |   | 391     |      |  |   | 330     |   |  |      | 113     |   |      |   | 37      |   |  |   | 72      |  
|Curtailments                                                     |  |                  |        |   |                                                      |   |        |      |  |   | 1,835   |   |  |      |        |   |      |   |        |   |  |   | (7,216  | )
|Net periodic pension cost                                        |  | $                | 3,313   |   |                                                      | $ | 2,847   |      |  | $ | 4,594   |   |  | $    | 1,599   |   |      | $ | 1,436   |   |  | $ | (5,611  | )
|Weighted-average assumptions                                     |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|US assumptions:                                                  |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Discount rate for benefit obligation                             |  |                  | 5.75    | % |                                                      |   | 5.75    | %    |  |   | 6.00    | % |  |      | 5.75    | % |      |   | 5.75    | % |  |   | 6.00    | %
|Discount rate for net periodic benefit cost                      |  |                  | 5.75    | % |                                                      |   | 6.00    | %    |  |   | 6.75    | % |  |      | 5.75    | % |      |   | 6.00    | % |  |   | 6.75    | %
|Rate of compensation increase                                    |  |                  | 5.00    | % |                                                      |   | 5.00    | %    |  |   | 5.00    | % |  |      | 5.00    | % |      |   | 5.00    | % |  |   | 5.00    | %
|Expected return on plan assets                                   |  |                  | 7.00    | % |                                                      |   | 7.50    | %    |  |   | 8.50    | % |  |      | NA      |   |      |   | NA      |   |  |   | NA      |  
|                                                                 |  |                  |         |   |                                                      |  
|UK assumptions:                                                  |  |                  |         |   |                                                      |   |         |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|Discount rate for benefit obligation                             |  |                  | 4.75    | % |                                                      |   | 5.30    | %    |  |   | 5.40    | % |  |      |         |   |      |   |         |   |  |   |         |  
|Discount rate for net periodic benefit cost                      |  |                  | 5.30    | % |                                                      |   | 5.40    | %    |  |   | 5.50    | % |  |      |         |   |      |   |         |   |  |   |         |  
|Rate of compensation increase                                    |  |                  | 2.00    | % |                                                      |   | 2.75    | %    |  |   | 2.60    | % |  |      |         |   |      |   |         |   |  |   |         |  
|Expected return on plan assets                                   |  |                  | 5.70    | % |                                                      |   | 6.20    | %    |  |   | 6.40    | % |  |      |         |   |      |   |         |   |  |   |         |  



The projected benefit
obligations for UK pension plans included above are $9,260, $8,270 and $7,048 for 2005, 2004 and 2003 respectively. The fair value of the plan assets for the UK pension plans included above are $7,693, $7,264 and $6,080 for 2005, 2004 and 2003
respectively.



To develop the expected long-term rate of return
on assets assumption, the Company considered the historical returns and future expectations for returns for each asset class, as well as the target asset allocation of the present portfolio. This resulted in the assumption of long-term rate of
return on assets of 7.0% for the U.S. pension plans and 5.7% for UK pension plans.



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The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was
signed into law on December 8, 2003. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least
actuarially equivalent to Medicare Part D. The Company has determined that the prescription drug benefits available under its plan to certain retirees over age 65 are at least actuarially equivalent to the benefits provided under Medicare Part D and
thus qualify for the subsidy under the Act beginning in 2006. This subsidy will reduce the Companys share of the cost of underlying postretirement prescription drug coverage on which the subsidy is based. The expected effect of the subsidy is
as follows:



|                                                                                |  |   |      
|------------------------------------------------------------------------------- |  | - | -----
|Reduction in accumulated post retirement benefit obligation at January 1, 2004. |  | $ | 1,359
|Effect on net periodic postretirement benefit cost for 2005                     |  |   |      
|Reduction in service cost                                                       |  |   | 32   
|Reduction in interest cost                                                      |  |   | 82   



In 2003, the Company
recorded a post-employment benefit curtailment gain of $7,216 and a pension plan curtailment charge of $1,835 related to restructuring activities. For more information, see Note 6.



The Companys investment strategies with respect to pension assets are:



| | 1. | The assets are managed in compliance with provisions of the Employee Retirement Income Security Act.
| | -- | ----------------------------------------------------------------------------------------------------



| | 2. | The assets are to be invested with expectations of achieving real growth with respect to inflation, the belief that the U.S capital markets will remain viable, maintaining a level
of liquidity to meet timely payment of benefits to participants and minimizing risk and achieving growth through prudent diversification of assets among investment categories.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The target plan asset allocation is:



|                                |  |                  
|------------------------------- |  | -----------------
|                                |  | Target Allocation
|Equity Investments              |  | 60%  80%        
|Fixed Income Investments        |  | 20%  40%        
|Cash and Short Term Investments |  | 0%  10%         



|                                                    |  |      |        |   |      |       |   |  |   |        |   |  |       |  
|--------------------------------------------------- |  | ---- | ------ | - | ---- | ----- | - |  | - | ------ | - |  | ----- | -
|                                                    |  | 2005 |        |   | 2004 |      
|Asset Allocation for Plan Assets                    |  |      |        |   |      |       |   |  |   |        |   |  |       |  
|Interest-bearing cash                               |  | $    | 1,333  |   |      | 3.5   | % |  | $ | 384    |   |  | 1.1   | %
|Bond Mutual Funds                                   |  |      | 8,682  |   |      | 22.9  | % |  |   | 11,573 |   |  | 34.3  | %
|Equity Mutual Funds                                 |  |      | 27,940 |   |      | 73.6  | % |  |   | 21,722 |   |  | 64.3  | %
|Receivables                                         |  |      | 8      |   |      | 0.0   | % |  |   | 111    |   |  | 0.3   | %
|Total plan assets                                   |  | $    | 37,963 |   |      | 100.0 | % |  | $ | 33,790 |   |  | 100.0 | %
|                                                    |  |      |        |  
|Accumulated Benefit Obligation                      |  | $    | 51,104 |   |      |       |   |  | $ | 48,308 |   |  |       |  
|                                                    |  |      |        |  
|Assumed Health Care Cost Trend Rates                |  |      |        |   |      |       |   |  |   |        |   |  |       |  
|Health care cost trend rate assumed for next year   |  |      | 10.0   | % |      |       |   |  |   | 11.0   | % |  |       |  
|Rate to which the cost trend is expected to decline |  |      | 5.0    | % |      |       |   |  |   | 5.0    | % |  |       |  
|Year that the rate reaches the ultimate trend rate  |  |      | 2010   |   |      |       |   |  |   | 2010   |   |  |       |  



Sensitivity
Analysis



An increase and decrease of one-percentage-point
in the assumed health care trends would have the following effects in the year ended December 31, 2005:



|                                                                                                                 |  |             |       |             |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | ----------- | - | ------ | -
|                                                                                                                 |  | 1% Increase |       | 1% decrease |  
|Effect on total of service and interest cost components of net periodic post-retirement health care benefit cost |  | $           | 217   |             | $ | (229   | )
|Effect on the health care component of the accumulated post-retirement benefit obligation                        |  | $           | 2,701 |             | $ | (3,219 | )



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Cash Flows



In 2006, the Company plans to contribute approximately $4,200 to its U.S. pension plans and $200 to its UK pension plans.
The benefits of the post-retirement health care plan are funded on a pay as you go basis and are funded on a cash basis as benefits are paid.



The following reflects the estimated future benefit payments to be paid:



|                |  |         |        |       |   |      
|--------------- |  | ------- | ------ | ----- | - | -----
|                |  | Pension |        | Other
|2006            |  | $       | 1,886  |       | $ | 750  
|2007            |  |         | 1,875  |       |   | 838  
|2008            |  |         | 1,904  |       |   | 929  
|2009            |  |         | 1,914  |       |   | 1,034
|2010            |  |         | 1,885  |       |   | 1,113
|Years 2011-2015 |  |         | 11,168 |       |   | 6,486



Defined
Contribution Plans



The Company sponsors two voluntary
savings plans for U.S. employees. 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 $2,194, $1,900, and $1,847 for the years ending December 31, 2005, 2004, and 2003 respectively.



The Company sponsors a defined contribution plan following the guidelines of
the UK government for the employees of RAUK. The Companys contributions to these plans were $47, $36 and $50 for the years ending December 31, 2005, 2004 and 2003 respectively.



13.    INCOME TAXES

---



The following is a summary of the components of the provision for income tax
expense for continuing operations:



|                   |  |      |        |   |      |   |       |  |   |        |  
|------------------ |  | ---- | ------ | - | ---- | - | ----- |  | - | ------ | -
|                   |  | 2005 |        |   | 2004 |   | 2003  | 
|Current:           |  |      |        |   |      |   |       |  |   |        |  
|Federal            |  | $    |       |   |      | $ |      |  | $ |       |  
|State and local    |  |      | 897    |   |      |   | 369   |  |   | 238    |  
|Foreign            |  |      | 6,257  |   |      |   | 2,043 |  |   | 12,800 |  
|Deferred:          |  |      |        |   |      |   |       |  |   |        |  
|Federal            |  |      | 7,421  |   |      |   |      |  |   | 20,896 |  
|State and local    |  |      | 608    |   |      |   |      |  |   | 3,697  |  
|Foreign            |  |      | (1,996 | ) |      |   | 2,955 |  |   | (949   | )
|Income tax expense |  | $    | 13,187 |   |      | $ | 5,367 |  | $ | 36,682 |  



The deferred tax
expense for 2005 includes $8,029 for U.S. federal and state goodwill amortization for tax purposes which creates tax loss carryforwards that are assigned a full valuation allowance and a ($1,996) deferred tax benefit for various foreign items.



Income (loss) from continuing operations before income taxes,
minority interest and income (loss) from unconsolidated subsidiaries, was taxed in the following jurisdictions:



|         |  |      |         |   |      |   |        |      |  |   |          |  
|-------- |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | -------- | -
|         |  | 2005 |         |   | 2004 |   |        | 2003 | 
|Domestic |  | $    | (82,290 | ) |      | $ | (2,812 | )    |  | $ | (160,413 | )
|Foreign  |  |      | 2,132   |   |      |   | 22,924 |      |  |   | 22,453   |  
|         |  | $    | (80,158 | ) |      | $ | 20,112 |      |  | $ | (137,960 | )



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



|                                                                        |  |       |    |  |       |   |  |       |   
|----------------------------------------------------------------------- |  | ----- | -- |  | ----- | - |  | ----- | --
|                                                                        |  | 2005  |    |  | 2004  |   |  | 2003  |   
|Federal statutory income tax rate                                       |  | 35.0  | %  |  | 35.0  | % |  | 35.0  | % 
|State and local income taxes, net of Federal tax benefit, if applicable |  | (1.9  | )  |  | 1.8   |   |  | (0.2  | ) 
|Foreign operations                                                      |  | (4.4  | )  |  | (15.0 | ) |  | (2.9  | ) 
|Goodwill                                                                |  | (9.3  | )  |  |      |   |  |      |   
|Losses not benefited                                                    |  | (35.9 | )  |  | 0.3   |   |  | (58.4 | ) 
|Other items                                                             |  |      |    |  | 4.6   |   |  | (0.1  | ) 
|Effective income tax rate                                               |  | (16.5 | )% |  | 26.7  | % |  | (26.6 | )%



State and local income
taxes may 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:



|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2005 |          |   | 2004 |  
|Deferred tax assets:                           |  |      |          |   |      |   |          |  
|Restructuring charges                          |  | $    | 5,842    |   |      | $ | 4,356    |  
|Employee benefits                              |  |      | 11,624   |   |      |   | 12,383   |  
|Inventories                                    |  |      | 3,922    |   |      |   | 3,876    |  
|Warranty                                       |  |      | 7,909    |   |      |   | 5,483    |  
|Alternative minimum tax credits                |  |      | 3,259    |   |      |   | 3,101    |  
|Foreign deferred assets                        |  |      | 31,991   |   |      |   | 26,080   |  
|Net operating loss carryforwards               |  |      | 123,166  |   |      |   | 94,307   |  
|Other                                          |  |      | 20,801   |   |      |   | 14,181   |  
|Total deferred tax assets                      |  |      | 208,514  |   |      |   | 163,767  |  
|Valuation allowance                            |  |      | (197,141 | ) |      |   | (138,308 | )
|Deferred tax assets net of valuation allowance |  |      | 11,373   |   |      |   | 25,459   |  
|Deferred tax liabilities:                      |  |      |          |   |      |   |          |  
|Depreciation                                   |  |      | (1,951   | ) |      |   | (2,284   | )
|Foreign deferred liabilities                   |  |      | (4,567   | ) |      |   | (5,241   | )
|Research expenses                              |  |      | (562     | ) |      |   | (3,846   | )
|Other                                          |  |      | (13,528  | ) |      |   | (17,153  | )
|Total deferred tax liabilities                 |  |      | (20,608  | ) |      |   | (28,524  | )
|Net deferred tax liability                     |  | $    | (9,235   | ) |      | $ | (3,065   | )



At December 31,
2005, the Company had unused US federal net operating loss carry forwards of approximately $198,406 that expire during 2021 through 2023. The Company also had unused US alternative minimum tax credit carry forwards of $3,259 that may be carried
forward indefinitely. Income tax payments, net of refunds including state taxes, for the years ended December 31, 2005, 2004 and 2003 were $2,514, $5,957 and $9,397, respectively.



At December 31, 2005, the Company had unused foreign loss carryovers totaling $83,503. Loss carryovers totaling $11,736
will expire during 2007 thru 2010 and loss carryovers totaling $71,767 have no expiration.



A provision in the amount of $461 has been made for United States federal and state or foreign taxes that may result from future remittances of undistributed earnings ($94,894 at December 31, 2005) of certain
foreign subsidiaries.



In the fourth quarter of 2003, the
Company recorded a charge of $28,320 for a deferred tax valuation allowance for a substantial portion of the unreserved domestic income tax assets established prior to 2003. Of this total, $24,685 was charged to income tax provision and $3,635 was
charged to other comprehensive loss. In 2005, the Company recorded a charge of $6,748 to increase the deferred tax valuation allowance for all previously unreserved domestic deferred tax assets.



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In March 2003, the Company filed a request for a bilateral advance pricing agreement between Remy
International, Inc and Remy Korea Ltd. In 2003, 2004, and 2005 the Company operated under this proposal and recorded an income tax provision in Korea on its terms. The Company expects the United States and Korean authorities to finalize this
transfer pricing matter in 2006.



14.    STOCKHOLDERS EQUITY

---



2004 Corporate Reorganization



Effective September 30, 2004, the stockholders of the Company formed a new holding company, RWH, to own all of the outstanding stock of RII. The
Companys stockholders exchanged all of their stock for identical shares in RWH with the same number and class of shares and percentage ownership of RWH and the same relative rights and preferences in the equity value of RWH, as they previously
held in the Company. As a result, the Company is now a wholly owned subsidiary of RWH and the stockholders of the Company became stockholders of RWH. The Company will continue to be the issuer of its outstanding notes and the reporting company with
the Securities and Exchange Commission.



In conjunction with
the formation of the new holding Company, all of the outstanding shares of the Companys Series A Preferred Stock were cancelled. The cancellation is reflected in the consolidated balance sheet as a reclassification of the Preferred Stock to
Paid-in Capital, which increased stockholders equity by $334,336 and was the amount attributable to the outstanding Series A Preferred Stock as of September 30, 2004. Since the Companys Series A Preferred Stock was cancelled
effective October 1, 2004, the accretion of Preferred Stock dividends will no longer be reflected in the Companys financial statements and the Companys former stockholders now hold preferred stock in RWH that continues to accrete at
12.0%. RWH has no assets or operations other than its 100% ownership of the Company.



Common Stock



The
Companys Second 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. Under the Companys Second 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.



As a result of the reorganization the
Companys Class A and Class C Common Stock were converted into the same number of shares of Class B Common Stock. Accordingly, as of December 31, 2005, the Company had an aggregate of 2,503,024.48 shares of Class B Common Stock
outstanding, consisting of 1,000.00 shares of converted Class A Common Stock, 16,687.00 shares of converted Class C Common Stock, and 2,485,337.48 shares of Class B Common Stock previously outstanding. All of the outstanding shares are owned by
RWH.



The holders of Class A Common Stock were entitled to
vote on all matters submitted to a vote of the stockholders. 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 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 Second Amended and Restated Certificate of Incorporation, enter
into any plan of liquidation, recapitalization, reorganization, reclassification, consolidation or merger, sell all or



66



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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.



Redeemable Preferred Stock



Effective as of July 1, 2003, holders of substantially all of the Companys common stock and preferred stock agreed to amend the terms of the Companys outstanding preferred stock. The Companys
Second Amended and Restated Certificate of Incorporation provided for the issuance of 3,500,000 shares of preferred stock, all of which are designated as 12% Series A Accreting Preferred Stock. The preferred stock had a stated value of $100 per
share and was entitled to receive dividends when, as and if declared by the Board of Directors in such amounts as the Board of Directors may determine at the time of declaration, provided that the aggregate amount of dividends per share do not
exceed the compounded annual rate of 12% of the stated value per share from the date of original issue. As indicated above the Companys Series A Accreting Preferred Stock was cancelled in connection with the 2004 corporate reorganization.



The amount accreted on the preferred stock from the issue date
through September 30, 2004 (the cancellation date) is reported as Accretion for redemption of preferred stock on the Consolidated Statements of Operations. The dividends accrued on the preferred stock prior to the adoption of the
restated terms were never declared or paid to the holders of the preferred stock and are also reported as Accretion for redemption of preferred stock.



Dividends



The Companys ability to pay cash dividends are subject to restrictions contained in the senior credit facility, the 8 5/8% Senior Notes due 2007,
the 11% Senior Subordinated Notes due 2009, the Floating Rate Notes due 2009, and the 9 3/8% Senior Subordinated Notes due 2012.



15.    ACCUMULATED OTHER COMPREHENSIVE INCOME (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:



|                                  |  |                                      |         |   |                                                  |   |       |                                    |  |   |                                            |      |  |   |         |  
|--------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------------------ | - | ----- | ---------------------------------- |  | - | ------------------------------------------ | ---- |  | - | ------- | -
|                                  |  | ForeignCurrencyTranslationAdjustment |         |   | UnrealizedGains/(Losses)on DerivativeInstruments |   |       | MinimumPensionLiabilityAdjustments |  |   | AccumulatedOtherComprehensiveIncome (Loss) |     
|Balances at December 31, 2002     |  | $                                    | (10,469 | ) |                                                  | $ | 335   |                                    |  | $ | (5,934                                     | )    |  | $ | (16,068 | )
|Before tax income (loss)          |  |                                      | 2,593   |   |                                                  |   | (905  | )                                  |  |   | 1,997                                      |      |  |   | 3,685   |  
|Income tax effect                 |  |                                      |        |   |                                                  |   | 214   |                                    |  |   | (3,635                                     | )(1) |  |   | (3,421  | )
|Other comprehensive income (loss) |  |                                      | 2,593   |   |                                                  |   | (691  | )                                  |  |   | (1,638                                     | )    |  |   | 264     |  
|                                  |  |                                      |         |  
|Balances at December 31, 2003     |  |                                      | (7,876  | ) |                                                  |   | (356  | )                                  |  |   | (7,572                                     | )    |  |   | (15,804 | )
|Before tax income (loss)          |  |                                      | 9,840   |   |                                                  |   | 1,201 |                                    |  |   | (634                                       | )    |  |   | 10,407  |  
|Income tax effect                 |  |                                      |        |   |                                                  |   | (406  | )                                  |  |   |                                           |      |  |   | (406    | )
|Other comprehensive income (loss) |  |                                      | 9,840   |   |                                                  |   | 795   |                                    |  |   | (634                                       | )    |  |   | 10,001  |  
|                                  |  |                                      |         |  
|Balances at December 31, 2004     |  |                                      | 1,964   |   |                                                  |   | 439   |                                    |  |   | (8,206                                     | )    |  |   | (5,803  | )
|Before tax income (loss)          |  |                                      | (4,684  | ) |                                                  |   | 497   |                                    |  |   | (441                                       | )    |  |   | (4,628  | )
|Income tax effect                 |  |                                      |        |   |                                                  |   | (99   | )                                  |  |   |                                           |      |  |   | (99     | )
|Other comprehensive income (loss) |  |                                      | (4,684  | ) |                                                  |   | 398   |                                    |  |   | (441                                       | )    |  |   | (4,727  | )
|                                  |  |                                      |         |  
|Balances at December 31, 2005.    |  | $                                    | (2,720  | ) |                                                  | $ | 837   |                                    |  | $ | (8,647                                     | )    |  | $ | (10,530 | )

|(1) | Reflects the establishment of a valuation allowance for domestic income tax assets. See Note 13.
|--- | ------------------------------------------------------------------------------------------------



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The Companys total comprehensive income (loss) is as follows:



|                                  |  |      |          |   |      |   |        |  |   |          |  
|--------------------------------- |  | ---- | -------- | - | ---- | - | ------ |  | - | -------- | -
|                                  |  | 2005 |          |   | 2004 |   | 2003   | 
|Net income (loss)                 |  | $    | (96,984  | ) |      | $ | 56,424 |  | $ | (186,625 | )
|Other comprehensive income (loss) |  |      | (4,727   | ) |      |   | 10,001 |  |   | 264      |  
|                                  |  |      |          |   |      |   |        |  |   |          |  
|Comprehensive income (loss)       |  | $    | (101,711 | ) |      | $ | 66,425 |  | $ | (186,361 | )
|                                  |  |      |          |   |      |   |        |  |   |          |  



16.    TRANSACTIONS WITH GM

---



The Company has entered into several transactions and agreements with GM and certain of its subsidiaries 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 and certain of its subsidiaries:



|                                          |  |      |         |      |   |         |  |   |        
|----------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                          |  | 2005 |         | 2004 |   | 2003   
|Sales                                     |  | $    | 272,753 |      | $ | 291,525 |  | $ | 245,419
|Material purchases and costs for services |  |      | 21,892  |      |   | 18,749  |  |   | 9,394  



In addition, the
Company had the following balances with GM at December 31:



|                          |  |      |        |      |   |       
|------------------------- |  | ---- | ------ | ---- | - | ------
|                          |  | 2005 |        | 2004
|Trade accounts receivable |  | $    | 34,604 |      | $ | 20,148



17.    LEASE
COMMITMENTS

---



The Company occupies space and uses certain equipment under lease arrangements. Rent expense was $11,824 for 2005, $10,775 for 2004 and $16,167 for 2003. Rental commitments at December 31, 2005 for long-term non-cancelable operating
leases (not reflected as a restructuring reserve) were as follows:



|                 |  |   |       
|---------------- |  | - | ------
|Year ending 2006 |  | $ | 9,979 
|Year ending 2007 |  |   | 8,334 
|Year ending 2008 |  |   | 7,134 
|Year ending 2009 |  |   | 6,560 
|Year ending 2010 |  |   | 4,815 
|Thereafter       |  |   | 12,451
|Total payments   |  | $ | 49,273



18.    OTHER
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 and the matters discussed below will not have a material adverse effect on the financial position, results of operations or cash flows of the Company except as otherwise indicated.



GM Supply Agreements



On July 31, 1994, the Company, through a wholly owned subsidiary, Remy
Inc. (formerly known as (fka) Delco Remy America, Inc.), purchased substantially all of the assets, other than facilities, and assumed certain liabilities of specific business activities of the Delco Remy Division of GM (the GM
Acquisition). The specific business activities purchased are engaged in the design, manufacture, remanufacture and sale of heavy-duty starters and alternators, automotive starters, and related components.



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



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GM Acquisition. The supply agreement for automotive starters had an initial term of ten years, while the supply agreement for heavy-duty starters and
alternators had an initial term of six years. In 1999, the Company and GM amended the agreement for the Companys price of automotive products and extended the agreement term to July 31, 2008. In April 2002, price and product offering was
adjusted (as to price, technology and design) in accordance with the competitive clause of the original agreement. Subsequently, further price reductions have been negotiated consistent with this agreement. The Supply Agreement for heavy-duty
products terminated on July 31, 2000. Sales to GM were not adversely affected by the termination and the Company now has the ability to provide an expanded heavy-duty product offering to GM and other customers. GMs obligation to
distribute the Companys automotive aftermarket products terminates on July 31, 2008.



HCS Pay Litigation



On January 16, 2006, the Company initiated litigation in the Circuit Court of Oakland County, Michigan against Hennessey Capital, LLC; HCSPay, LLC; and SurGen, LLC (the preceding three entities collectively are
referred to as Hennessey) and against Surge Capital; Lancelot Investors Fund LP; Lancelot Investment Management, LLC; AGM II, LLC; and John Maselli (the preceding five entities collectively are referred to as Surge). This litigation seeks the return
of approximately $6,083 that the Company believes is owed to it under a factoring agreement that it entered into with Hennessey plus punitive damages and costs. The Company alleges claims against Hennessey for breach of contract and breach of
fiduciary duty. The Company alleges claims against Surge for conversion, unjust enrichment, declaratory judgment, and constructive trust and seek the return of the Companys funds plus punitive damages. This matter is at the very earliest stage
of litigation, and no discovery has taken place. The Company intends to pursue its claims vigorously. At December 31, 2005, the Company had a receivable recorded of $6,083 related to this matter.



UAW Litigation



On April 16, 2003, the International Union, United Automobile, Aerospace
and Agriculture Implement Workers of America (UAW) and its Local Union 662 filed suit against the Company and Remy, Inc. (RI), in Federal District Court in the Southern District of Indiana, Indianapolis Division. The lawsuit
was filed under Section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, seeking enforcement of an expired Supplemental Unemployment Benefits plan (SUB plan). The plaintiffs alleged that the SUB plan provided
supplemental unemployment benefits for 52 weeks and separation pay in an amount exceeding $20,000 for employees who were terminated as a result of the closure of RIs Anderson, Indiana production facilities at the end of March 2003. The
plaintiffs also sought to enforce terminated provisions of a health care program, which the plaintiffs alleged that the plan provided the terminated employees with 25 months of continued hospital, surgical, medical, hearing aid, prescription drug,
mental health, substance abuse and vision insurance coverage. The terminated employees were represented by the UAW and its Local Union 662 under various agreements, which expired on March 31, 2003. The lawsuit was filed shortly after the UAW
membership failed to ratify RIs last, best and final offer for a Shutdown Agreement. The UAW filed an amended complaint on July 8, 2003 to which the Company filed an answer on July 24, 2003. Motions for summary judgment filed by the
parties were denied by the court in September 2005. On January 31, 2006, a final settlement agreement and release was entered into by the parties which fully resolved all of the allegations of the complaint. Under the terms of the settlement
agreement, the Company and RI agreed to contribute approximately $5,250 to the SUB plan in return for a release of all claims alleged in the lawsuit, including any further obligations to fund the SUB plan. The accompanying consolidated financial
statements reflect a restructuring charge recorded in the 4th quarter of approximately $1,525 related to this issue. The Company paid the $5,250 and associated payroll taxes of $315 in 2006.



Prison Labor Matter



In January 2004, a class action on behalf of all prisoners who worked in a
South Carolina Department of Corrections (SCDC) Services Training Program at Lieber Correctional Institute was brought against the SCDC and the Companys former subsidiary Williams Technologies, Inc. (Williams), which
was sold to Caterpillar, Inc., in September 2004. The Plaintiffs claim that (a) they should have been paid industry prevailing wages under a South Carolina prison industries authorization statute, (b) the SCDC and Williams violated the
Payment of Wages Act and (c) the SCDC and Williams committed a tort under the South Carolina Tort Claims Act. Under the terms of the sale, the Company retained liability and responsibility for this claim. The Circuit Court for Dorchester County
granted summary judgment to the Company on April 21, 2005, and decertified the Plaintiff class. On January 24, 2006 the Plaintiff filed an appellate brief and Williams responded to this brief in March 2006. The Company continues to deny
the material allegations of the complaint and any wrongdoing. The Company intends to defend itself vigorously.



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Import/Export Matters



The Company continues to expand globally to take advantage of global economic conditions and related cost structures. The
Company is subject to various duties and import/export taxes. The Company actively reviews its import/export processes in North America, Europe and Asia to verify the appropriate import duty classification, value and duty rate, including import
value added tax. As part of this review process, the Company identified a potential exposure related to customs duties in the United States. Upon resolution of these interpretations, duties due from the Company will range from $0 to $12,200. The
Company has paid approximately $1,000 and accrued approximately $7,100 as of December 31, 2005 related to this issue.



Franklin Power Products Facility



In September 2000, one of Franklin Power Products, Inc.s Indiana facilities received a Finding of Violation and Order for Compliance (the
Order) from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. has installed wastewater treatment equipment and is in compliance with the terms of the Order and has
eliminated the discharge. In July 2004, the Company and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on behalf of the EPA, which tolled the statute of limitations on the EPAs potential claim for
penalties. Since that time, the Company has been cooperating with the EPA by providing additional information and has entered into settlement negotiations with the EPA and the Department of Justice. On resolution of these negotiations, the amount
due from the Company will range from $200 to $2,400. The accompanying consolidated financial statements reflect a liability of approximately $1,100 related to this issue.



19.    BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION

---



The Company is a leading global vehicular parts designer,
manufacturer, remanufacturer, marketer and distributor, and a provider of core exchange services. Products include starters, alternators, remanufactured engines, 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, China, Hungary, Poland, Germany, South Korea, the United Kingdom, Belgium and Tunisia. 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 Chinese Yuan, 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 point of sale.



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|                                 |  |      |           |      |   |           |  |   |        
|-------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | -------
|                                 |  | 2005 |           | 2004 |   | 2003     
|Net sales to external customers: |  |      |           |      |   |           |  |   |        
|United States                    |  | $    | 987,779   |      | $ | 840,303   |  | $ | 792,909
|Europe                           |  |      | 106,592   |      |   | 106,461   |  |   | 99,135 
|Canada                           |  |      | 1,984     |      |   | 705       |  |   | 2,165  
|Asia Pacific                     |  |      | 74,602    |      |   | 51,376    |  |   | 41,436 
|Mexico and Brazil                |  |      | 57,993    |      |   | 52,320    |  |   | 37,149 
|Total net sales                  |  | $    | 1,228,950 |      | $ | 1,051,165 |  | $ | 972,794
|                                 |  |      |          
|                                 |  |      |           | 2005 |   | 2004     
|Long-lived assets:               |  |      |           |      |   |           |  |   |        
|United States                    |  |      |           |      | $ | 240,684   |  | $ | 161,897
|Europe                           |  |      |           |      |   | 35,753    |  |   | 37,093 
|Canada                           |  |      |           |      |   | 306       |  |   | 320    
|Asia Pacific                     |  |      |           |      |   | 43,907    |  |   | 40,384 
|Mexico and Brazil                |  |      |           |      |   | 63,372    |  |   | 50,607 
|Total long-lived assets          |  |      |           |      | $ | 384,022   |  | $ | 290,301



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



|                                           |  |      |         |      |   |         |  |   |        
|------------------------------------------ |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                           |  | 2005 |         | 2004 |   | 2003   
|General Motors Corporation                 |  | $    | 272,753 |      | $ | 291,525 |  | $ | 245,419
|International Truck and Engine Corporation |  |      | 151,548 |      |   | 109,393 |  |   | 94,013 



Following is a summary
of the composition by product category of the Companys sales to external customers.



|                   |  |      |           |      |   |           |  |   |        
|------------------ |  | ---- | --------- | ---- | - | --------- |  | - | -------
|                   |  | 2005 |           | 2004 |   | 2003     
|Electrical systems |  | $    | 1,057,520 |      | $ | 913,630   |  | $ | 841,950
|Powertrain         |  |      | 113,645   |      |   | 78,741    |  |   | 65,650 
|Core services      |  |      | 57,785    |      |   | 58,794    |  |   | 65,194 
|Total              |  | $    | 1,228,950 |      | $ | 1,051,165 |  | $ | 972,794



20.    SUPPLEMENTAL CASH FLOW INFORMATION

---



|                                                    |  |      |         |   |      |   |        |      |  |   |        |  
|--------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                    |  | 2005 |         |   | 2004 |   |        | 2003 | 
|Cash paid for interest                              |  | $    | 65,211  |   |      | $ | 60,232 |      |  | $ | 58,097 |  
|Cash paid for income taxes, net of refunds received |  |      | 2,514   |   |      |   | 5,957  |      |  |   | 9,397  |  
|Detail of acquisitions:                             |  |      |         |   |      |   |        |      |  |   |        |  
|Fair value of assets acquired                       |  | $    | 92,911  |   |      | $ | 1,789  |      |  | $ | 12,524 |  
|Liabilities assumed                                 |  |      | (99,837 | ) |      |   |       |      |  |   | (3,641 | )
|Notes paid                                          |  |      |        |   |      |   | 4,786  |      |  |   | 6,759  |  
|Prepayments                                         |  |      |        |   |      |   | (5,930 | )    |  |   |       |  
|Goodwill recorded                                   |  |      | 64,567  |   |      |   | 18,555 | (1)  |  |   | 4,052  |  
|Minority interest                                   |  |      |        |   |      |   | 6,317  |      |  |   | 2,825  |  
|Cash acquired                                       |  |      |        |   |      |   |       |      |  |   | (3,600 | )
|Net cash paid for acquisitions                      |  | $    | 57,641  |   |      | $ | 25,517 |      |  | $ | 18,919 |  

|(1) | Includes $13,500 recorded in 2003 for accrual of the contingent earn-out liability relative to the acquisition of Knopf.
|--- | ------------------------------------------------------------------------------------------------------------------------



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|21. | FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR SUBSIDIARIES
|--- | ------------------------------------------------------------------------------

---



The Company conducts a significant portion of its business through its
subsidiaries. The Companys 8 5/8% Senior Notes Due 2007, 11% Senior Subordinated Notes Due 2009, Floating Rate Notes, and the 9 3/8% Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, by certain direct
and indirect subsidiaries of the Company (the Subsidiary Guarantors). Certain of the Companys subsidiaries do not guarantee the 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 consolidating financial information for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at December 31,
2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003.



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:



|                      |  |                                   |  |   |  |                                                   
|--------------------- |  | --------------------------------- |  | - |  | --------------------------------------------------
|Subsidiary Guarantors |  | Non-Guarantor Subsidiaries       
|·                     |  | Ballantrae Corporation            |  | · |  | Central Precision Limited                         
|·                     |  | Franklin Power Products, Inc.     |  | · |  | Remy Automotive Germany GmbH                      
|·                     |  | International Fuel Systems, Inc.  |  | · |  | Delco Remy International (Europe) GmbH, iL        
|·                     |  | M & M Knopf Auto Parts, L.L.C.    |  | · |  | Electro Diesel Rebuild BVBA                       
|·                     |  | Marine Corporation of America     |  | · |  | Electro-Rebuild Tunisia S.A.R.L.                  
|·                     |  | Nabco, Inc.                       |  | · |  | Magnum Power Products, L.L.C.                     
|·                     |  | Power Investments, Inc.           |  | · |  | Publitech, Inc.                                   
|·                     |  | Power Investments Marine, Inc.    |  | · |  | Remy Automotive Brasil Ltda.                      
|·                     |  | Powrbilt Products, Inc.           |  | · |  | Remy Automotive Europe BVBA                       
|·                     |  | Reman Holdings, L.L.C.            |  | · |  | Remy Automotive Poland, Sp.zo.o.                  
|·                     |  | Remy Inc.                         |  | · |  | Remy Automotive UK Limited                        
|·                     |  | Remy International Holdings, Inc. |  | · |  | Remy Componentes S. de R. L. de C. V.             
|·                     |  | Remy Powertrain, L.P.             |  | · |  | Remy Automotive Hungary kft                       
|·                     |  | Remy Reman, L.L.C.                |  | · |  | Remy India Holdings, Inc.                         
|·                     |  | Unit Parts Company                |  | · |  | Remy Korea Holdings, Inc.                         
|·                     |  | World Wide Automotive, L.L.C.     |  | · |  | Remy Remanufacturing de Mexico, S. de R.L. de C.V.
|                      |  |                                   |  | · |  | World Wide Automotive Distributors, Inc.          
|                      |  |                                   |  | · |  | Remy Electricals Hubei Company Limited            
|                      |  |                                   |  | · |  | QAPI, S.A. de C.V.                                
|                      |  |                                   |  | · |  | Unit Parts Coahuilla, S.A. de C.V.                
|                      |  |                                   |  | · |  | Remy Korea, Ltd.                                  



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING BALANCE SHEET



|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, At December 31, 2005                   |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS:                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                           | 302      |   |                      | $ | 634     |                           |  | $ | 19,086       |   |  | $            |         |      |  | $ | 20,022   |  
|Trade accounts receivable, net                       |  |                                             |         |   |                      |   | 137,756 |                           |  |   | 47,062       |   |  |              |         |      |  |   | 184,818  |  
|Other receivables                                    |  |                                             | 37       |   |                      |   | 2,045   |                           |  |   | 11,455       |   |  |              |         |      |  |   | 13,537   |  
|Inventories                                          |  |                                             |         |   |                      |   | 192,563 |                           |  |   | 70,104       |   |  |              | (846     | )(c) |  |   | 261,821  |  
|Deferred income taxes                                |  |                                             |         |   |                      |   |        |                           |  |   | 1,155        |   |  |              |         |      |  |   | 1,155    |  
|Assets of discontinued operations                    |  |                                             |         |   |                      |   |        |                           |  |   | 16           |   |  |              |         |      |  |   | 16       |  
|Other current assets                                 |  |                                             | 1,443    |   |                      |   | 1,698   |                           |  |   | 2,643        |   |  |              |         |      |  |   | 5,784    |  
|Total current assets                                 |  |                                             | 1,782    |   |                      |   | 334,696 |                           |  |   | 151,521      |   |  |              | (846     | )    |  |   | 487,153  |  
|                                                     |  |                                             |          |   |                     
|Property, plant and equipment                        |  |                                             | 26,670   |   |                      |   | 166,197 |                           |  |   | 171,974      |   |  |              |         |      |  |   | 364,841  |  
|Less accumulated depreciation                        |  |                                             | 21,754   |   |                      |   | 98,540  |                           |  |   | 70,016       |   |  |              |         |      |  |   | 190,310  |  
|Property, plant and equipment, net                   |  |                                             | 4,916    |   |                      |   | 67,657  |                           |  |   | 101,958      |   |  |              |         |      |  |   | 174,531  |  
|Deferred financing costs, net                        |  |                                             | 13,962   |   |                      |   |         |                           |  |   |             |   |  |              |         |      |  |   | 13,962   |  
|Goodwill, net                                        |  |                                             |         |   |                      |   | 144,506 |                           |  |   | 12,144       |   |  |              |         |      |  |   | 156,650  |  
|Investment in unconsolidated subsidiaries            |  |                                             | 506,432  |   |                      |   |        |                           |  |   |             |   |  |              | (500,515 | )(a) |  |   | 5,917    |  
|Other assets                                         |  |                                             | 1,947    |   |                      |   | 22,018  |                           |  |   | 8,997        |   |  |              |         |      |  |   | 32,962   |  
|Total assets                                         |  | $                                           | 529,039  |   |                      | $ | 568,877 |                           |  | $ | 274,620      |   |  | $            | (501,361 | )    |  | $ | 871,175  |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY:      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                           | 1,401    |   |                      | $ | 128,694 |                           |  | $ | 64,028       |   |  | $            |         |      |  | $ | 194,123  |  
|Intercompany accounts                                |  |                                             | 75,778   |   |                      |   | (52,582 | )                         |  |   | (23,100      | ) |  |              | (96      | )(c) |  |   |         |  
|Accrued interest                                     |  |                                             | 8,755    |   |                      |   |        |                           |  |   | 151          |   |  |              |         |      |  |   | 8,906    |  
|Accrued restructuring                                |  |                                             | 1,793    |   |                      |   | 10,398  |                           |  |   | 478          |   |  |              |         |      |  |   | 12,669   |  
|Liabilities of discontinued operations               |  |                                             |         |   |                      |   | 25      |                           |  |   | 418          |   |  |              |         |      |  |   | 443      |  
|Other liabilities and accrued expenses               |  |                                             | 9,355    |   |                      |   | 86,618  |                           |  |   | 18,851       |   |  |              |         |      |  |   | 114,824  |  
|Current maturities of long-term debt                 |  |                                             | 1,053    |   |                      |   | 414     |                           |  |   | 26,034       |   |  |              |         |      |  |   | 27,501   |  
|Total current liabilities                            |  |                                             | 98,135   |   |                      |   | 173,567 |                           |  |   | 86,860       |   |  |              | (96      | )    |  |   | 358,466  |  
|                                                     |  |                                             |          |   |                     
|Long-term debt, net of current portion               |  |                                             | 694,171  |   |                      |   | 11,001  |                           |  |   | 9,009        |   |  |              |         |      |  |   | 714,181  |  
|Post-retirement benefits other than pensions         |  |                                             | 15,841   |   |                      |   |        |                           |  |   | 9            |   |  |              |         |      |  |   | 15,850   |  
|Accrued pension benefits                             |  |                                             | 11,574   |   |                      |   |        |                           |  |   | 1,566        |   |  |              |         |      |  |   | 13,140   |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 481     |                           |  |   |             |   |  |              |         |      |  |   | 481      |  
|Deferred income taxes                                |  |                                             | 8,490    |   |                      |   |        |                           |  |   | 1,900        |   |  |              |         |      |  |   | 10,390   |  
|Other non-current liabilities                        |  |                                             | 1,689    |   |                      |   | 48,516  |                           |  |   | 1,215        |   |  |              |         |      |  |   | 51,420   |  
|Minority interest                                    |  |                                             |         |   |                      |   | 2,689   |                           |  |   | 8,869        |   |  |              |         |      |  |   | 11,558   |  
|                                                     |  |                                             |          |   |                     
|Stockholders (deficit) equity:                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                             | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Paid-in-capital                                      |  |                                             | 334,336  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 334,336  |  
|Retained (deficit) earnings                          |  |                                             | (628,120 | ) |                      |   | 40,400  |                           |  |   | (4,084       | ) |  |              | (36,316  | )(b) |  |   | (628,120 | )
|Subsidiary investment                                |  |                                             |         |   |                      |   | 292,698 |                           |  |   | 172,251      |   |  |              | (464,949 | )(a) |  |   |         |  
|Accumulated other comprehensive loss                 |  |                                             | (7,080   | ) |                      |   | (475    | )                         |  |   | (2,975       | ) |  |              |         |      |  |   | (10,530  | )
|Total stockholders (deficit) equity                 |  |                                             | (300,861 | ) |                      |   | 332,623 |                           |  |   | 165,192      |   |  |              | (501,265 | )    |  |   | (304,311 | )
|Total liabilities and stockholders (deficit) equity |  | $                                           | 529,039  |   |                      | $ | 568,877 |                           |  | $ | 274,620      |   |  | $            | (501,361 | )    |  | $ | 871,175  |  

|(a) | Elimination of investments in subsidiaries.
|--- | -------------------------------------------

|(b) | Elimination of investments in subsidiaries earnings.
|--- | -----------------------------------------------------

|(c) | Elimination of intercompany profit in inventory.
|--- | ------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING STATEMENT OF OPERATIONS



|                                                                                                                                                              |  |                                             |         |   |                      |   |           |                           |  |   |              |   |  |              |          |      |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | --------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | --------- | -
|IN THOUSANDS, For the Year Ended December 31, 2005                                                                                                            |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |           | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|NET SALES                                                                                                                                                     |  | $                                           |        |   |                      | $ | 1,115,341 |                           |  | $ | 509,965      |   |  | $            | (396,356 | )(a) |  | $ | 1,228,950 |  
|Cost of goods sold                                                                                                                                            |  |                                             |        |   |                      |   | 1,000,392 |                           |  |   | 477,707      |   |  |              | (396,356 | )(a) |  |   | 1,081,743 |  
|Gross profit                                                                                                                                                  |  |                                             |        |   |                      |   | 114,949   |                           |  |   | 32,258       |   |  |              |         |      |  |   | 147,207   |  
|                                                                                                                                                              |  |                                             |         |   |                     
|Selling, general and administrative expenses                                                                                                                  |  |                                             | 22,241  |   |                      |   | 89,214    |                           |  |   | 27,734       |   |  |              |         |      |  |   | 139,189   |  
|Impairment charges                                                                                                                                            |  |                                             |        |   |                      |   | 13,917    |                           |  |   |             |   |  |              |         |      |  |   | 13,917    |  
|Restructuring charges (credits)                                                                                                                               |  |                                             | 2,694   |   |                      |   | (80       | )                         |  |   | 2,236        |   |  |              |         |      |  |   | 4,850     |  
|OPERATING (LOSS) INCOME                                                                                                                                       |  |                                             | (24,935 | ) |                      |   | 11,898    |                           |  |   | 2,288        |   |  |              |         |      |  |   | (10,749   | )
|                                                                                                                                                              |  |                                             |         |   |                     
|Interest expense, net                                                                                                                                         |  |                                             | 63,157  |   |                      |   | 4,551     |                           |  |   | 1,701        |   |  |              |         |      |  |   | 69,409    |  
|Income (loss) from continuing operations before income taxes, minority interest, loss from unconsolidated subsidiaries and equity in earnings
of subsidiaries |  |                                             | (88,092 | ) |                      |   | 7,347     |                           |  |   | 587          |   |  |              |         |      |  |   | (80,158   | )
|                                                                                                                                                              |  |                                             |         |   |                     
|Income tax expense                                                                                                                                            |  |                                             | 9,187   |   |                      |   | 465       |                           |  |   | 3,535        |   |  |              |         |      |  |   | 13,187    |  
|Minority interest                                                                                                                                             |  |                                             |        |   |                      |   | 3,015     |                           |  |   | 427          |   |  |              |         |      |  |   | 3,442     |  
|Loss from unconsolidated subsidiaries                                                                                                                         |  |                                             |        |   |                      |   |          |                           |  |   | (208         | ) |  |              |         |      |  |   | (208      | )
|Equity in earnings of subsidiaries                                                                                                                            |  |                                             | (295    | ) |                      |   |          |                           |  |   |             |   |  |              | 295      | (b)  |  |   |          |  
|Net (loss) income from continuing operations                                                                                                                  |  |                                             | (96,984 | ) |                      |   | 3,867     |                           |  |   | (3,167       | ) |  |              | (295     | )    |  |   | (96,579   | )
|                                                                                                                                                              |  |                                             |         |   |                     
|Discontinued Operations:                                                                                                                                      |  |                                             |         |   |                      |   |           |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Loss from discontinued operations, net of tax                                                                                                                 |  |                                             |        |   |                      |   | (947      | )                         |  |   | (384         | ) |  |              |         |      |  |   | (1,331    | )
|Gain on disposal of discontinued operations, net of tax                                                                                                       |  |                                             |        |   |                      |   | 478       |                           |  |   | 448          |   |  |              |         |      |  |   | 926       |  
|Income (loss) from discontinued operations, net of tax                                                                                                        |  |                                             |        |   |                      |   | (469      | )                         |  |   | 64           |   |  |              |         |      |  |   | (405      | )
|Net (loss) income attributable to common stockholders                                                                                                         |  | $                                           | (96,984 | ) |                      | $ | 3,398     |                           |  | $ | (3,103       | ) |  | $            | (295     | )    |  |   | (96,984   | )

|(a) | Elimination of intercompany sales and cost of sales.
|--- | ----------------------------------------------------

|(b) | Elimination of equity in net loss of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING STATEMENT OF CASH FLOW



|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |      |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | ---- |  | - | ------- | -
|IN THOUSANDS, For the Year Ended December 31, 2005                                                 |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |      |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                              |  | $                                           | (96,984 | ) |                      | $ | 3,398   |                           |  | $ | (3,103       | ) |  | $            | (295 | )(a) |  | $ | (96,984 | )
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |      |      |  |   |         |  
|Discontinued operations                                                                            |  |                                             |        |   |                      |   | 469     |                           |  |   | (64          | ) |  |              |     |      |  |   | 405     |  
|Depreciation and amortization                                                                      |  |                                             | 2,636   |   |                      |   | 14,969  |                           |  |   | 12,481       |   |  |              |     |      |  |   | 30,086  |  
|Non-cash interest expense                                                                          |  |                                             | 3,438   |   |                      |   |        |                           |  |   |             |   |  |              |     |      |  |   | 3,438   |  
|Minority interest and loss from unconsolidated subsidiaries, net                                   |  |                                             |        |   |                      |   | 3,015   |                           |  |   | 219          |   |  |              |     |      |  |   | 3,234   |  
|Equity in earnings of subsidiaries                                                                 |  |                                             | (295    | ) |                      |   |        |                           |  |   |             |   |  |              | 295  | (a)  |  |   |        |  
|Deferred income taxes                                                                              |  |                                             | 8,491   |   |                      |   |        |                           |  |   | (2,288       | ) |  |              |     |      |  |   | 6,203   |  
|Post-retirement benefits other than pensions and accrued pension benefits, net                     |  |                                             | (2,397  | ) |                      |   |        |                           |  |   | 8            |   |  |              |     |      |  |   | (2,389  | )
|Restructuring charges                                                                              |  |                                             | 2,694   |   |                      |   | (80     | )                         |  |   | 2,236        |   |  |              |     |      |  |   | 4,850   |  
|Cash payments for restructuring charges                                                            |  |                                             | (956    | ) |                      |   | (4,607  | )                         |  |   | (1,894       | ) |  |              |     |      |  |   | (7,457  | )
|Impairment charges                                                                                 |  |                                             |        |   |                      |   | 13,917  |                           |  |   |             |   |  |              |     |      |  |   | 13,917  |  
|Changes in operating assets and liabilities, net of acquisitions and restructuring:                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |      |      |  |   |         |  
|Accounts receivable                                                                                |  |                                             |        |   |                      |   | (17,358 | )                         |  |   | (2,652       | ) |  |              |     |      |  |   | (20,010 | )
|Inventories                                                                                        |  |                                             |        |   |                      |   | 8,281   |                           |  |   | 1,263        |   |  |              |     |      |  |   | 9,544   |  
|Accounts payable                                                                                   |  |                                             | (182    | ) |                      |   | (345    | )                         |  |   | 9,561        |   |  |              |     |      |  |   | 9,034   |  
|Intercompany accounts                                                                              |  |                                             | 11,535  |   |                      |   | 40,507  |                           |  |   | (52,042      | ) |  |              |     |      |  |   |        |  
|Other current assets and liabilities                                                               |  |                                             | 5,474   |   |                      |   | (10,709 | )                         |  |   | 6,639        |   |  |              |     |      |  |   | 1,404   |  
|Other non-current assets and liabilities,
net                                                      |  |                                             | (23,114 | ) |                      |   | (18,670 | )                         |  |   | 39,622       |   |  |              |     |      |  |   | (2,162  | )
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                             | (89,660 | ) |                      |   | 32,787  |                           |  |   | 9,986        |   |  |              |     |      |  |   | (46,887 | )
|                                                                                                   |  |                                             |         |   |                     
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |      |      |  |   |         |  
|Acquisition, net of cash acquired                                                                  |  |                                             | (57,316 | ) |                      |   | (325    | )                         |  |   |             |   |  |              |     |      |  |   | (57,641 | )
|Net proceeds on sale of assets and businesses                                                      |  |                                             |        |   |                      |   | 10,453  |                           |  |   | 240          |   |  |              |     |      |  |   | 10,693  |  
|Purchases of property, plant and equipment                                                         |  |                                             | (2,354  | ) |                      |   | (24,727 | )                         |  |   | (14,301      | ) |  |              |     |      |  |   | (41,382 | )
|Investments in unconsolidated subsidiaries                                                         |  |                                             |        |   |                      |   |        |                           |  |   |             |   |  |              |     |      |  |   |        |  
|Net cash used in investing activities of continuing operations                                     |  |                                             | (59,670 | ) |                      |   | (14,599 | )                         |  |   | (14,061      | ) |  |              |     |      |  |   | (88,330 | )
|                                                                                                   |  |                                             |         |   |                     
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |      |      |  |   |         |  
|Proceeds from issuances of long-term debt                                                          |  |                                             | 77,600  |   |                      |   |        |                           |  |   |             |   |  |              |     |      |  |   | 77,600  |  
|Retirement of long-term debt                                                                       |  |                                             | (12,500 | ) |                      |   |        |                           |  |   |             |   |  |              |     |      |  |   | (12,500 | )
|Net (repayments) borrowings under revolving line of credit and other                               |  |                                             | 46,268  |   |                      |   | (14,570 | )                         |  |   | 2,288        |   |  |              |     |      |  |   | 33,986  |  
|Deferred financing costs                                                                           |  |                                             | (2,476  | ) |                      |   |        |                           |  |   |             |   |  |              |     |      |  |   | (2,476  | )
|Distributions to minority interests                                                                |  |                                             |        |   |                      |   | (2,382  | )                         |  |   |             |   |  |              |     |      |  |   | (2,382  | )
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                             | 108,892 |   |                      |   | (16,952 | )                         |  |   | 2,288        |   |  |              |     |      |  |   | 94,228  |  
|                                                                                                   |  |                                             |         |   |                     
|Effect of exchange rate changes on cash                                                            |  |                                             |        |   |                      |   |        |                           |  |   | (367         | ) |  |              |     |      |  |   | (367    | )
|                                                                                                   |  |                                             |         |   |                     
|Cash flows of discontinued operations                                                              |  |                                             |        |   |                      |   | (1,291  | )                         |  |   | 124          |   |  |              |     |      |  |   | (1,167  | )
|Net decrease in cash and cash equivalents                                                          |  |                                             | (40,438 | ) |                      |   | (55     | )                         |  |   | (2,030       | ) |  |              |     |      |  |   | (42,523 | )
|Cash and cash equivalents at beginning of year                                                     |  |                                             | 40,740  |   |                      |   | 689     |                           |  |   | 21,116       |   |  |              |     |      |  |   | 62,545  |  
|Cash and cash equivalents at end of year                                                           |  | $                                           | 302     |   |                      | $ | 634     |                           |  | $ | 19,086       |   |  | $            |     |      |  | $ | 20,022  |  

|(a) | Elimination of equity in earnings of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING BALANCE SHEET



|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, At December 31, 2004                   |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS:                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                           | 40,740   |   |                      | $ | 689     |                           |  | $ | 21,116       |   |  | $            |         |      |  | $ | 62,545   |  
|Trade accounts receivable, net                       |  |                                             |         |   |                      |   | 109,923 |                           |  |   | 44,410       |   |  |              |         |      |  |   | 154,333  |  
|Other receivables                                    |  |                                             | 1,685    |   |                      |   | 3,584   |                           |  |   | 13,828       |   |  |              |         |      |  |   | 19,097   |  
|Inventories                                          |  |                                             |         |   |                      |   | 149,338 |                           |  |   | 69,925       |   |  |              | (1,351   | )(c) |  |   | 217,912  |  
|Deferred income taxes                                |  |                                             |         |   |                      |   |        |                           |  |   | 260          |   |  |              |         |      |  |   | 260      |  
|Assets of discontinued operations                    |  |                                             |         |   |                      |   |        |                           |  |   | 356          |   |  |              |         |      |  |   | 356      |  
|Other current assets                                 |  |                                             | 1,700    |   |                      |   | 1,912   |                           |  |   | 7,602        |   |  |              |         |      |  |   | 11,214   |  
|Total current assets                                 |  |                                             | 44,125   |   |                      |   | 265,446 |                           |  |   | 157,497      |   |  |              | (1,351   | )    |  |   | 465,717  |  
|                                                     |  |                                             |          |   |                     
|Property, plant and equipment                        |  |                                             | 2,610    |   |                      |   | 181,525 |                           |  |   | 145,502      |   |  |              |         |      |  |   | 329,637  |  
|Less accumulated depreciation                        |  |                                             | 203      |   |                      |   | 134,842 |                           |  |   | 57,299       |   |  |              |         |      |  |   | 192,344  |  
|Property, plant and equipment, net                   |  |                                             | 2,407    |   |                      |   | 46,683  |                           |  |   | 88,203       |   |  |              |         |      |  |   | 137,293  |  
|Deferred financing costs, net                        |  |                                             | 14,842   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 14,842   |  
|Goodwill, net                                        |  |                                             |         |   |                      |   | 94,255  |                           |  |   | 12,145       |   |  |              |         |      |  |   | 106,400  |  
|Investment in unconsolidated subsidiaries            |  |                                             | 426,358  |   |                      |   |        |                           |  |   |             |   |  |              | (420,652 | )(a) |  |   | 5,706    |  
|Other assets                                         |  |                                             | 4,519    |   |                      |   | 12,456  |                           |  |   | 9,085        |   |  |              |         |      |  |   | 26,060   |  
|Total assets                                         |  | $                                           | 492,251  |   |                      | $ | 418,840 |                           |  | $ | 266,930      |   |  | $            | (422,003 | )    |  | $ | 756,018  |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY:      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                           | 1,583    |   |                      | $ | 110,434 |                           |  | $ | 58,759       |   |  | $            |         |      |  | $ | 170,776  |  
|Intercompany accounts                                |  |                                             | 64,243   |   |                      |   | (92,507 | )                         |  |   | 28,865       |   |  |              | (601     | )(c) |  |   |         |  
|Accrued interest                                     |  |                                             | 8,105    |   |                      |   |        |                           |  |   | 105          |   |  |              |         |      |  |   | 8,210    |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 6,074   |                           |  |   | 377          |   |  |              |         |      |  |   | 6,451    |  
|Liabilities of discontinued operations               |  |                                             |         |   |                      |   | 436     |                           |  |   | 2,363        |   |  |              |         |      |  |   | 2,799    |  
|Other liabilities and accrued expenses               |  |                                             | 8,010    |   |                      |   | 62,289  |                           |  |   | 13,858       |   |  |              |         |      |  |   | 84,157   |  
|Current maturities of long-term debt                 |  |                                             |         |   |                      |   | 1,455   |                           |  |   | 21,435       |   |  |              |         |      |  |   | 22,890   |  
|Total current liabilities                            |  |                                             | 81,941   |   |                      |   | 88,181  |                           |  |   | 125,762      |   |  |              | (601     | )    |  |   | 295,283  |  
|                                                     |  |                                             |          |   |                     
|Long-term debt, net of current portion               |  |                                             | 583,857  |   |                      |   | 15,249  |                           |  |   | 11,224       |   |  |              |         |      |  |   | 610,330  |  
|Post-retirement benefits other than pensions         |  |                                             | 16,302   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 16,302   |  
|Accrued pension benefits                             |  |                                             | 13,510   |   |                      |   |        |                           |  |   | 1            |   |  |              |         |      |  |   | 13,511   |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 4,407   |                           |  |   |             |   |  |              |         |      |  |   | 4,407    |  
|Deferred income taxes                                |  |                                             |         |   |                      |   |        |                           |  |   | 3,325        |   |  |              |         |      |  |   | 3,325    |  
|Other non-current liabilities                        |  |                                             | 1,561    |   |                      |   | 2,370   |                           |  |   | 1,031        |   |  |              |         |      |  |   | 4,962    |  
|Minority interest                                    |  |                                             |         |   |                      |   | 2,055   |                           |  |   | 8,443        |   |  |              |         |      |  |   | 10,498   |  
|Stockholders (deficit) equity:                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                             | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Paid-in-capital                                      |  |                                             | 334,336  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 334,336  |  
|Retained (deficit) earnings                          |  |                                             | (531,136 | ) |                      |   | 37,002  |                           |  |   | (981         | ) |  |              | (36,021  | )(b) |  |   | (531,136 | )
|Subsidiary investment                                |  |                                             |         |   |                      |   | 270,048 |                           |  |   | 115,333      |   |  |              | (385,381 | )(a) |  |   |         |  
|Accumulated other comprehensive (loss) income        |  |                                             | (8,123   | ) |                      |   | (472    | )                         |  |   | 2,792        |   |  |              |         |      |  |   | (5,803   | )
|Total stockholders (deficit) equity                 |  |                                             | (204,920 | ) |                      |   | 306,578 |                           |  |   | 117,144      |   |  |              | (421,402 | )    |  |   | (202,600 | )
|Total liabilities and stockholders (deficit) equity |  | $                                           | 492,251  |   |                      | $ | 418,840 |                           |  | $ | 266,930      |   |  | $            | (422,003 | )    |  | $ | 756,018  |  

|(a) | Elimination of investments in subsidiaries.
|--- | -------------------------------------------

|(b) | Elimination of investments in subsidiaries earnings.
|--- | -----------------------------------------------------

|(c) | Elimination of intercompany profit in inventory.
|--- | ------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING STATEMENT OF OPERATIONS



|                                                                                                                                                                        |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ---------
|IN THOUSANDS, For the Year Ended December 31, 2004                                                                                                                      |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated
|NET SALES                                                                                                                                                               |  | $                                           |        |   |                      | $ | 975,284 |                           |  | $ | 447,797      |   |  | $            | (371,916 | )(a) |  | $ | 1,051,165
|Cost of goods sold                                                                                                                                                      |  |                                             | 630     |   |                      |   | 810,135 |                           |  |   | 411,823      |   |  |              | (371,916 | )(a) |  |   | 850,672  
|Gross (loss) profit                                                                                                                                                     |  |                                             | (630    | ) |                      |   | 165,149 |                           |  |   | 35,974       |   |  |              |         |      |  |   | 200,493  
|                                                                                                                                                                        |  |                                             |         |   |                     
|Selling, general and administrative expenses                                                                                                                            |  |                                             | 18,768  |   |                      |   | 69,278  |                           |  |   | 25,217       |   |  |              |         |      |  |   | 113,263  
|Restructuring charges (credits)                                                                                                                                         |  |                                             | 250     |   |                      |   | (73     | )                         |  |   | 765          |   |  |              |         |      |  |   | 942      
|OPERATING (LOSS) INCOME                                                                                                                                                 |  |                                             | (19,648 | ) |                      |   | 95,944  |                           |  |   | 9,992        |   |  |              |         |      |  |   | 86,288   
|                                                                                                                                                                        |  |                                             |         |   |                     
|Interest expense, net                                                                                                                                                   |  |                                             | 54,475  |   |                      |   | 2,458   |                           |  |   | 1,304        |   |  |              |         |      |  |   | 58,237   
|Loss on early extinguishment of debt                                                                                                                                    |  |                                             | 7,939   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 7,939    
|Income (loss) from continuing operations before income taxes (benefit), minority interest, loss from unconsolidated subsidiaries and equity in
earnings of subsidiaries |  |                                             | (82,062 | ) |                      |   | 93,486  |                           |  |   | 8,688        |   |  |              |         |      |  |   | 20,112   
|                                                                                                                                                                        |  |                                             |         |   |                     
|Income tax (benefit) expense                                                                                                                                            |  |                                             | (1,146  | ) |                      |   | 1,455   |                           |  |   | 5,058        |   |  |              |         |      |  |   | 5,367    
|Minority interest                                                                                                                                                       |  |                                             |        |   |                      |   | 2,073   |                           |  |   | 725          |   |  |              |         |      |  |   | 2,798    
|Loss from unconsolidated subsidiaries                                                                                                                                   |  |                                             |        |   |                      |   |        |                           |  |   | 588          |   |  |              |         |      |  |   | 588      
|Equity in earnings of subsidiaries                                                                                                                                      |  |                                             | (92,206 | ) |                      |   |        |                           |  |   |             |   |  |              | 92,206   | (b)  |  |   |         
|Net income (loss) from continuing operations                                                                                                                            |  |                                             | 11,290  |   |                      |   | 89,958  |                           |  |   | 2,317        |   |  |              | (92,206  | )    |  |   | 11,359   
|                                                                                                                                                                        |  |                                             |         |   |                     
|Discontinued Operations:                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          
|Income (loss) from discontinued operations, net of tax                                                                                                                  |  |                                             |        |   |                      |   | 1,821   |                           |  |   | (667         | ) |  |              |         |      |  |   | 1,154    
|Gain (loss) on disposal of discontinued operations, net of tax                                                                                                          |  |                                             | 45,134  |   |                      |   | 1,023   |                           |  |   | (2,246       | ) |  |              |         |      |  |   | 43,911   
|Income (loss) from discontinued operations, net of tax                                                                                                                  |  |                                             | 45,134  |   |                      |   | 2,844   |                           |  |   | (2,913       | ) |  |              |         |      |  |   | 45,065   
|NET INCOME (LOSS)                                                                                                                                                       |  |                                             | 56,424  |   |                      |   | 92,802  |                           |  |   | (596         | ) |  |              | (92,206  | )    |  |   | 56,424   
|                                                                                                                                                                        |  |                                             |         |   |                     
|Accretion for redemption of preferred stock                                                                                                                             |  |                                             | 27,367  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 27,367   
|Net income (loss) attributable to common stockholders                                                                                                                   |  | $                                           | 29,057  |   |                      | $ | 92,802  |                           |  | $ | (596         | ) |  | $            | (92,206  | )    |  | $ | 29,057   

|(a) | Elimination of intercompany sales and cost of sales.
|--- | ----------------------------------------------------

|(b) | Elimination of equity in net loss of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING STATEMENT OF CASH FLOW



|                                                                                                   |  |                                                |          |   |                      |   |          |                             |  |   |              |   |  |              |         |      |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | -------- | - | -------------------- | - | -------- | --------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | -------- | -
|IN THOUSANDS,For the Year Ended December 31, 2004                                                  |  | Remy International, Inc. (Parent Company Only) |          |   | SubsidiaryGuarantors |   |          | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                                                |          |   |                      |   |          |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Net income (loss) attributable to common stockholders                                              |  | $                                              | 29,057   |   |                      | $ | 92,802   |                             |  | $ | (596         | ) |  | $            | (92,206 | )(a) |  | $ | 29,057   |  
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |                                                |          |   |                      |   |          |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Discontinued operations                                                                            |  |                                                | (45,134  | ) |                      |   | (2,844   | )                           |  |   | 2,913        |   |  |              |        |      |  |   | (45,065  | )
|Depreciation and amortization                                                                      |  |                                                | 1,252    |   |                      |   | 10,462   |                             |  |   | 11,332       |   |  |              |        |      |  |   | 23,046   |  
|Non-cash interest expense                                                                          |  |                                                | 3,855    |   |                      |   |         |                             |  |   |             |   |  |              |        |      |  |   | 3,855    |  
|Loss on early extinguishment of debt                                                               |  |                                                | 7,939    |   |                      |   |         |                             |  |   |             |   |  |              |        |      |  |   | 7,939    |  
|Accretion for redemption of preferred stock                                                        |  |                                                | 27,367   |   |                      |   |         |                             |  |   |             |   |  |              |        |      |  |   | 27,367   |  
|Minority interest and loss from unconsolidated subsidiaries, net                                   |  |                                                |         |   |                      |   | 2,073    |                             |  |   | 1,313        |   |  |              |        |      |  |   | 3,386    |  
|Equity in earnings of subsidiaries                                                                 |  |                                                | (92,206  | ) |                      |   |         |                             |  |   |             |   |  |              | 92,206  | (a)  |  |   |         |  
|Deferred income taxes                                                                              |  |                                                |         |   |                      |   |         |                             |  |   | 2,592        |   |  |              |        |      |  |   | 2,592    |  
|Post retirement benefits other than pensions and accrued pension benefits, net                     |  |                                                | 307      |   |                      |   |         |                             |  |   | 1            |   |  |              |        |      |  |   | 308      |  
|Restructuring charges                                                                              |  |                                                | 250      |   |                      |   | (73      | )                           |  |   | 765          |   |  |              |        |      |  |   | 942      |  
|Cash payments for restructuring charges                                                            |  |                                                | (250     | ) |                      |   | (7,775   | )                           |  |   | (1,002       | ) |  |              |        |      |  |   | (9,027   | )
|Mexico arbitration settlement                                                                      |  |                                                |         |   |                      |   |         |                             |  |   | (13,622      | ) |  |              |        |      |  |   | (13,622  | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring:                |  |                                                |          |   |                      |   |          |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Accounts receivable                                                                                |  |                                                |         |   |                      |   | (3,390   | )                           |  |   | (7,376       | ) |  |              |        |      |  |   | (10,766  | )
|Inventories                                                                                        |  |                                                |         |   |                      |   | (18,445  | )                           |  |   | (1,087       | ) |  |              |        |      |  |   | (19,532  | )
|Accounts payable                                                                                   |  |                                                | (1,188   | ) |                      |   | 36,406   |                             |  |   | (19,906      | ) |  |              |        |      |  |   | 15,312   |  
|Intercompany accounts                                                                              |  |                                                | 51,717   |   |                      |   | (121,324 | )                           |  |   | 69,607       |   |  |              |        |      |  |   |         |  
|Other current assets and liabilities                                                               |  |                                                | 2,500    |   |                      |   | (19,324  | )                           |  |   | (5,381       | ) |  |              |        |      |  |   | (22,205  | )
|Other non-current assets and liabilities, net                                                      |  |                                                | (48,882  | ) |                      |   | 58,550   |                             |  |   | (12,606      | ) |  |              |        |      |  |   | (2,938   | )
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                                | (63,416  | ) |                      |   | 27,118   |                             |  |   | 26,947       |   |  |              |        |      |  |   | (9,351   | )
|                                                                                                   |  |                                                |          |   |                     
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |                                                |          |   |                      |   |          |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Acquisition, net of cash acquired                                                                  |  |                                                | (5,488   | ) |                      |   | (14,435  | )                           |  |   | (5,594       | ) |  |              |        |      |  |   | (25,517  | )
|Net proceeds on sale of assets and businesses                                                      |  |                                                | 104,269  |   |                      |   | 384      |                             |  |   |             |   |  |              |        |      |  |   | 104,653  |  
|Purchases of property, plant and equipment                                                         |  |                                                | (2,553   | ) |                      |   | (12,543  | )                           |  |   | (10,251      | ) |  |              |        |      |  |   | (25,347  | )
|Investments in unconsolidated subsidiaries                                                         |  |                                                |         |   |                      |   |         |                             |  |   |             |   |  |              |        |      |  |   |         |  
|Net cash provided by (used in) investing activities of continuing operations                       |  |                                                | 96,228   |   |                      |   | (26,594  | )                           |  |   | (15,845      | ) |  |              |        |      |  |   | 53,789   |  
|                                                                                                   |  |                                                |          |   |                     
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |  |                                                |          |   |                      |   |          |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Proceeds from issuances of long-term debt                                                          |  |                                                | 275,000  |   |                      |   |         |                             |  |   |             |   |  |              |        |      |  |   | 275,000  |  
|Retirement of long-term debt                                                                       |  |                                                | (200,000 | ) |                      |   |         |                             |  |   |             |   |  |              |        |      |  |   | (200,000 | )
|Net (repayments) borrowings under revolving line of credit and other                               |  |                                                | (52,041  | ) |                      |   | (1,159   | )                           |  |   | (9,454       | ) |  |              |        |      |  |   | (62,654  | )
|Deferred financing costs                                                                           |  |                                                | (15,032  | ) |                      |   |         |                             |  |   |             |   |  |              |        |      |  |   | (15,032  | )
|Distributions to minority interests                                                                |  |                                                |         |   |                      |   |         |                             |  |   | (1,010       | ) |  |              |        |      |  |   | (1,010   | )
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                                | 7,927    |   |                      |   | (1,159   | )                           |  |   | (10,464      | ) |  |              |        |      |  |   | (3,696   | )
|                                                                                                   |  |                                                |          |   |                     
|Effect of exchange rate changes on cash                                                            |  |                                                |         |   |                      |   |         |                             |  |   | 1,510        |   |  |              |        |      |  |   | 1,510    |  
|                                                                                                   |  |                                                |          |   |                     
|Cash flows of discontinued operations                                                              |  |                                                |         |   |                      |   | 1,075    |                             |  |   | (1,989       | ) |  |              |        |      |  |   | (914     | )
|Net increase in cash and cash equivalents                                                          |  |                                                | 40,739   |   |                      |   | 440      |                             |  |   | 159          |   |  |              |        |      |  |   | 41,338   |  
|                                                                                                   |  |                                                |          |   |                     
|Cash and cash equivalents at beginning of year                                                     |  |                                                | 1        |   |                      |   | 249      |                             |  |   | 20,957       |   |  |              |        |      |  |   | 21,207   |  
|Cash and cash equivalents at end of year                                                           |  | $                                              | 40,740   |   |                      | $ | 689      |                             |  | $ | 21,116       |   |  | $            |        |      |  | $ | 62,545   |  

|(a) | Elimination of equity in earnings of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING STATEMENT OF OPERATIONS



|                                                                                                                                                                        |  |                                                |          |   |                      |   |         |                             |  |   |              |   |  |              |          |      |  |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | -------- | - | -------------------- | - | ------- | --------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS,For the Year Ended December 31, 2003                                                                                                                       |  | Remy International, Inc. (Parent Company Only) |          |   | SubsidiaryGuarantors |   |         | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|NET SALES                                                                                                                                                               |  | $                                              |         |   |                      | $ | 981,813 |                             |  | $ | 514,823      |   |  | $            | (523,842 | )(a) |  | $ | 972,794  |  
|Cost of goods sold                                                                                                                                                      |  |                                                |         |   |                      |   | 847,882 |                             |  |   | 467,282      |   |  |              | (523,842 | )(a) |  |   | 791,322  |  
|Cost of goods sold  special charges:                                                                                                                                   |  |                                                |          |   |                      |   |         |                             |  |   |              |   |  |              |          |      |  |   |          |  
|Core inventory valuation                                                                                                                                                |  |                                                |         |   |                      |   | 102,296 |                             |  |   | 1,634        |   |  |              |         |      |  |   | 103,930  |  
|Mexican arbitration award                                                                                                                                               |  |                                                |         |   |                      |   |        |                             |  |   | 14,310       |   |  |              |         |      |  |   | 14,310   |  
|Gross profit                                                                                                                                                            |  |                                                |         |   |                      |   | 31,635  |                             |  |   | 31,597       |   |  |              |         |      |  |   | 63,232   |  
|                                                                                                                                                                        |  |                                                |          |   |                     
|Selling, general and administrative expenses                                                                                                                            |  |                                                | 11,215   |   |                      |   | 67,153  |                             |  |   | 18,402       |   |  |              |         |      |  |   | 96,770   |  
|Restructuring charges                                                                                                                                                   |  |                                                |         |   |                      |   | 48,235  |                             |  |   | 733          |   |  |              |         |      |  |   | 48,968   |  
|OPERATING (LOSS) INCOME                                                                                                                                                 |  |                                                | (11,215  | ) |                      |   | (83,753 | )                           |  |   | 12,462       |   |  |              |         |      |  |   | (82,506  | )
|                                                                                                                                                                        |  |                                                |          |   |                     
|Interest expense, net                                                                                                                                                   |  |                                                | 50,824   |   |                      |   | 2,818   |                             |  |   | 1,812        |   |  |              |         |      |  |   | 55,454   |  
|Income (loss) from continuing operations before income taxes (benefit), minority interest, loss from unconsolidated subsidiaries and equity in
earnings of subsidiaries |  |                                                | (62,039  | ) |                      |   | (86,571 | )                           |  |   | 10,650       |   |  |              |         |      |  |   | (137,960 | )
|                                                                                                                                                                        |  |                                                |          |   |                     
|Income tax expense (benefit)                                                                                                                                            |  |                                                | 37,115   |   |                      |   | (9,915  | )                           |  |   | 9,482        |   |  |              |         |      |  |   | 36,682   |  
|Minority interest                                                                                                                                                       |  |                                                |         |   |                      |   | (2,332  | )                           |  |   | 2,189        |   |  |              |         |      |  |   | (143     | )
|Loss from unconsolidated subsidiaries                                                                                                                                   |  |                                                | 67       |   |                      |   |        |                             |  |   | 6,360        |   |  |              |         |      |  |   | 6,427    |  
|Equity in earnings of subsidiaries                                                                                                                                      |  |                                                | 87,404   |   |                      |   |        |                             |  |   |             |   |  |              | (87,404  | )(b) |  |   |         |  
|Net (loss) income from continuing operations                                                                                                                            |  |                                                | (186,625 | ) |                      |   | (74,324 | )                           |  |   | (7,381       | ) |  |              | 87,404   |      |  |   | (180,926 | )
|                                                                                                                                                                        |  |                                                |          |   |                     
|Discontinued Operations:                                                                                                                                                |  |                                                |          |   |                      |   |         |                             |  |   |              |   |  |              |          |      |  |   |          |  
|Loss from discontinued operations, net of tax                                                                                                                           |  |                                                |         |   |                      |   | (6,464  | )                           |  |   | (1,555       | ) |  |              |         |      |  |   | (8,019   | )
|Gain on disposal of discontinued operations, net of tax                                                                                                                 |  |                                                |         |   |                      |   | 2,320   |                             |  |   |             |   |  |              |         |      |  |   | 2,320    |  
|Loss from discontinued operations, net of tax                                                                                                                           |  |                                                |         |   |                      |   | (4,144  | )                           |  |   | (1,555       | ) |  |              |         |      |  |   | (5,699   | )
|NET (LOSS) INCOME                                                                                                                                                       |  |                                                | (186,625 | ) |                      |   | (78,468 | )                           |  |   | (8,936       | ) |  |              | 87,404   |      |  |   | (186,625 | )
|                                                                                                                                                                        |  |                                                |          |   |                     
|Accretion for redemption of preferred stock                                                                                                                             |  |                                                | 32,895   |   |                      |   |        |                             |  |   |             |   |  |              |         |      |  |   | 32,895   |  
|Net (loss) income attributable to common stockholders                                                                                                                   |  | $                                              | (219,520 | ) |                      | $ | (78,468 | )                           |  | $ | (8,936       | ) |  | $            | 87,404   |      |  | $ | (219,520 | )

|(a) | Elimination of intercompany sales and cost of sales.
|--- | ----------------------------------------------------

|(b) | Elimination of equity in net loss of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



CONSOLIDATING STATEMENT OF CASH FLOWS



|                                                                                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | -------- | -
|IN THOUSANDS, For the Year Ended December 31, 2003                                                            |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash Flows from Operating Activities:                                                                         |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Net (loss) income attributable to common stockholders                                                         |  | $                                           | (219,520 | ) |                      | $ | (78,468 | )                         |  | $ | (8,936       | ) |  | $            | 87,404  | (a)  |  | $ | (219,520 | )
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Discontinued operations                                                                                       |  |                                             |         |   |                      |   | 4,144   |                           |  |   | 1,555        |   |  |              |        |      |  |   | 5,699    |  
|Depreciation and amortization                                                                                 |  |                                             | 1,007    |   |                      |   | 12,109  |                           |  |   | 9,465        |   |  |              |        |      |  |   | 22,581   |  
|Non-cash interest expense                                                                                     |  |                                             | 4,473    |   |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | 4,473    |  
|Accretion for redemption of preferred stock                                                                   |  |                                             | 32,895   |   |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | 32,895   |  
|Minority interest and loss from unconsolidated subsidiaries, net                                              |  |                                             | 67       |   |                      |   | (2,332  | )                         |  |   | 8,549        |   |  |              |        |      |  |   | 6,284    |  
|Equity in earnings of subsidiaries                                                                            |  |                                             | 87,404   |   |                      |   |        |                           |  |   |             |   |  |              | (87,404 | )(a) |  |   |         |  
|Deferred income taxes                                                                                         |  |                                             | 28,800   |   |                      |   |        |                           |  |   | (715         | ) |  |              |        |      |  |   | 28,085   |  
|Post retirement benefits other than pensions and accrued pension benefits, net                                |  |                                             | (4,801   | ) |                      |   | (3,675  | )                         |  |   |             |   |  |              |        |      |  |   | (8,476   | )
|Restructuring charges                                                                                         |  |                                             |         |   |                      |   | 48,235  |                           |  |   | 733          |   |  |              |        |      |  |   | 48,968   |  
|Cash payments for restructuring charges                                                                       |  |                                             | (514     | ) |                      |   | (14,090 | )                         |  |   | (729         | ) |  |              |        |      |  |   | (15,333  | )
|Special charges                                                                                               |  |                                             |         |   |                      |   | 102,296 |                           |  |   | 15,944       |   |  |              |        |      |  |   | 118,240  |  
|Changes in operating assets and liabilities, net of acquisitions, restructuring and non-cash special charges: |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Accounts receivable                                                                                           |  |                                             |         |   |                      |   | (4,250  | )                         |  |   | (4,331       | ) |  |              |        |      |  |   | (8,581   | )
|Inventories                                                                                                   |  |                                             |         |   |                      |   | (11,670 | )                         |  |   | (16,608      | ) |  |              |        |      |  |   | (28,278  | )
|Accounts payable                                                                                              |  |                                             | 1,982    |   |                      |   | (4,912  | )                         |  |   | 27,468       |   |  |              |        |      |  |   | 24,538   |  
|Intercompany accounts                                                                                         |  |                                             | 20,355   |   |                      |   | (22,188 | )                         |  |   | 1,833        |   |  |              |        |      |  |   |         |  
|Other current assets and liabilities                                                                          |  |                                             | 8,648    |   |                      |   | 8,562   |                           |  |   | 3,629        |   |  |              |        |      |  |   | 20,839   |  
|Other non-current assets and liabilities,
net                                                                 |  |                                             | 49,111   |   |                      |   | (38,454 | )                         |  |   | (17,982      | ) |  |              |        |      |  |   | (7,325   | )
|Net cash provided by (used in) operating activities of continuing operations                                  |  |                                             | 9,907    |   |                      |   | (4,693  | )                         |  |   | 19,875       |   |  |              |        |      |  |   | 25,089   |  
|                                                                                                              |  |                                             |          |   |                     
|Cash Flows from Investing Activities:                                                                         |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Acquisition, net of cash acquired                                                                             |  |                                             |         |   |                      |   | (12,160 | )                         |  |   | (6,759       | ) |  |              |        |      |  |   | (18,919  | )
|Net proceeds on sale of assets and businesses                                                                 |  |                                             |         |   |                      |   | 30,058  |                           |  |   |             |   |  |              |        |      |  |   | 30,058   |  
|Purchases of property, plant and equipment                                                                    |  |                                             |         |   |                      |   | (6,316  | )                         |  |   | (9,989       | ) |  |              |        |      |  |   | (16,305  | )
|Investments in unconsolidated subsidiaries                                                                    |  |                                             | (115     | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (115     | )
|Net cash (used in) provided by investing activities of continuing operations                                  |  |                                             | (115     | ) |                      |   | 11,582  |                           |  |   | (16,748      | ) |  |              |        |      |  |   | (5,281   | )
|                                                                                                              |  |                                             |          |   |                     
|Cash Flows from Financing Activities:                                                                         |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |          |  
|Proceeds from issuances of long-term debt                                                                     |  |                                             |         |   |                      |   |        |                           |  |   | 10,297       |   |  |              |        |      |  |   | 10,297   |  
|Net (repayments) borrowings under revolving line of credit and other                                          |  |                                             | (7,812   | ) |                      |   | (988    | )                         |  |   | (3,747       | ) |  |              |        |      |  |   | (12,547  | )
|Deferred financing costs                                                                                      |  |                                             | (1,980   | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (1,980   | )
|Net cash (used in) provided by financing activities of continuing operations                                  |  |                                             | (9,792   | ) |                      |   | (988    | )                         |  |   | 6,550        |   |  |              |        |      |  |   | (4,230   | )
|                                                                                                              |  |                                             |          |   |                     
|Effect of exchange rate changes on cash                                                                       |  |                                             |         |   |                      |   |        |                           |  |   | 967          |   |  |              |        |      |  |   | 967      |  
|                                                                                                              |  |                                             |          |   |                     
|Cash flows of discontinued operations                                                                         |  |                                             |         |   |                      |   | (5,808  | )                         |  |   | (1,845       | ) |  |              |        |      |  |   | (7,653   | )
|Net increase in cash and cash equivalents                                                                     |  |                                             |         |   |                      |   | 93      |                           |  |   | 8,799        |   |  |              |        |      |  |   | 8,892    |  
|                                                                                                              |  |                                             |          |   |                     
|Cash and cash equivalents at beginning of year                                                                |  |                                             | 1        |   |                      |   | 156     |                           |  |   | 12,158       |   |  |              |        |      |  |   | 12,315   |  
|Cash and cash equivalents at end of year                                                                      |  | $                                           | 1        |   |                      | $ | 249     |                           |  | $ | 20,957       |   |  | $            |        |      |  | $ | 21,207   |  

|(a) | Elimination of equity in earnings of consolidated subsidiaries.
|--- | ---------------------------------------------------------------



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22.    QUARTERLY FINANCIAL INFORMATION(UNAUDITED)

---



|                                                       |  |         |         |   |         |   |         |         |  |   |          |   |  |            |         |   |  |   |           |  
|------------------------------------------------------ |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | -------- | - |  | ---------- | ------- | - |  | - | --------- | -
|Quarter Ended:                                         |  | 3/31/05 |         |   | 6/30/05 |   |         | 9/30/05 |  |   | 12/31/05 |   |  | Total Year |        
|Net sales                                              |  | $       | 281,568 |   |         | $ | 312,341 |         |  | $ | 315,963  |   |  | $          | 319,078 |   |  | $ | 1,228,950 |  
|Gross profit                                           |  |         | 45,359  |   |         |   | 30,510  |         |  |   | 44,493   |   |  |            | 26,845  |   |  |   | 147,207   |  
|Loss from continuing operations                        |  |         | (2,851  | ) |         |   | (21,818 | )       |  |   | (27,895  | ) |  |            | (44,015 | ) |  |   | (96,579   | )
|Income (loss) from discontinued operations, net of tax |  |         | (201    | ) |         |   | (93     | )       |  |   | (190     | ) |  |            | (847    | ) |  |   | (1,331    | )
|Gain on disposal of businesses, net of tax             |  |         | 155     |   |         |   | 524     |         |  |   | 107      |   |  |            | 140     |   |  |   | 926       |  
|Net loss                                               |  |         | (2,897  | ) |         |   | (21,387 | )       |  |   | (27,978  | ) |  |            | (44,722 | ) |  |   | (96,984   | )
|                                                       |  |         |         |   |        
|Quarter Ended:                                         |  | 3/31/04 |         |   | 6/30/04 |   |         | 9/30/04 |  |   | 12/31/04 |   |  | Total Year |        
|Net sales                                              |  | $       | 269,028 |   |         | $ | 272,032 |         |  | $ | 254,271  |   |  | $          | 255,834 |   |  | $ | 1,051,165 |  
|Gross profit                                           |  |         | 50,270  |   |         |   | 54,293  |         |  |   | 50,032   |   |  |            | 45,898  |   |  |   | 200,493   |  
|Income (loss) from continuing operations               |  |         | 5,700   |   |         |   | (85     | )       |  |   | 3,885    |   |  |            | 1,859   |   |  |   | 11,359    |  
|Income (loss) from discontinued operations, net of tax |  |         | (552    | ) |         |   | 1,543   |         |  |   | (25      | ) |  |            | 188     |   |  |   | 1,154     |  
|Gain on disposal of businesses, net of tax             |  |         | 108     |   |         |   | 107     |         |  |   | 43,162   |   |  |            | 534     |   |  |   | 43,911    |  
|Net income                                             |  |         | 5,256   |   |         |   | 1,565   |         |  |   | 47,022   |   |  |            | 2,581   |   |  |   | 56,424    |  



23.    RELATED
PARTY TRANSACTIONS

---



In 2002 the Company entered into to an advisory agreement with CVC Management LLC (the Advisor), an affiliate of Court Square and CVC Equity Partners. Under the terms of the agreement, the Advisor is
required to provide executive, management, consulting and support services to the Company and certain of its subsidiaries. The Advisor is entitled to receive an initial advisory fee of $1,000 for 2002 and an advisory fee of $1,000 for each year
thereafter, payable in equal quarterly installments. The Company made payments to the Advisor for the advisory fee of $1,000 in 2005 and $2,750 in 2004 for the period 2002 through the third quarter of 2005. The advisory agreement continues until
December 31, 2006 and is automatically renewed from year to year thereafter unless terminated by either of the parties. The Advisor was also entitled to receive a transaction fee of $2,500 for services provided in connection with the
refinancing of the Companys senior credit facilities in 2002. The Company paid the Advisor the $2,500 transaction fee in 2004. No transaction fees were paid in 2005. The Advisor may receive additional transaction fees under the advisory
agreement in amounts to be agreed upon by the parties for services provided in connection with future financings, acquisitions and divestitures.



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|ITEM 9 |  | DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------ |  | ---------------------------------------------------------------------

---



There were no disagreements with the independent accountants.



|ITEM 9A |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------

---



(a) Within 90 days prior to the date of the filing of this report, we carried out an evaluation, under the supervision and
with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure controls and procedures were effective in timely alerting us to material information required to be included in our periodic SEC reports.



(b) In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation. However, our prior evaluation did not include the disclosure controls and procedures of
the acquired operations of UPC, which are included in our consolidated financial statements as of December 31, 2005 and for the period from March 18, 2005 through December 31, 2005. Additionally, we are currently implementing a global Enterprise
Resource Planning system. During 2005 we completed the implementation at its facilities in Mexico and Korea.



|ITEM 9B |  | OTHER INFORMATION
|------- |  | -----------------

---



None.



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PART III



|ITEM 10 |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|------- |  | --------------------------------------------------

---



Our executive officers and the members of our board of directors prior to the
filing of this report are as follows:



|                     |  |     |  |                                                             
|-------------------- |  | --- |  | ------------------------------------------------------------
|Name                 |  | Age |  | Position(s) held                                            
|John H. Weber        |  | 50  |  | Chief Executive Officer and Director                        
|Jeffrey Potrzebowski |  | 53  |  | Senior Vice President of Finance and Chief Financial Officer
|Harold K. Sperlich   |  | 76  |  | Chairman and Director                                       
|E.H. Billig          |  | 79  |  | Director                                                    
|John P. Civantos     |  | 38  |  | Director                                                    
|Michael A. Delaney   |  | 51  |  | Director                                                    
|James R. Gerrity     |  | 64  |  | Director and Chairman of the Audit Committee                
|Richard J. Puricelli |  | 67  |  | Director                                                    
|Thomas J. McWilliams |  | 62  |  | Director                                                    
|Rajesh K. Shah       |  | 55  |  | Executive Vice President and Chief Operating Officer        
|Amitabh Rai          |  | 45  |  | Vice President and Corporate Controller                     
|Patrick C. Mobouck   |  | 51  |  | Vice President - Managing Director, Europe                  
|Richard L. Stanley   |  | 49  |  | President, Remy Inc.                                        



Set forth below is a
brief description of the business experience of each of our executive officers and the members of the board of directors.



John H. Weber, Chief Executive Officer and Director. Mr. Weber was elected as our Chief Executive Officer and director in January 2006. Prior to
joining us, Mr. Weber served as President, Chief Executive Officer and director of Eagle Picher, Inc. since July 2001. Prior to that, Mr. Weber served as President of the Industrial Controls and Friction Materials Group for Honeywell
International since July 2000.



Jeffrey Potrzebowski, Senior
Vice President of Finance and Chief Financial Officer. Mr. Potrzebowski was appointed as the Senior Vice President and Chief Financial Officer in September 2005. Prior to joining us, Mr. Potrzebowski was with Great Lakes Chemical
Corporation since 1993 serving in financial roles of increasing responsibility, most recently as Senior Vice President and Chief Financial Officer.



Harold K. Sperlich, Chairman of the Board of Directors. Mr. Sperlich has been Chairman of the Board of Directors since our 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.



E.H. Billig, Director.
Mr. Billig has been a director since our inception in 1994. Prior to that, Mr. Billig was the Vice Chairman of the Board of Directors since our 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 is also a director of Titan Wheel International, Inc. and Titan Europe. He was formerly the President and Chief Operating Officer of MascoTech, Inc. Mr. Billig has
submitted his resignation to the Board to be effective April 1, 2006.



John P. Civantos, Director. Mr. Civantos is a Partner of CVC and has been a director since 2004. Mr. Civantos joined CVC in 2004 after serving for several years with the leveraged buyout firm Hicks, Muse, Tate & Furst. Prior to Hicks
Muse, he was with Morgan Stanley & Co. Mr. Civantos is also a director of Southern Graphic Systems, Inc. and IWCO Direct Inc.



Michael A. Delaney, Director. Mr. Delaney has been a director since our inception in 1994. Mr. Delaney has been a Managing Director of CVC since
1995. Mr. Delaney is Vice President and Managing Director of Court Square. He is also a director of Strategic Industries LLC, IWCO Corporation, MSX International, Inc. and ERICO International Corporation.



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James R. Gerrity, Director and Chairman of the Audit Committee. Mr. Gerrity has been a director
since our inception in 1994. Mr. Gerrity is also a director of Keystone Automotive Industries. From August 2000 to July 2005, Mr. Gerrity was a director of Flender GmbH.



Richard J. Puricelli, Director. Mr. Puricelli became a director in April 2005. Mr. Puricelli is also a director of
ERICO International Corporation, MSX International, Inc., JAC Products and Fastentech, Inc. Mr. Puricelli is also a Non-Executive Chairman of JAC Products. Mr. Puricelli has been associated with JAC Products in various positions since
1995.



Thomas J. McWilliams, Director. Mr. McWilliams
became a director in August 2005. Mr. McWilliams is a Managing Director of CVC and has served on its Investment Committee since 1984. He is also a director of WCI Communities, Inc., Strategic Industries, LLC, Arizant, Inc., IWCO Corporation and
MMI Products, Inc.



Rajesh K. Shah, Executive Vice President
and Chief Operating Officer. Mr. Shah was appointed as our Vice President and Chief Operating Officer in July 2005. Prior to that, Mr. Shah served as our Chief Financial Officer since March 2002. Prior to joining us, Mr. Shah was the
Chief Financial Officer and Executive Vice President of Finance for Collins & Aikman Corp. since 1999, and prior to that he served as Vice President of Finance for United Technologies Automotive Division since 1994.



Amitabh Rai, Vice President and Corporate Controller. Mr. Rai has been
Vice President and Corporate Controller since July 2003. Before joining us, Mr. Rai was with Sensient Technologies Corporation since November 1990 in financial roles of increasing responsibility, most recently as Director of Accounting and
Finance, Sensient Flavors Group.



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 us, Mr. Mobouck was with Monroe Auto Equipment
since 1987, most recently as Managing Director-Europe, Middle East and Africa.



Richard L. Stanley, President, Remy Inc. Mr. Stanley has been President of Remy Inc. since November 1998. Prior to that, Mr. Stanley had been Senior Vice President, Automotive Systems since our 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.



Audit Committee Financial Expert



The Board of Directors believes that its audit committee members are financially literate and are capable of analyzing and
evaluating the Companys financial statements. However, the Board has determined that none of the audit committee members currently meet the technical requirements for being an audit committee financial expert as that term is
defined under applicable rules of the Securities and Exchange Commission. As the Board of Directors believes that the current audit committee members are qualified to carry out all of the duties and responsibilities of an audit committee, the Board
does not believe that it is necessary at this time to actively search for another person to serve on the audit committee who would qualify as an audit committee financial expert.



Code of Ethics



The Company has adopted a code of ethics applicable to the Companys principal executive officer, principal financial officer, principal accounting
officer or controller, or for persons performing similar functions. The Company will provide a copy of the code of ethics to any person, without charge, upon written request made to the Companys Corporate Secretary.



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|ITEM 11 |  | EXECUTIVE COMPENSATION
|------- |  | ----------------------

---



Executive Compensation



The following table sets forth, for the years ending December 31, 2005, 2004 and 2003, the information regarding the cash compensation paid by us, as
well as other compensation paid or accrued for that period, to each of our executive officers named below, in all capacities in which they served.



Summary Compensation Table



|                                                                           |  |              |  |                        |  |                |                           |                               |           |  |                |          
|-------------------------------------------------------------------------- |  | ------------ |  | ---------------------- |  | -------------- | ------------------------- | ----------------------------- | --------- |  | -------------- | ---------
|                                                                           |  |              |  | Annual Compensation    |  |                | All OtherCompensation ($) |                              
|Name and Principal Position                                                |  | Year         |  | Salary ($)             |  | Bonus ($)      |                           | Other Annual Compensation ($) |           | 
|                                                                           |  |              |  | (dollars in thousands) | 
|Thomas J. SnyderPresident and ChiefExecutive Officer                       |  | 200520042003 |  | 550.0516.7500.0        |  | 269.6434.9    |                           | 57.770.9                     | (1)(1)    |  | 119.9128.151.4 | (1)(1)(1)
|                                                                           |  |              |  |                        | 
|Rajesh K. ShahExecutive Vice President andChief Operating Officer          |  | 200520042003 |  | 475.0441.7425.0        |  | 139.7229.4    |                           | 8.00.820.1                    | (2)(2)(2) |  | 39.125.524.9   | (2)(2)(2)
|                                                                           |  |              |  |                        | 
|Patrick C. MobouckVice President andManaging Director, Europe              |  | 200520042003 |  | 433.5376.0347.9        |  | 55.2101.9134.9 |                           |                            |           |  |             |          
|                                                                           |  |              |  |                        | 
|Richard L. StanleyPresident, Remy Inc.                                     |  | 200520042003 |  | 350.0330.7321.0        |  | 102.9167.5    |                           | 5.09.3                       | (4)(4)    |  | 29.829.028.2   | (3)(3)(3)
|Roderick English Senior Vice President, Human Resources and Communications |  | 200520042003 |  | 303.5288.5281.0        |  | 89.3149.2     |                           | 6.65.5                       | (5)(5)    |  | 27.423.025.0   | (4)(4)(4)

---

|(1) | Includes the following in fiscal years 2005, 2004 and 2003, respectively: (i) Other Annual Compensation reflect amount reimbursed for payment of taxes; (ii) All Other
Compensation reflects $111.7, $116.3 and $40.6 in life insurance premiums paid, the remainder reflects matching contributions under our 401(k) Plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes the following in fiscal years 2005, 2004 and 2003, respectively: (i) Other Annual Compensation reflects amount reimbursed for payment of taxes in 2005 and 2004, and
reflects relocation benefits in 2003; (ii) All Other Compensation reflects $32.1, $24.8 and $24.9 in life insurance premiums paid, the remainder reflects matching contributions under our 401(k) Plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes the following in fiscal years 2005, 2004 and 2003, respectively: (i) Other Annual Compensation reflects amount reimbursed for payment of taxes; (ii) All Other
Compensation reflects $24.0, $18.5 and $18.6 in life insurance premiums paid, the remainder reflects matching contributions under our 401(k) Plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes the following in fiscal years 2005, 2004 and 2003, respectively: (i) Other Annual Compensation reflects amount reimbursed for payments of taxes; (ii) All other
compensation reflects $23.3, $16.9, and $16.9 in life insurance Premiums paid, the remainder reflects matching contributions under our 401(k) plan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Subsequent Events



Resignation of Thomas J. Snyder



On January 23, 2006, Mr. Snyder resigned as Chief Executive Officer and as a member of the board of directors of Remy International, Inc. and
entered into a Separation Agreement with the Company. Under the terms of the Separation Agreement, which was effective as of January 23, 2006, Mr. Snyder will be on special assignment and receive his current monthly salary of $45,833 and
benefits until August 1, 2006. Effective as of the close of business on August 1, 2006, Mr. Snyder shall retire as an employee of the Company and will receive a monthly severance allowance in the amount of $45,833 until
January 31, 2007 together with vested benefits.



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Appointment of John H. Weber



On January 23, 2006, the Company announced the appointment of John H. Weber to the position of President and Chief
Executive Officer of Remy International, Inc. The board of directors also approved an Employment Agreement between Citicorp Venture Capital Equity Partners, L.P. and Mr. Weber.



The Employment Agreement was effective as of January 23, 2006 and includes the following material terms:



| | · |  | Mr. Weber will receive an annualized base salary of $700,000.
| | - |  | -------------------------------------------------------------



| | · |  | Mr. Weber will receive an annual target incentive bonus of $700,000 based upon the attainment of certain performance objectives.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| | · |  | Mr. Weber will be eligible to receive a payment (the Success Payment) based upon the proceeds received upon a corporate transaction (generally, a sale
of the equity interests in or assets of the Company, as defined in the Agreement). The Success Payment shall equal an amount (a) up to the first $5,000,000 in proceeds that would otherwise be paid to the equity holders of the Company from all
corporate transactions (on an aggregate basis), plus (b) 5% of proceeds that are paid to the equity holders of the Company from all corporate transactions in excess of $5,000,000.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | Mr. Weber will be eligible to participate in the Companys benefit programs and will be eligible to participate in the Companys supplemental executive retirement
plan.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | Mr. Weber will receive a $25,000 relocation payment and all of Mr. Webers reasonable moving expenses will be reimbursed by the Company. The Company will also
reimburse Mr. Weber for any sales commission paid on the sale of his current home, provided that Mr. Weber is still employed by the Company at the closing of any such sale.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Key termination benefits under the agreement are summarized as follows:



| | · |  | If Mr. Webers employment is terminated by the Company other than for cause or by Mr. Weber for good reason, then Mr. Weber will receive 18 months of base salary
plus 150% of Mr. Webers most recent incentive bonus, paid in 18 monthly installments. Notwithstanding the foregoing, Mr. Weber will not be entitled to any severance, if he has received or will receive Success Payments which in the
aggregate equal or exceed $12,000,000.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | Additionally, if Mr. Webers employment is terminated by the Company other than for cause or if Mr. Webers employment is terminated by Mr. Weber for good
reason within three months prior to the signing of an agreement to enter into a transaction the consummation of which would result in a corporate transaction and such transaction is actually consummated and such transaction would have
otherwise resulted in a Success Payment, then notwithstanding the termination, Mr. Weber will receive such Success Payment.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | If Mr. Webers employment is terminated by the Company for cause or by Mr. Weber without good reason, Mr. Weber will receive his accrued and unpaid base salary
through the date of termination and any vested and accrued benefits.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Resignation of Roderick English



On
February 10, 2006, Roderick English resigned his position of Senior Vice President, Human Resources and Communications of Remy International, Inc. and entered into a Separation Agreement with the Company. Under the terms of the Separation
Agreement, which was effective as of January 31, 2006, Mr. English will be on special assignment and receive his current monthly salary of $25,290 and benefits until October 31, 2006. Effective as of the close of business on
November 1, 2006, Mr. English shall retire as an employee of the Company and will receive a monthly severance allowance in the amount of $25,290 until May 31, 2007 together with vested benefits.



Stock Options



There are currently no options outstanding to purchase our securities. See
Item 13, Certain Relationships and Related Transactions, for a description of other agreements entered into between us and our executive officers and directors as a result of the going private transaction and the merger.



Retirement Plans



Remy Inc., our wholly owned subsidiary, established the Remy Inc. Salaried
Retirement Plan, which we refer to as the retirement plan, primarily to provide eligible salaried employees with a monthly pension benefit after retirement for life. As of December 31, 2005, our named executive officers have been credited with
the following amounts of service under the retirement plan: Thomas J. Snyder  44.4 years; and Richard L. Stanley  28.8 years.



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Change of Control Agreements



We executed change of control agreements with the following executive officers: Mr. Snyder, Mr. Shah,
Mr. Stanley, Mr. English and Mr. Mobouck. Effective with their resignations as executive officers of the Company, the Change of Control Agreements for Mr. Snyder and for Mr. English were terminated. The agreements for
the remaining executives entitle each of the eligible executive officers to receive payments and benefits upon the occurrence of a change of control of our business followed by termination of the executives employment within the two years
immediately following the change of control under specified circumstances. Each eligible executive officer 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 us.



Payments and other benefits received by
the eligible executives will be subject to cutback 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 us.



Amendments to Benefit Plans



As a condition to the execution of the change of control agreements, we required the applicable executive officers to agree to amendments to our benefit
plans. We amended the definition of change in control in the Remy International, Inc. Supplemental Executive Retirement Plan, which we refer to as the executive retirement plan, to conform to the definition contained in the change of
control agreements. In addition, we amended the executive retirement plan to provide that, upon a change in control, we 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 our financial condition or creditworthiness or any other surviving successor or entity. We 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



We 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 us as security for the repayment of premiums paid by us. Our interest in the cash value of the policy is equal to the premium paid by us, and the employees have a
remaining interest in the cash value. If an employee dies while the collateral assignment is in place, we have a right to receive a portion of the death benefit equal to the amount of the premiums previously paid by us, 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, which we refer to as the policy. The collateral assignment will terminate on the first
to occur of the following events:



| | · |  | total cessation of our business;
| | - |  | --------------------------------



| | · |  | our bankruptcy, receivership or dissolution;
| | - |  | --------------------------------------------



| | · |  | surrender or cancellation of the policy by the employee;
| | - |  | --------------------------------------------------------



| | · |  | employee entering into competition (as defined by the agreements) with us 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 us for cause (as defined by the agreements); or
| | - |  | ---------------------------------------------------------------------------------------------



| | · |  | as of the date the employee turns 65 or 75, as defined.
| | - |  | -------------------------------------------------------



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 us under the agreements, and upon receipt of the repayment we will release the assignment of the policy by the employee. Messrs. Snyder, Shah, English and Stanley are parties to the agreements.



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As a condition to execution of the split-dollar agreements, we 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. We also amended the agreements to provide that our 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 our 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 our financial condition or creditworthiness or any other surviving or successor entity.



Concurrent with Mr. Snyders and Mr. Englishs resignation, the Company released the assignment of the policies and did not require
the repayment of the premiums. The asset value of these policies written off due to the resignation of Mr. Snyder and Mr. English was $201,511 and $73,266, respectively.



Employment Agreement



We entered into an employment agreement with Mr. Snyder, which provided for his employment until July 2003. In July 2003, Mr. Snyders
agreement automatically extended through July 2004 and will continue to automatically extend for successive additional 12-month periods after July 2003 until notice by either us or Mr. Snyder. Mr. Snyder receives an annual base salary of
$500,000, 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 us
while employed by us and for a period of one year thereafter. In July 2004, Mr. Snyders agreement automatically extended through July 2005. On January 23, 2006, concurrent with Mr. Snyders resignation, the contract was
terminated.



Separation Agreement



We executed a separation agreement with Mr. Shah. If we terminate
Mr. Shahs employment other than for cause or Mr. Shah terminates his employment for good reason, Mr. Shah is entitled to receive from us his accrued salary to the date of termination, his accrued pro-rata bonus to the date of
termination, reimbursement for relocation expenses, twelve months of executive outplacement services, and, for eighteen months after the date of termination, his base salary at the date of termination, a bonus equal to 60% of his salary at the date
of termination, and continued medical, dental and vision benefits.



Director Compensation



During 2005
Mr. Sperlich received $254,666 in directors fees. For the period from January 2005 to October 2005, Mr. Sperlich received a prorated portion of his $160,000 fee, 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, and a prorated portion of his $100,000 fee for his chairmanship of the Board of Directors. Mr. Sperlichs
directors fees above include a fee of $1,200 for each Board of Directors meeting attended. Effective November 1, 2005 Mr. Sperlich elected to reduce his consulting fee to $100,000, his chairmans fee to $80,000 and his board meeting
attendance fees to $1,000.



During 2005 total directors fees to
Mr. Billig, Mr. Gerrity, Mr. Puricelli, and Mr. Schultz in 2005 were $43,933, $52,333, $31,600 and $30,267, respectively. In May 2005, Mr. Puricelli became a Board Member. Mr. Schultz resigned from the Board effective
August 15, 2005. For the period January 2005 to October 2005 each director received a prorated portion of their annual fee of $40,000, and each received a fee of $1,200 for each Board of Directors meeting attended and a fee of $1,000 for each
meeting of a committee of the Board of Directors attended. Effective November 1, 2005 all Board Members elected to take a reduction in their annual fees to $36,000 and Board meeting attendance fees to $1,000. Mr. Gerrity also received
$5,000 in 2005 for his chairmanship of the Audit Committee.



Compensation Committee Interlocks and Insider Participation



The members of the compensation committee are Messrs. Sperlich, Delaney and McWilliams. No member of the compensation committee during 2005 was an officer or employee of us or any of our subsidiaries, or was formerly
an officer of us or any of our subsidiaries. Mr. Delaney also serves on the compensation committee of MSX International, Inc.



88



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##### Table of Contents

|ITEM 12 |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|------- |  | --------------------------------------------------------------

---



Effective September 30, 2004, our stockholders formed a new holding
company, Remy Worldwide Holdings, Inc. (RWH), to own all of the outstanding stock of Remy International, Inc. Our stockholders exchanged all of their stock for identical shares in RWH with the same number and class of shares and
percentage ownership of RWH and the same relative rights and preferences in the equity value of RWH, as they previously held in us. As a result, we are now a wholly owned subsidiary of RWH and our stockholders became stockholders of RWH. We will
continue to be the issuer of our outstanding notes and the reporting company with the Securities and Exchange Commission.



In conjunction with the formation of the new holding company, all of the outstanding shares of our Series A Preferred Stock were cancelled. The
cancellation is reflected in the consolidated balance sheet as a reclassification of the Preferred Stock to Paid-in Capital, which increased stockholders equity by $334,336 and was the amount attributable to the outstanding Series A Preferred
Stock as of September 30, 2004. Since our Preferred Stock was cancelled, the accretion of Preferred Stock dividends will no longer be reflected in our financial statements, effective October 1, 2004. Although our Series A Preferred Stock
was cancelled, our former stockholders now hold preferred stock in RWH that continues to accrete at 12.0%. RWH has no assets or operations other than its 100% ownership of us.



The Certificate of Incorporation of RWH provides that it may issue 3,500,000 shares of preferred stock, all of which has
been designated as 12% Series A Accreting Preferred Stock. As of December 31, 2005, 2,237,257.23 shares of preferred stock were outstanding. The preferred stock has a stated value of $100 per share and is entitled to receive dividends when, as
and if declared by the Board of Directors in such amounts as the Board of Directors may determine at the time of declaration, provided that the aggregate amount of dividends per share do not exceed the compounded annual rate of 12% of the stated
value per share from the date of original issue. 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 a preference prior to the preferred stock or to
amend the Certificate of Incorporation if the amendment would adversely affect the relative rights and preferences of the holders of the preferred stock. The vote of not less than 75% of the outstanding shares of the preferred stock is required to
amend the Certificate of Incorporation if the amendment changes the maximum dividend amount or accreting amount payable on the preferred stock. Except as described above or as otherwise required by law, the preferred stock is not entitled to vote.



The Certificate of Incorporation of RWH provides that it may
issue 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 the date hereof, 1,000 shares
of Class A Common Stock, 2,485,337.48 shares of Class B Common Stock and 16,687 shares of Class C Common Stock were issued and outstanding.



The stockholders of RWH entered into Amendment No. 3 to the Securities Transfer, Recapitalization and Holders Agreement, which we refer to as the
securities holders agreement, with RWH, the Company and the stockholders signatory thereto. The securities holders agreement is attached hereto as Exhibit 10.8 and the terms of the securities holders agreement are incorporated
herein by reference. According to the securities holders agreement, so long as Court Square and its permitted transferees own at least 5% of the common stock outstanding, Court Square has the right to designate observers to attend meetings of
RWHs Board of Directors. The securities holders agreement contains provisions, which, with certain exceptions, restrict the ability of RWHs stockholders to transfer any of the common stock or preferred stock. If holders of at least
50% of RWHs common stock approve the sale of the business, each of RWHs stockholders has agreed to consent to the sale and, if the sale includes the sale of stock, each of RWHs stockholders 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, certain of RWHs shareholders may not sell any of their shares of common stock
without offering our other 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 RWHs stockholders, including the right to repurchase certain shares from those stockholders employed by
RWH or its affiliates, 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 RWH in the event such person elects to transfer its shares of common stock.



89



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RWHs stockholders also entered into Amendment No. 3 to the Preferred Stockholders Agreement,
which we refer to as the preferred stockholders agreement, containing certain additional agreements among RWHs stockholders regarding its preferred stock. Subject to some limitations, certain of RWHs shareholders may not sell any of
their shares of preferred stock without offering RWH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 business, each of RWHs stockholders has agreed
to consent to the sale and, if the sale includes the sale of stock, each of RWHs stockholders has agreed to sell all of such stockholders preferred stock on the terms and conditions approved by holders of a majority of RWH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.



90



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The following table sets forth the ownership of RWH as of March 15, 2006 and 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 us to be the beneficial owner of more than 5% of each class of Capital stock, (ii) each of our directors
and named executive officers and (iii) all of our directors and executive officers as a group.



|                                                                                               |  |                              |  |         |                  |  |        |                  |         |   |               |              |  |         |   |  |           |  |         |  
|---------------------------------------------------------------------------------------------- |  | ---------------------------- |  | ------- | ---------------- |  | ------ | ---------------- | ------- | - | ------------- | ------------ |  | ------- | - |  | --------- |  | ------- | -
|                                                                                               |  | Number and Percent of Shares | 
|                                                                                               |  | Preferred Stock              |  |         | Class A Stock(1) |  |        | Class B Stock(1) |         |   | Class C Stock |             
|                                                                                               |  | Number                       |  | Percent |                  |  | Number |                  | Percent |   |               | Number       |  | Percent |   |  | Number    |  | Percent |  
|Citicorp Venture Capital(2) (3) Equity
Partners, L.P. 399 Park Avenue New York, New York 10043 |  | 1,650,910.38                 |  | 73.79   | %                |  |       |                  |        |   |               | 1,768,385.63 |  | 71.15   | % |  | 16,687.00 |  | 100     | %
|                                                                                               |  |                              |  |         |                  |  |        |                 
|Harney Investment Trust c/o Berkshire Hathaway Inc. 1440 Kiewit Plaza Omaha, Nebraska 68131    |  | 460,404.96                   |  | 20.58   | %                |  |       |                  |        |   |               | 498,098.94   |  | 20.04   | % |  |          |  |        |  
|                                                                                               |  |                              |  |         |                  |  |        |                 
|Court Square Capital Limited(4) 399 Park
Avenue New York, New York 10043                       |  |                             |  |        |                  |  | 1,000  |                  | 100     | % |               |             |  |        |   |  |          |  |        |  
|                                                                                               |  |                              |  |         |                  |  |        |                 
|Harold K. Sperlich                                                                             |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|John H. Weber                                                                                  |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|E.H. Billig                                                                                    |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|John P. Civantos                                                                               |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|Michael A. Delaney                                                                             |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|James R. Gerrity(3)                                                                            |  | 4,307.30                     |  | 0.19    | %                |  |       |                  |        |   |               | 4,659.94     |  | 0.19    | % |  |          |  |        |  
|Richard J. Puricelli                                                                           |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|Thomas J. McWilliams                                                                           |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|Rajesh K. Shah                                                                                 |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|Jeffery Potrzebowski                                                                           |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|Amitabh Rai                                                                                    |  |                             |  |        |                  |  |       |                  |        |   |               |             |  |        |   |  |          |  |        |  
|Patrick C. Mobouck                                                                             |  | 327.36                       |  | 0.01    | %                |  |       |                  |        |   |               | 13,354.16    |  | 0.54    | % |  |          |  |        |  
|Richard Stanley                                                                                |  | 5,728.72                     |  | 0.26    | %                |  |       |                  |        |   |               | 19,697.73    |  | 0.79    | % |  |          |  |        |  
|Thomas J. Snyder(3) (5)                                                                        |  | 9,174.56                     |  | 0.41    | %                |  |       |                  |        |   |               | 51,425.69    |  | 2.07    | % |  |          |  |        |  
|Roderick English(5)                                                                            |  | 2,618.84                     |  | 0.12    | %                |  |       |                  |        |   |               | 14,833.25    |  | 0.60    | % |  |          |  |        |  
|All directors and executive officers as a group                                                |  | 22,156.78                    |  | .99     | %                |  |       |                  |        |   |               | 103,970.77   |  | 4.18    | % |  |          |  |        |  
|All others                                                                                     |  | 103,785.11                   |  | 4.64    | %                |  |       |                  |        |   |               | 114,882.14   |  | 4.62    | % |  |          |  |        |  

---



|(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) | Citicorp Venture Capital Equity Partners, L.P., which we refer to as CVC Equity Partners, is a Delaware limited partnership managed by CVC Management LLC, a Delaware limited
liability Company. Citicorp Partners LLC, a Delaware limited liability Company, which we refer to as Citicorp Partners, is the general manager of CVC Equity Partners. Citicorp Partners is owned 35% by Citigroup Venture Capital GP Holdings Ltd., a
Delaware limited partnership, which we refer to as CVC GP, and 65% by certain investment professionals employed by Citigroup Inc., a Delaware corporation, which we refer to as Citigroup. Court Square owns all of the outstanding equity interests of
CVC GP.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes shares held by related parties.
|--- | ----------------------------------------

|(4) | 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, which we refer to as Citicorp Banking. Citicorp, a Delaware corporation, owns all of the outstanding capital stock of Citicorp Banking. Citigroup Holdings Company, a Delaware corporation, owns all of the outstanding common stock of
Citicorp. Citigroup owns all the outstanding common stock of Citigroup Holdings Company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Thomas J. Snyder and Roderick English were named executive officers during 2005 but have subsequently resigned.
|--- | ---------------------------------------------------------------------------------------------------------------



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|ITEM 13 |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|------- |  | ----------------------------------------------

---



In 2002, we entered into to an advisory agreement with CVC Management LLC, which we refer to as the advisor, an affiliate of
Court Square and CVC Equity Partners. Under the terms of the agreement, the advisor is required to provide executive, management, consulting and support services to us and certain of our subsidiaries. The advisor is entitled to receive an initial
advisory fee of $1 million for 2002 and an advisory fee of $1 million for each year thereafter, payable in equal quarterly installments. The Company made payments to the Advisor for the advisory fee of $1 million in 2005 and $2.75 million in 2004
for the period 2002 through the third quarter of 2005. The advisory agreement continues until December 31, 2006 and is automatically renewed from year to year thereafter unless terminated by either of the parties. The advisor is also entitled
to receive a transaction fee of $2.5 million for services provided in connection with the refinancing of our senior credit facilities in 2002 and may receive additional transaction fees under the advisory agreement in amounts to be agreed upon by
the parties for services provided in connection with future financings, acquisitions and divestitures. The Company paid the Advisor the $2.5 million transaction fee in 2004. No transaction fees were paid in 2005.



|ITEM 14 |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|------- |  | --------------------------------------

---



Independent Auditors Fees



The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of
our annual financial statements for the years ended December 31, 2005 and December 31, 2004, and fees billed for other services rendered by Ernst & Young LLP during those periods.



|                   |  |      |           |      |   |          
|------------------ |  | ---- | --------- | ---- | - | ---------
|                   |  | 2005 |           | 2004
|Audit Fees         |  | $    | 2,820,986 |      | $ | 1,879,237
|Audit-Related Fees |  |      | 348,403   |      |   | 294,497  
|Tax Fees           |  |      | 405,793   |      |   | 809,456  
|All Other Fees     |  |      |          |      |   | 36,219   



Audit Fees:
Fees incurred for professional services rendered by Ernst & Young LLP for auditing our annual financial statements, including Form 10-K, statutory audits of subsidiaries, and reviewing the quarterly financial statements included in our
filings on Form 10-Q, and other services normally provided by Ernst & Young in connection with statutory and regulatory filings.



Audit-Related Fees: Fees incurred for professional services rendered by Ernst & Young LLP primarily for acquisitions, dispositions and for
auditing our employee pension and benefit plans.



Tax
Fees: Fees incurred for professional services rendered by Ernst & Young LLP in connection with global tax planning, the review of the federal and state income tax returns and other compliance filings.



All Other Fees: Fees incurred for professional services rendered by
Ernst & Young LLP that are not within the scope of the above categories.



Pursuant to its charter, the Audit Committee is responsible for selection, approving compensation and overseeing the independence, qualifications and performance of the independent accountants. The Audit
Committees policy is to pre-approve all audit and permissible non-audit services provided by the independent accountants. Pre-approval is generally provided for up to one year, is detailed as to the particular service or category of services
and is generally subject to a specific budget. The Audit Committee may also pre-approve particular services on a case-by-case basis. In assessing requests for services by the independent accountants, the Audit Committee considers whether such
services are consistent with the auditors independence; whether the independent accountants are likely to provide the most effective and efficient service based upon their familiarity with us; and whether the service could enhance our ability
to manage or control risk or improve audit quality.



All of the
audit-related, tax and other services provided by Ernst & Young LLP in fiscal year 2005 (described in the footnotes to the table above) and related fees were approved in advance by the Audit Committee.



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PART IV



|ITEM 15 |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|------- |  | ------------------------------------------

---



|(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
| | -- | --------



See Item 15(b) below.



|(b) | Exhibits
|--- | --------



|     |  |     |  |                                                                                                                                                                                                          
|---- |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  |  | 2.1 |  | Agreement and Plan of Merger dated as of February 7, 2001 by and among Court Square, DRI Acquisition LLC and the Company                                                                                 
|     |  |    
|(2)  |  | 2.2 |  | Amendment No. 1 to Agreement and Plan of Merger                                                                                                                                                          
|     |  |    
|(17) |  | 3.1 |  | Second Amended and Restated Certificate of Incorporation                                                                                                                                                 
|     |  |    
|(2)  |  | 3.2 |  | By-laws of the Company                                                                                                                                                                                   
|     |  |    
|(7)  |  | 4.1 |  | Indenture governing 85/8% Senior Notes Due 2007 among the
Company, the Subsidiary Guarantors named therein and United States Trust Company of New York, as trustee, dated December 22, 1997              
|     |  |    
|(13) |  | 4.2 |  | Indenture governing 11% Senior Subordinated Notes Due 2009 among the Company, the Subsidiary Guarantors named therein and First Union National Bank, as trustee, dated April 26,
2001.                   
|     |  |    
|(19) |  | 4.3 |  | Indenture governing Floating Rate Notes among the Company, the Subsidiary Guarantors named therein and Deutsche Bank National Trust Company, as trustee, dated April 23, 2004.                           
|     |  |    
|(19) |  | 4.4 |  | Indenture governing 93/8% Senior Subordinated Notes among
the Company, the Subsidiary Guarantors named therein and Deutsche Bank National Trust Company, as trustee, dated April 23, 2004.               
|     |  |    
|(21) |  | 4.5 |  | Indenture governing 93/8% Senior Subordinated Notes due 2012, dated as of April 23, 2004 by and among the Company, the Subsidiary
Guarantors named therein, and Deutsche Bank Company.                   
|     |  |    
|(21) |  | 4.6 |  | Form of 93/8% Senior Subordinated Notes due 2012
(included in Exhibit 4.5).                                                                                                                              
|     |  |    
|(21) |  | 4.7 |  | Indenture governing Second-Priority Senior Secured Floating Rate Notes due 2009, dated as of April 23, 2004 by and among the Company, the Subsidiary Guarantors named therein, and Deutsche
Bank Company.
|     |  |    
|(21) |  | 4.8 |  | Form of Second-Priority Senior Secured Floating Rate Notes due 2009 (included in Exhibit 4.7).                                                                                                           



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|     |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(21) |  | 4.9   |  | Registration Rights Agreement, dated as of April 23, 2004 by and among the Company, the Subsidiary Guarantors named therein, Credit Suisse First Boston LLC, Deutsche Bank Securities Inc.,
and Wachovia Capital Markets, LLC.                                                                                                                                                            
|     |  |      
|(6)* |  | 10.1  |  | Light Duty Starter Motor Supply Agreement, dated July 31, 1994, by and between Delco Remy America, Inc. (DRA) and 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, the Company and GM                                                                                                                                                                                                                                                                                                              
|     |  |      
|(3)  |  | 10.5  |  | Tradename License Agreement, dated July 31, 1994, by and among DRA, the Company 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 by and between Remy Korea Holdings, Inc. and S.C. Kim                                                                                                                                                                                                                                                                                                             
|     |  |      
|(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 the Company and Thomas J. Snyder                                                                                                                                                                                                                                                                                                
|     |  |      
|(16) |  | 10.11 |  | Amended and Restated Loan and Security Agreement by and among Delco Remy International, Inc. and certain Subsidiaries of the Company named therein as Borrowers, Congress Financial
Corporation (Central), as Administrative Agent and US Collateral Agent, Wachovia Bank, National Association as Documentation Agent and the Financial Institutions named therein dated October 3, 2003.
|     |  |      
|(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                                                                                                                                                                                                    



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|     |  |       |  |                                                                                                                                                                                                                                                                                                    
|---- |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  |  | 10.22 |  | Stock Purchase Warrant dated March 14, 2001 issued by the Company to World Equity Partners, L.P.                                                                                                                                                                                                   
|     |  |      
|(9)  |  | 10.23 |  | Letter Agreement by and between the Company and Thomas J. Snyder, dated as of February 6, 2001                                                                                                                                                                                                     
|     |  |      
|(10) |  | 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                                                                               
|     |  |      
|(11) |  | 10.25 |  | Amendment Number Two to the Delco Remy International, Inc. Supplemental Executive Retirement Plan, dated as of February 6, 2001                                                                                                                                                                    
|     |  |      
|(12) |  | 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                                               
|     |  |      
|(14) |  | 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.                                                 
|     |  |      
|(14) |  | 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.                                                                               
|     |  |      
|(14) |  | 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.                                                                            
|     |  |      
|(15) |  | 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
|     |  |      
|(15) |  | 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                              
|     |  |      
|(15) |  | 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 Hathaway Inc. and Dresdner Kleinwort Capital Partners 2001 LP                           
|     |  |      
|(18) |  | 10.33 |  | Letter Agreement dated March 18, 2002 by and between the Company and Rajesh K. Shah                                                                                                                                                                                                                
|     |  |      
|(18) |  | 10.34 |  | Separation Agreement and Release dated March 18, 2002 by and between the Company and Rajesh K. Shah                                                                                                                                                                                                



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|     |  |       |  |                                                                                                                                                                                                                                                                            
|---- |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(18) |  | 10.35 |  | Advisory Agreement dated December 10, 2002 by and among the Company, certain of the Companys subsidiaries and CVC Management LLC                                                                                                                                          
|     |  |      
|(18) |  | 10.36 |  | Side Letter Agreement dated December 10, 2002 by and among the Company, certain of the Companys subsidiaries and CVC Management LLC                                                                                                                                       
|     |  |      
|(20) |  | 10.37 |  | Second Amended and Restated Loan and Security Agreement, dated as of April 23, 2004 by and among the Company, certain subsidiaries named therein, Congress Financial Corporation (Central), and
certain financial institutions named therein                               
|     |  |      
|(21) |  | 10.38 |  | Limited Waiver and Amendment No. 1 to Second Amended and Restated Loan and Security Agreement and the Other Financing Agreements dated September 1, 2004                                                                                                                   
|     |  |      
|(22) |  | 10.39 |  | Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement, dated as of March 16, 2005, by and among the Company, certain subsidiaries of the Company, Congress Financial
Corporation (Central), as agent, and the financial institutions party thereto
|     |  |      
|(24) |  | 10.40 |  | Third Amended and Restated Loan and Security Agreement, dated as of December 27, 2005                                                                                                                                                                                      
|     |  |      
|(22) |  | 10.41 |  | Asset Purchase Agreement, dated as of February 25, 2005, by and among the Company, UPC Acquisition Corporation, the Sellers Representative and each of the other signatories
thereto                                                                                       
|     |  |      
|(22) |  | 10.42 |  | Amendment No. 1 to the Asset Purchase Agreement, dated as of March 16, 2005, by and among the Company, UPC Acquisition Corporation and Jack Vollbrecht, as Sellers Representative                                                                                          
|     |  |      
|(23) |  | 10.43 |  | Employment Agreement between Remy International, Inc. and Jeffrey Potrzebowski dated August 24, 2005                                                                                                                                                                       
|     |  |      
|(23) |  | 10.44 |  | Severance and Change of Control Agreement between Remy International, Inc. and Jeffrey Potrzebowski dated September 6, 2005                                                                                                                                                
|     |  |      
|(25) |  | 10.45 |  | Employment Agreement between Citicorp Venture Capital Equity Partners, L.P. and John H. Weber dated January 23, 2006                                                                                                                                                       
|     |  |      
|(26) |  | 10.46 |  | Separation Agreement between Remy International, Inc. and Roderick English dated January 31, 2006                                                                                                                                                                          
|     |  |      
|     |  | 21    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                             
|     |  |      
|     |  | 31.1  |  | Certification by John H. Weber, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                        
|     |  |      
|     |  | 31.2  |  | Certification by Jeffery Potrzebowski, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                 
|     |  |      
|     |  | 32.1  |  | Certification by John H. Weber, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                         



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|     |  |      |  |                                                                                                                                                                                                                                                                                          
|---- |  | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | 32.2 |  | Certification by Jeffery Potrzebowski, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                
|     |  |     
|*    |  |      |  | 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                                                                                                                   
|     |  |     
|(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 31, 1999                                                                                                                                                                                   
|     |  |     
|(9)  |  |      |  | 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                                                                                                                   
|     |  |     
|(10) |  |      |  | 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                                                                                                                   
|     |  |     
|(11) |  |      |  | 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                                                                                                                   
|     |  |     
|(12) |  |      |  | 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                                                                                                                   



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|     |  |  |  |                                                                                                                                                               
|---- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | 
|(13) |  |  |  | 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        
|     |  | 
|(14) |  |  |  | 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
|     |  | 
|(15) |  |  |  | Incorporated by reference to the Exhibit of the same number to the Companys Form 10-K for the year ended December 31, 2001                                   
|     |  | 
|(16) |  |  |  | Incorporated by reference to Exhibit 99.1 to the Companys Form 8-K dated October 8, 2003                                                                     
|     |  | 
|(17) |  |  |  | Incorporated by reference to Exhibit 3.1 to the Companys Form 10-Q for the quarter ended September 30, 2003                                                  
|     |  | 
|(18) |  |  |  | Incorporated by reference to the Exhibit of the same number to the Companys Form 10-K for the year ended December 31, 2002                                   
|     |  | 
|(19) |  |  |  | Incorporated by reference to Exhibits 4.4 and 4.5 of the Registration Statement on Form S-4 filed by the Company on April 23, 2004.                           
|     |  | 
|(20) |  |  |  | Incorporated by reference to Exhibits 4.1, 4.2, 4.3, 4.4, 4.5 and 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2004.                       
|     |  | 
|(21) |  |  |  | Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q for the quarter ended September 30, 2004.                                                
|     |  | 
|(22) |  |  |  | Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 to the Companys Form 10-Q for the quarter ended March 31, 2005                                     
|     |  | 
|(23) |  |  |  | Incorporated by reference to Exhibits 10.1 and 10.2 to the Companys 8-K filed on September 9, 2005                                                           
|     |  | 
|(24) |  |  |  | Incorporated by reference to Exhibit 10.1 to the Companys 8-K filed on December 28, 2005                                                                     
|     |  | 
|(25) |  |  |  | Incorporated by reference to Exhibit 10.1 to the Companys 8-K filed on January 25, 2006                                                                      
|     |  | 
|(26) |  |  |  | Incorporated by reference to Exhibit 10.1 to the Companys 8-K filed on February 16, 2006                                                                     



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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.



REMY INTERNATIONAL, INC.By:

/S/ John H. WeberJohn H. Weber President, Chief Executive
Officer and Director (Principal Executive
Officer)Dated: March 31, 2006




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: |  | /S/ Harold K. SperlichHarold K. Sperlich Chairman of the Board                                                               |  | By: |  | /S/ John H. WeberJohn H. Weber President, Chief Executive Officer and Director (Principal Executive Officer)
|    |  |                                                                                                                              | 
|By: |  | /S/ Jeffrey PotrzebowskiJeffrey Potrzebowski Senior Vice President and Chief Financial Officer (Principal Financial Officer) |  | By: |  | /S/ Amitabh RaiAmitabh Rai Vice President and Corporate Controller (Principal Accounting Officer)           
|    |  |                                                                                                                              | 
|By: |  | /S/ E.H. BilligE.H. Billig Vice Chairman of the Board of Directors                                                           |  |     |  | Date: March 31, 2006                                                                                        
|    |  |                                                                                                                             
|By: |  | /S/ Richard J. PuricelliRichard J.Puricelli Director                                                                         |  |    
|    |  |                                                                                                                             
|By: |  | /S/ Michael A. DelaneyMichael A. Delaney Director                                                                            |  |    
|    |  |                                                                                                                             
|By: |  | /S/ James R. GerrityJames R. Gerrity Director                                                                                |  |    
|    |  |                                                                                                                             
|By: |  | /S/ Thomas F. McWilliamsThomas F. McWilliams Director                                                                        |  |    
|    |  |                                                                                                                             
|By: |  | /S/ John P. CivantosJohn P. Civantos Director                                                                                |  |    



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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.



100