UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

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 No. 1-7807

CHAMPION PARTS, INC.

(Exact name of Registrant as specified in its charter)



Illinois

36-2088911

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification Number)



|2005 West Avenue B, Hope, Arkansas       | 71801     
|---------------------------------------- | ----------
|(Address of Principal Executive Offices) | (Zip Code)



Registrant's telephone number, including area code:                     (870) 777-8821



Securities Registered Pursuant to Section 12(b) of the Act:            None



Securities Registered Pursuant to Section 12(g) of the Act:           Common Shares, $.10 Par Value

(Title of Class)



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 an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes  [  ]   No [X]



As of March 31, 2005, 3,655,266 Common Shares were outstanding and the aggregate market value of the Common Shares held by non-affiliates of the Registrant, based on the closing price, was $2,330,374, and was $2,290,195 as of June 30, 2004.  For information as to persons considered to be affiliates for purposes of this calculation, see "Item 5, Market for the Company's Common Shares and Related Shareholder Matters".





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Champion Parts, Inc.

Form 10-K

Cross Reference Index



|PART I |         |                                                 | PAGE
|------ | ------- | ----------------------------------------------- | ----
|       | Item 1. | Business                                        | 3   
|       | Item 2. | Properties                                      | 6   
|       | Item 3. | Legal Proceedings                               | 7   
|       | Item 4. | Submission of Matters to a Vote of Shareholders | 9   



|PART II |          |                                                                                      |      
|------- | -------- | ------------------------------------------------------------------------------------ | -----
|        | Item 5.  | Market for the Registrant's Common Stock and Related Shareholder Matters             | 10   
|        | Item 6.  | Selected Financial Data                                                              | 11   
|        | Item 7.  | Management's Discussion and Analysis of Operations                                   | 12   
|        | Item 7a. | Quantitative and Qualitative Disclosures About Market Risk                           | 21   
|        | Item 8.  | Financial Statements and Supplementary Data                                          | 21/36
|        | Item 9.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 21   
|        | Item 9a. | Controls and Procedures                                                              | 21   



|PART III |          |                                                                |   
|-------- | -------- | -------------------------------------------------------------- | --
|         | Item 10. | Directors and Executive Officers of the Registrant             | 22
|         | Item 11. | Executive Compensation                                         | 24
|         | Item 12. | Security Ownership of Certain Beneficial
Owners and Management | 26
|         | Item 13. | Certain Relationships and Related Transactions                 | 27
|         | Item 14. | Principal Accountant Fees and Services                         | 28



|PART IV |          |                                                                 |      
|------- | -------- | --------------------------------------------------------------- | -----
|        | Item 15. | Exhibits, Financial Statement Schedules
and Reports on Form 8-K | 29   
|        |          | Signature Page                                                  | 31   
|        |          | Officer Certifications (Sarbanes - Oxley)  Exhibits 31 & 32    | 32-35







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PART I



Item 1.      Business



Unless context indicates otherwise, the term Company" as used herein means Champion Parts, Inc. and its subsidiaries.



Products



The Company remanufactures and sells replacement fuel system components (carburetors and diesel fuel injection components) and air conditioning compressors for substantially all makes and models of domestic and foreign automobiles, trucks and marine applications. It also remanufactures and sells replacement constant velocity drive assemblies, electrical and mechanical products for certain passenger car, agricultural, marine and heavy-duty truck original equipment applications. The Company is reporting one operating business segment in the same format as reviewed by the Company's senior management.



During the fiscal years ended December 31, 2004, 2003 and 2002, the Company's net sales of parts for automobiles (including light duty trucks) accounted for 86%, 83% and 87%, respectively, of the Company's total net sales; while sales of parts for heavy duty trucks, farm equipment and marine applications accounted for 14%, 17% and 13%, respectively, of total net sales.



The Company's largest product line is remanufactured carburetors, which accounted for 55% of 2004 net sales compared to 47% in 2003. The Company's main distribution channel is through two large retailers who accounted for 87% of net carburetor sales in 2004 and 95% in 2003.  The balance of the carburetor sales was to original equipment aftermarket customers and traditional warehouse distributors.



Marketing and Distribution



The Company's products are marketed throughout the continental United States and, in a limited way, in Canada and other countries.  The Company sells carburetors to aftermarket retail chains that distribute products through their stores. In addition, the Company sells its products for resale through their dealers. The Company also sells carburetors, air conditioning compressors, electrical and mechanical products to automotive and marine warehouse distributors, which in turn sell to jobber stores and through them to service stations, automobile and marine repair shops and individual motorists.



Of the Company's net sales in the year ended December 31, 2004, approximately 49% were to retailers; approximately 28% were to manufacturers of automobiles, trucks and farm equipment and heavy duty fleet specialists; and approximately 23% were to automotive warehouse distributors, marine distributors and other customers.



The Company exhibits its products at trade shows. The Company also publishes catalogs of its products, including a guide with information as to the various vehicle models for which the Company's products may be used and a pictorial product identification guide to assist customers in the return of used units.  The Company's sales representatives and sales agents call on customers and prospective customers to familiarize them with the Company's products, and the applications of its products.





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During the fiscal year ended December 31, 2004, the four largest customers of the Company accounted for approximately 74% of net sales (24%, 24%, 18% and 8%).  In 2003, the same customers of the Company accounted for approximately 77% of net sales (23%, 21%, 17% and 16%), and in 2002, they accounted for approximately 84% of net sales (26%, 23%, 18% and 17%).  No other customers accounted for more than 10% of net sales in any of the three years.



The Company has various methods available to its customers to place orders into the Company's order entry system. The Company also utilizes direct Electronic Data Interchange with its largest customers.



The Company's business is slightly seasonal in nature, primarily as a result of the impact of weather conditions and the agricultural cycle on the demand for certain automotive and agricultural replacement parts.  Historically, the Company's sales and profits are generally the highest in the first and second quarters, and then declining through the summer months.



Materials



In its remanufacturing operations, the Company obtains and utilizes used units, commonly known as "cores". A majority of the units remanufactured by the Company are acquired from customers as trade-ins, generally referred to as "core returns", which are encouraged by the Company in the sale of remanufactured units. The remainder of the core requirements is filled by purchasing cores on the open market.



The price of a finished product is usually comprised of a separately invoiced amount for the core included in the product ("core value") and an amount for remanufacturing.  Upon receipt of a core as a trade-in, credit is given to the customer for the then current core value of the part returned.  The Company limits trade-ins to cores for units included in its sales catalogs and in rebuildable condition, and credit for cores is allowed only against purchases by the customer of similar remanufactured products within a specified time period.  The dollar volume of the core sales further limits a customer's total allowable credit for core trade-ins.  The Company also permits warranty and stock adjustment returns (generally referred to as "product returns") pursuant to established policies.  The Company's product return policies are consistent with industry practice, whereby remanufacturers accept product returns from current customers regardless of whether the remanufacturer actually sold the product.  The Company has no obligation to accept product returns from customers that no longer purchase units from the Company.



Patents, Trademarks, Etc.



The Company has no material patents, trademarks, licenses, franchises or concessions.



Backlog



The Company did not have a significant order backlog at December 31, 2004 and 2003.





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Competition



The remanufactured automotive parts industry is highly competitive as the Company competes with a number of other companies, including certain original equipment manufacturers that sell remanufactured automotive parts.  The Company competes with several large regional remanufacturers and with remanufacturers that are franchised by certain original equipment manufacturers to remanufacture their products for regional distribution.  The Company also competes with numerous remanufacturers that serve local areas. In addition, sales of remanufactured parts compete with sales of similar new replacement parts. Manufacturers of kits used by mechanics to rebuild carburetors may also be deemed to be competitors of the Company.



The Company competes in a number of ways, including price, quality, product performance, prompt order fill, service and warranty policy.  The Company believes its technical expertise in the niche product lines it sells has been an important factor in enabling the Company to compete effectively.



Engineering



Product engineers support each of the Companys main product lines.  Engineers participate in product planning, product line structuring, cataloging and engineering of the Company's products and in developing manufacturing processes.  The primary activities of the product engineers include improving the quality of existing products, formulating specifications and procedures for remanufactured products for use on makes and models of vehicles for which they were originally designed, converting cores for use amongst different makes and models and developing specifications, supplies and procedures for remanufacturing newly introduced products.



The engineers also design and build new tools, machines and testing equipment for use in all the Company's plants and develop specifications for certain components manufactured by the Company for use in its remanufacturing operations.  Additionally, the engineers design and test new methods of reassembling components and cleaning parts and cores. The Company believes such activities improve the Company's ability to serve the needs of its customers.



Quality Assurance personnel conduct periodic quality audits of the Company's plants under its quality improvement program to test product quality and compliance with specifications.



Environmental Matters



The Company is subject to various federal, state and local environmental laws and regulations incidental to its business.  The Company continues to modify, on an ongoing basis, processes that may have an environmental impact. Although management believes that the current level of environmental reserves are adequate to satisfy the future compliance with the environmental laws, the ultimate outcome of its environmental matters and potential insurance settlements are undeterminable.  Accordingly, there can be no assurance that these reserves will be adequate. See Item 3, "Legal Proceedings - Environmental Matters" for additional discussion.





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Employees



As of December 31, 2004, the Company employed 300 people including the corporate headquarters, plant and warehouse facilities.



The Collective Bargaining Agreement between the Company and the International Brotherhood of Electrical Workers at the Company's Pennsylvania facilities was dissolved on August 31, 2002.  The Union signed a shutdown agreement on March 15, 2002 accepting the Companys terms for closing the facility in Beech Creek, Pennsylvania (see Item 7). There are no Collective Bargaining Agreements in place at any of the Companys present facilities.





Item 2.      Properties



The Company's corporate headquarters occupies office space at the Hope Division facility, 2005 West Avenue B, Hope, Arkansas.  This facility houses the Company's corporate office functions, including executive, administration, finance and data processing.



The following table sets forth certain information with respect to each of the Company's remanufacturing, warehousing and service facilities other than the corporate headquarters:

|                                         | Warehouse Area | Manufacturing Area
|---------------------------------------- | -------------- | ------------------
|Location:                                | (Sq. Ft.)      | (Sq. Ft.)         
|Owned:                                   |                |                   
|Hope, Arkansas                           | 55,000         | 222,000           
|                                         |                |                   
|Leased:                                  |                |                   
|Port Richey, Florida  Plant & Warehouse | 7,000          | 40,000            
|Bristol, Pennsylvania - Warehouse        | 2,500          | -0-               

The Company's facilities currently operating are well maintained and are in good condition and repair.

A substantial portion of the machinery and equipment has been designed by the Company for its particular purposes and, in many instances, has been built by it.





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Item 3.      Legal Proceedings



1.   Beech Creek, Pennsylvania Facility Soil and Groundwater Contamination



In May 1991, the Pennsylvania Department of Environmental Protection ("PADEP") notified the Company that there was evidence of trichloroethylene and trichloroethane in the soil, and possibly the groundwater under the Beech Creek facility.  Further, PADEP was concerned that the contamination had migrated off site.  PADEP demanded that the Company conduct an investigation to determine the source and extent of the contamination, and perform any required cleanup.



The Company retained a qualified environmental consultant to prepare a site investigation plan.  In June of 1992 PADEP approved the investigation plan.  The plan, which included extensive soil testing and groundwater monitoring, was completed in 1995.



Cleanup commenced in 1995 at the Beech Creek plant.  Cleanup activities consist of the venting of volatile organic gases from soil, and the pumping and treating of groundwater. The maintenance and operation of the system has been approximately $26,000 per year.  In November 1998 the Company submitted a plan to PADEP to monitor groundwater and to stop operation of the remediation system under Pennsylvania's "Act Two."  PADEP approved the plan.  In January 2001, PADEP indicated that a minimum of eight quarterly rounds of sampling would be needed before an Act Two liability release could be considered by PADEP.



In June 2004 the Company entered into a consent order agreement with PADEP and the purchaser of the Beech Creek property, whereby the Company agreed to the remediation of the property under Pennsylvanias Act 2 Program. A $200,000 escrow account was established at the closing of the sale of the property to cover EPA issues.



The Company also has demanded indemnity from its insurance carriers regarding this matter.  One of its carriers settled with the Company.  The Company plans to vigorously pursue all remaining applicable coverage.



2.   Spectron, Maryland Superfund Proceeding



On September 20, 1995, the USEPA notified the Company (along with several hundred other companies) of potential liability for response actions at the Spectron Superfund Site.  The USEPA letter asks the Company and the other PRPs to negotiate with USEPA for their performance of a remedial investigation/feasibility study at the Spectron Site.



In August 2002, the Company received a de minimis settlement offer from the USEPA for approximately $154,000.  The Company did not accept the settlement offer.



The Company has demanded defense and indemnity from its insurance carriers for any liability at the Spectron Site, and one of the carriers has settled with the Company.  The Company plans to vigorously pursue all remaining applicable coverage, if necessary.  Further, the Company believes that its former solvent supplier and waste solvent transporter are responsible for a share of any liability the Company incurs for the Spectron Site cleanup. The Company plans to vigorously pursue the transporter for this claim.





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3.   Double Eagle Superfund Proceeding



In January 2003, the Company received a "Notice of Liability" letter from the former owner and PRP at the Double Eagle Refinery Superfund Site (DER Site). The former owner is liable for remediation costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). According to DER Site records, the Company sent approximately 46,000 gallons of waste oil to the DER Site from 1985 through 1988 and, as such, also faces potential PRP liability for DER Site remediation costs. The Company has been informed that 4,500 PRPs have been identified at the DER Site accounting for 8.5 million gallons of waste.  Manyof these PRPs apparently are small companies which sent relatively small quantities of waste to the DER Site, but approximately 100 PRPs have been identified who sent more than 10,000 gallons each.  The USEPA has threatened the former owner and several other PRPs with whom USEPA has a tolling agreement with a $21-22 million cost recovery action concerning the USEPA's remediation of soil and groundwater contamination of the DER Site.  (The USEPA is barred from pursuing the Company, and many other PRPs, by the applicable statute of limitations.) In response to the threatened cost recovery action, the former owner sent Notice of Liability letters to approximately 100 PRPs and hosted a February 25, 2003 meeting asking the PRPs to form a PRP Group to negotiate with the USEPA and allocate liability.  The stated intent, in the absence of the formation of such a group, is to pursue, when appropriate, a private party contribution action against the PRPs.  To date, no PRP Group has been formed and private party contribution action has not been initiated.  The Company's liability at the DER Site, if any, will likely be based on an as yet undetermined volume allocation.



The Company has put its insurance carriers on notice of this potential claim. The primary carrier has denied coverage but the Company plans to vigorously pursue the carrier for coverage.



4.  Asbestos Litigation



In 2004 and certain prior years, the Company was one of numerous defendants named in suits for personal injuries caused by exposure to products containing asbestos. The Company put its insurance carriers on notice and its attorneys have filed answers denying the allegations in the complaints. The Companys insurance carriers have agreed to defend the Company under a reservation of rights.



While it is not possible to predict the course these cases may take in the future, only three cases remain open, less than ten percent of the cases that were filed.





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Summary



From time to time, the Company may be named in lawsuits during the normal course of its business. Management intends to vigorously defend any lawsuits that may arise.  In the opinion of Management, the environmental legal matters now pending will not have a material adverse effect on the consolidated financial position of the Company.



The Company has available established reserves of $100,000, as of December 31, 2004, for potential environmental and other legal liabilities that it believes to be adequate.   However, there can be no assurance that the reserves will be adequate to cover actual costs incurred or that the Company will not incur additional environmental or other legal liabilities in the future.





Item 4.      Submission of Matters to a Vote of Shareholders



None





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PART II





Item 5.      Market for the Registrant's Common Stock and Related Shareholder Matters



The Company's Common Shares are traded over the counter on the NASD Electronic Bulletin Board under the symbol "CREB.OB".  As of December 31, 2004, there were 631 holders of record of the Company's Common Shares.  This number does not include beneficial owners of Common Shares whose shares are held in the name of banks, brokers, nominees or other fiduciaries.



The information appearing in the following table on the range of high and low trade prices for the Company's Common Shares was obtained from NASDAQ quotations provided in the OTC Market Report published by the National Quotation Bureau. Such high and low bids reflect interdealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

|            | Year Ended        | Year Ended       
|----------- | ----------------- | -----------------
|            | December 31, 2004 | December 31, 2003
|            | Low               | High             
|            | Bid ($)           | Bid ($)          
|1st Quarter | 1.06              | 1.30             
|2nd Quarter | 0.95              | 1.20             
|3rd Quarter | 1.10              | 1.40             
|4th Quarter | 1.10              | 1.30             



Under the Company's credit agreement, the Company is not permitted to pay dividends.



Only for purposes of the calculation of aggregate market value of the Common Shares held by non-affiliates of the Company as set forth on the cover page of this report, the Common Shares held by RGP Holding, Inc., the Company's Employee Stock Ownership, and shares held by two of the Company's directors were included in the shares held by affiliates. Certain of such individuals and entities may not be affiliates.







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Item 6.      Selected Financial Data





|                                                                     | 2004         | 2003         | 2002         | 2001         | 2000        
|-------------------------------------------------------------------- | ------------ | ------------ | ------------ | ------------ | ------------
|Income Summary:                                                      |              |              |              |              |             
|Net Sales                                                            | $19,998,000  | $24,038,000  | $24,790,000  | $21,936,000  | $22,245,000 
|Costs and Expenses:                                                  |              |              |              |              |             
|Operating costs and other, net  (Note 1)                             | 18,522,000   | 22,403,000   | 23,889,000   | 21,428,000   | 20,904,000  
|Gain on disposal of assets  (Note 2)                                 | -0-          | -0-          | -0-          | -0-          | (26,000)    
|Gain on sale of investment  (Note 3)                                 | -0-          | -0-          | -0-          | -0-          | (753,000)   
|Interest - net                                                       | 606,000      | 468,000      | 529,000      | 491,000      | 556,000     
|Total costs and expenses                                             | 19,128,000   | 22,871,000   | 24,418,000   | 21,919,000   | 20,681,000  
|                                                                     |              |              |              |              |             
|Net Income before income taxes                                       | 870,000      | 1,167,000    | 372,000      | 17,000       | 1,564,000   
|                                                                     |              |              |              |              |             
|Income taxes                                                         | 155,000      | 37,000       | 5,000        | 10,000       | 100,000     
|                                                                     |              |              |              |              |             
|Net Income                                                           | $  715,000   | $1,130,000   | $  367,000   | $    7,000   | $1,464,000  
|Average Common Shares Outstanding
Outstanding and Share Equivalents: |              |              |              |              |             
|Basic                                                                | 3,655,266    | 3,655,266    | 3,655,266    | 3,655,266    | 3,655,266   
|Diluted                                                              | 3,756,452    | 3,704,465    | 3,655,266    | 3,671,497    | 3,689,190   
|Basic Earnings per Common Share:                                     |              |              |              |              |             
|Net Income per Common Share                                          | $ 0.20       | $ 0.31       | $ 0.10       | $ 0.00       | $ 0.40      
|Diluted Earnings per Common Share:                                   |              |              |              |              |             
|Net Income per Common Share                                          | $ 0.19       | $ 0.31       | $ 0.10       | $ 0.00       | $ 0.40      
|At Year-End:                                                         |              |              |              |              |             
|Total Assets                                                         | $ 27,071,000 | $ 25,641,000 | $ 24,380,000 | $ 23,980,000 | $ 18,840,000
|Debt Obligations (Note 4)                                            | $ 12,990,000 | $ 12,234,000 | $ 10,770,000 | $ 11,400,000 | $  5,713,000





Selected Financial Data - Notes



Note 1:   At the end of May 2004, the Company closed its warehouse distribution location in suburban Toronto, Ontario, Canada. A continual decline in sales revenues and profitability over the past several years did not warrant keeping the operation open.



Note 2:

In 2002, the Company incurred expenses totaling $582,000 for inventory and equipment relocation, severance and other restructuring costs, which could not be accrued in 2001, as they did not qualify as exit costs.  All restructuring expenditures were completed in 2002.



Included in the 2001 operating costs is a one time charge of $154,000 to establish a restructuring reserve for the expenses associated with the shut-down of the Beech Creek, Pennsylvania, facility.  It was determined in the second quarter of 2002 that the estimated restructuring charge was higher than needed, and consequently, a reversal of $127,000 was recorded in May 2002.



Note 3:

Included in the 2000 disposal of assets is a $26,000 gain from the sale of tooling.



Note 4:

The Company realized a gain of $753,000 in 2000 resulting from the sale of the Company's 50% interest in an automotive engine remanufacturer that had been accounted for using the equity method.  The gain reflects net proceeds realized after legal expenses, other fees, and reversals of foreign translation adjustments and the reserves for guarantee of bank loans.



Note 5:

For this schedule, the current maturities of long-term debt are included in long-term debt obligations in order to reflect comparable numbers with all periods presented.





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Item 7.      Management's Discussion and Analysis of Financial

Condition and Results of Operations



Management Overview



Net sales for 2004 of $19,998,000 were 16.8% less than 2003 reflecting the continuing market decline of carburetor net sales combined with a soft market for air conditioning products and a large air conditioning customer losing one its primary customers. Costs of products sold in 2004 were also lower versus last year by $3,225,000, or 16.3%, slightly less than proportional with the net sales decline. Operating expenses were $341,000, or 12.6%, below the 2003 level reflecting lower administrative costs due the reduction of operating costs for the idle Pennsylvania facility that was sold on June 28th. Operating income was $1,052,000, a $474,000 decline versus $1,526,000 from 2003 primarily as a result of the decline in net sales. Interest cost for the year was up $138,000 over 2003, reflecting a two-percentage point interest increase that resulted from extending the expired loan facility until refinancing was completed on August 10th, and slightly higher revolver loan balances towards the end of the year.  At the end of the first quarter of 2004, the Company met job expansion incentives under the City of Hope, Arkansas note agreement and the $250,000 note was forgiven. The Company also received during the year $151,000 in rebates from the State of Arkansas for meeting job expansion incentives under the States create rebate program. These two items primarily accounted for the $315,000 increase in non-operating income over the prior year. The Companys net income for 2004 was $715,000, a decrease of $415,000, or 36.7%, versus the $1,130,000 reported in 2003.  The decline in net income principally reflects the significantly lower net sales combined with higher interest costs.  Partially mitigating this was the gain in non-operating income and lower administrative expenses.



At the end of May 2004, the Company closed its warehouse distribution location in suburban Toronto, Ontario, Canada. A continual decline in sales revenues and profitability over the past several years did not warrant keeping the operation open.



The Company entered into a three-year secured revolving credit facility on August 10, 2004, with PNC Bank, National Association, replacing the Congress Financial Corporation credit facility.  Maximum credit available under the new PNC facility is $14,000,000, including available letter of credit accommodations of $1,000,000.  The interest rate on the revolving debt facility was lender prime plus 1/4 % or LIBOR plus 2%, and for letters of credit, the rate is 3.25% per annum on the daily outstanding balance. On March 18, 2005, the Company entered into an amendment to the Credit, Loan and Security Agreement. Amendment No. 1 set forth the terms for temporary modification of the revolving interest rate to 1.25% above bank prime through April 12, 2005; the terms for temporary over-formula advances resulting from a change in the Lenders interpretation of the formula for calculating Eligible Receivables; definition of collateral monitoring fees; and redefinition of the fixed charge coverage ratio covenant from a quarterly basis to a rolling twelve month basis.



On August 10, 2004, the Company also entered into a commercial property loan on its Hope, Arkansas property with Elk Horn Bank and Trust Company acting as lead bank for a group of five lending institutions. The loan with Elk Horn is for $900,000, with seven-year amortization and an interest rate of New York prime plus 2% adjusted quarterly.





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The Company finances its working capital needs through the use of its bank credit facility and the cash flow generated from operations. At December 31, 2004, the total balance outstanding on the Companys revolving loan facility with PNC Bank, National Association was $10,195,000 and letter of credit accommodations were $40,000.  Also at December 31, 2004, the balance outstanding on the Company's commercial mortgage loan with Elk Horn Bank was $866,000. The total of the loan balances was $11,061,000, which compares to a total loan balance at December 31, 2003 with Congress Financial Corporation of $9,988,000 and letter of credit accommodations of $50,000.





Results of Operations



2004 Compared to 2003



Net sales for the year ending December 31, 2004 were $19,998,000 versus net sales of $24,038,000 in 2003.  The $4,040,000, or 16.8%, decrease in net sales reflects the continued market decline of carburetor net sales combined with lower seasonal demand for air conditioning products and a large air conditioning customer losing one its primary customers.  Partially offsetting these declines were slightly higher sales in the traditional markets of heavy duty and agricultural product lines. Total product and core returns, which are accounted for as reductions to gross sales, were 23.7% and 20.3% of gross sales for the years 2004 and 2003, respectively. The higher percentage for the year of 2004 reflects the impact of product return credits issued declining less than the drop in gross sales.



Carburetor net sales were 54.6% and 46.5% of total net sales, respectively, for the year of 2004 and 2003. Even though new vehicles sold are no longer equipped with carburetors in the United States and Canada, the Company continues to sell replacement units for older vehicles that predominantly use carburetors.  Although carburetor net sales represented a larger share of the total net sales for the year, carburetor net sales declined slightly in 2004 compared to 2003. The Company expects that the trend in carburetor sales will continue to be a steady decline in future periods. In addition, carburetor margins may be negatively impacted in the future as customers accelerate product returns during periods of declining demand.



Cost of products sold were $16,588,000, or 82.9%, of net sales for 2004 as compared to $19,813,000, or 82.4%, for 2003.  The $3,225,000, or 16.3% decrease versus 2003 is primarily accounted for by the net sales decrease.



Selling, distribution and administrative expenses for 2004 were $2,358,000 compared to $2,699,000 in 2003. Administrative spending was significantly lower than 2003 reflecting the reduction of operating costs for the Pennsylvania facility (taxes and insurance) that was sold on June 28th combined with lower professional fees and payroll processing costs.



Operating income for the year was $1,052,000 compared to $1,526,000 in 2003, a $474,000, or 31.1% decline.  The operating income decline can be attributed to the significantly lower net sales.



Interest expense of $606,000 for the year was up $138,000 over 2003, reflecting a two-percentage point interest rate increase that resulted from extending the expired loan facility to until refinancing was completed on August 10th, and higher revolver balances during the last quarter of the year.





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Non-operating income was $424,000 compared to $109,000 recorded in 2003. At the end of the first quarter of 2004, the Company met job expansion incentives under the City of Hope, Arkansas note agreement and the $250,000 note was forgiven. The Company also received during the year $151,000 in rebates from the State of Arkansas for meeting job expansion incentives under the States create rebate program. These two items more than accounted for the $315,000 increase in non-operating income over the prior year.



Net income was $715,000 versus $1,130,000 in 2003, a decrease of $415,000, or 36.7%.  As discussed earlier, significantly lower net sales accounted for the drop in net income versus 2003. Partially mitigating this was the increase in non-operating income reflecting the loan City of Hope note write-off and State of Arkansas rebates and lower administrative expenses.





2003 Compared to 2002



Net sales for the year ending December 31, 2003 were $24,038,000 versus net sales of $24,790,000 for the fiscal year 2002.  The $752,000, or 3.0%, decrease in net sales compared to 2002 reflected the continuing decline of carburetor net sales combined with lower demand in traditional markets of heavy duty, agricultural and domestic automotive product lines. These declines in net sales were partially offset by the significant gains in net sales recorded for the air conditioning compressor and CV axle product lines. Total product and core returns, which are accounted for as reductions to gross rebuilding sales, were 20.3% and 19.2% of gross sales for the years of 2003 and 2002, respectively. The higher percentage of returns for the year of 2003 reflects the impact of increased carburetor returns.



Carburetor net sales were 46.5% and 51.2% of total net sales, respectively, for the years of 2003 and 2002.



Cost of products sold were $19,813,000, or 82.4%, of net sales for 2003 as compared to $20,804,000, or 83.9%, for the year of 2002.  The $991,000, or 4.8% decrease versus 2002 is partially attributed to the net sales decrease, which amounts to $589,000. The remaining cost reduction of $402,000 reflects manufacturing improvements in materials, labor and overhead costs at the Hope facility. Higher manufacturing costs at the B & T facility, reflecting increased sales and production activity of air conditioning products, offset a portion of the cost decreases at the Hope operation.



Selling, distribution and administrative expenses for the year 2003 were $2,699,000 compared to $2,680,000 in 2002. The slight spending increase of $19,000 reflects the residual operating costs of the idle Pennsylvania facility (taxes, insurance and utilities) being recorded in administrative overhead in 2003.  S, G & A spending without these costs was down 4.6% reflecting the overhead savings being realized as a result of the plant consolidation.



Net relocation expense -There was no relocation expense recorded in 2003.  For the year ending December 31, 2002, net relocation and restructuring costs amounted to $455,000.



Operating income for the year was $1,526,000, a substantial gain of $675,000, compared to $851,000 for fiscal 2002. Plant relocation spending of $455,000 in 2002 accounts for part of the difference.  The balance of the improvement over 2002 can be attributed to the lower cost of products sold and reduced operating costs discussed in the preceding analysis.





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Non-operating expense was $359,000 for the year versus $479,000 recorded in 2002. Primarily accounting for the $120,000 decrease in non-operating expense were lower interest costs, down $61,000 from 2002, reflecting lower bank prime interest rates combined with lower term loan balances versus 2002.  The remainder of the decrease in non-operating expense reflects a small net gain realized from adjustments in long-term liabilities versus prepaid expense write-offs from prior periods.



Net income was $1,130,000 for the year versus net income of $367,000 for fiscal 2002, an increase of $763,000.  Net relocation costs of $455,000 in 2002, combined with the significant improvement in operating profit in 2003, as discussed earlier, accounted for the improvement.



Liquidity and Capital Resources



Liquidity Overview



On February 6, 2004, the Company entered into an amendment to the Loan and Security Agreement with Congress Financial Corporation extending the maturity date of its revolving line of credit and its term loan from February 8, 2004 to May 8, 2004. A Second Amendment was entered into on May 7, 2004 extending the expiration date to June 8, 2004 and a third amendment was entered into on June 6, 2004 extending the expiration date to August 8, 2004.  Under the terms of the amendments, the availability to borrow on the line of credit decreased from $14,000,000 to $10,500,000. The revolving loan interest and term loan interest rates increased to 2.75% and 3.00% in excess of the lender prime rate, respectively.



On June 28, 2004, the Company consummated the sale of its Beech Creek facility and property. The plant was vacated after consolidating operations in March of 2002.  The gross value of the transaction was $1.5 million and the net proceeds were used to pay-down term and revolver debt in the month of July 2004. A $200,000 escrow account was established at the closing of the sale of the property to cover future EPA issues.  Sale of the Beech Creek property allowed the Company to proceed with replacing the Congress loan facility with new lenders.



On August 10, 2004, the Company entered into a three-year credit facility with PNC Bank, National Association, replacing the Congress Financial Corporation credit facility.  Maximum credit available under the new PNC facility is $14,000,000, including available letter of credit accommodations of $1,000,000.  The interest rate on the revolving debt facility was lender prime plus 1/4 % or LIBOR plus 2%, and for letters of credit, the rate is 3.25% per annum on the daily outstanding balance. On March 18, 2005, the Company entered into an amendment to the Credit, Loan and Security Agreement. Amendment No. 1 that set forth the terms for temporary modification of the revolving interest rate to 1.25% above bank prime through April 12, 2005; the terms for temporary over-formula advances resulting from a change in the Lenders interpretation of the formula for calculating Eligible Receivables; definition of collateral monitoring fees; and redefinition of the fixed charge coverage ratio covenant from a quarterly basis to a rolling twelve month basis.



Also on August 10, 2004, the Company entered into a commercial property loan on the Hope, Arkansas property with Elk Horn Bank and Trust Company acting as lead bank for a group of five lending institutions. The loan with Elk Horn is for $900,000, with seven-year amortization and an interest rate of New York prime plus 2% adjusted quarterly.





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Management believes that the Company will be able to finance its working capital needs in the current year and the foreseeable future through the use of borrowings and cash flows generated from operations.





Working Capital



Net working capital at December 31, 2004 was a positive $10,994,000 compared to negative $1,846,000 at December 31, 2003. The current ratio at December 31, 2004 was 1.82 versus 0.92 at December 31, 2003.The significant improvement in working capital primarily reflects the classification of term and revolver debt for the new loan facilities as long-term debt.



Net trade accounts receivable at December 31, 2004 were $10,410,000, an increase of $454,000 versus the year-end 2003 balance of $9,956,000.  The increase in the Company's accounts receivable balance at year-end generally reflects the strong November and December sales to large retailers in 2004 versus 2003.



Net inventories of $12,710,000 at December 31, 2004 were $1,846,000 higher compared to the year-end 2003 balance of $10,864,000.  The increase in inventory reflects higher finished goods and parts inventories partially offset by lower raw and core work-in-process balances. The finished goods inventory increase is a result of a build-up of air conditioning products inventories to service normally anticipated seasonal sales that did not materialize due to a soft market. This finished goods inventory is expected to be utilized to satisfy 2005 orders.



Accounts payable at December 31, 2004 were $8,001,000 compared to a balance at year-end 2003 of $7,681,000. The $320,000 increase in accounts payable is primarily due to the higher net trade accounts payable which are up reflecting higher purchases of raw materials to support the increased production levels at the Hope facility in December 2004 and January 2005.



Accrued expenses of $4,833,000 were $30,000 greater than the fiscal year-end 2003 balance of $4,803,000, principally reflecting customer return credit accruals.





Debt



On February 6, 2004, the Company entered into an amendment to the Loan and Security Agreement with Congress Financial Corporation extending the maturity date of its revolving line of credit and its term loan from February 8, 2004 to May 8, 2004. A Second Amendment was entered into on May 7, 2004 extending the expiration date to June 8, 2004 and a third amendment was entered into on June 6, 2004 extending the expiration date to August 8, 2004.  Under the terms of the amendments, the availability to borrow on the line of credit decreased from $14,000,000 to $10,500,000. The revolving loan interest and term loan interest rates increased to 2.75% and 3.00% in excess of the lender prime rate, respectively.



At March 28, 2004, the Company met job expansion incentives and the $250,000 City of Hope, Arkansas note was forgiven.The forgiveness of the debt was taken into non-operating income in March.





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Debt (Continued)



On June 28, 2004, the Company consummated the sale of its Beech Creek facility and property. The plant was vacated after consolidating operations in March of 2002.  The gross value of the transaction was $1.5 million and the net proceeds were used to reduce the property term loan and revolver debt in July.  A $200,000 escrow account was established at the closing of the sale of the property to cover future EPA issues. Sale of the Beech Creek property allowed the Company to proceed with replacing the Congress loan facility with new lenders.



On August 10, 2004, the Company entered into a three-year secure revolving credit facility with PNC Bank, National Association, replacing the Congress Financial Corporation credit facility.  Maximum credit available under the new PNC facility is $14,000,000, including available letter of credit accommodations of $1,000,000.  The interest rate on the revolving debt facility was lender prime plus 1/4 % or LIBOR plus 2%, and for letters of credit, the rate is 3.25% per annum on the daily outstanding balance.



Also on August 10, 2004, the Company entered into a commercial property loan on its Hope, Arkansas properties with Elk Horn Bank and Trust Company acting as lead bank for a group of five lending institutions.  The loan with Elk Horn is for $900,000, with seven-year amortization and an interest rate of New York prime plus 2% adjusted quarterly.



On March 18, 2005, the Company entered into an amendment to the Credit, Loan and Security Agreement dated August 10, 2004 with PNC Bank, National Association. The Amendment No. 1 set forth the terms for temporary modification of the revolving interest rate to 1.25% above bank prime, the terms for temporary over-formula advances resulting from a change in the Lenders interpretation of the formula for calculating Eligible Receivables, definition of collateral monitoring fees and redefinition of the fixed charge coverage ratio covenant from a quarterly basis to a rolling twelve month basis.



At December 31, 2004, the balance outstanding on the Companys revolver loan facility with PNC Bank, National Association was $10,195,000 and letter of credit accommodations were $40,000. Also at December 31, 2004, the balance outstanding on the Companys commercial mortgage loan with Elk Horn Bank was $866,000. The total of the loan balances was $11,061,000, which compares to a total loan balance at December 31, 2003 with Congress Financial Corporation of $9,988,000 and letter of credit accommodations of $50,000. At December 31, 2004, the Company was in compliance with the amended fixed charge coverage ratio covenant.







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Future Outlook



The additional revenue from the sales of air conditioning products has partially mitigated the declining carburetor product line sales during the past three years. Management is pursuing other new products and new markets for existing products. This includes internal new product development as well as acquisition opportunities.



The Company's cash flow generated from operations together with borrowings, are expected to provide sufficient working capital to meet its needs over the next fiscal year and beyond.





Factors Which May Affect Future Results



This annual report contains forward-looking statements that are subject to risks and uncertainties, including but not limited to the statements under "Future Outlook" and to the following:



The competitive environment has caused and is continuing to cause changes in the distribution channels between volume retailers and traditional warehouse/distributors.  The Company has diversified its customer base and currently serves all major aftermarket segments, including large volume automotive retailers, original equipment manufacturers of automotive equipment and automotive warehouse distributors. The decline in carburetor product sales over the longer term could impact future results.  The Company expects the growth in air conditioning product sales to partially offset this impact. There is no assurance that the sales increases in air conditioning products will exceed the decreases in carburetor sales or the contribution of carburetor sales to net income.



The Companys six largest customers accounted for a total of 84% of the Companys net sales in the year ending December 31, 2004, with the four largest customers aggregating 74% of the total. For the same period in 2003, the Companys six largest customers accounted for a total of 88% of the Companys net sales, with the four largest customers comprising 77% of the total. A significant reduction in the level of net sales or the loss of a large customer could have a materially adverse impact on the Companys financial condition and results of operations.



While the Company has established reserves for potential environmental liabilities that it believes to be adequate, there can be no assurance that the reserves will be adequate to cover actual costs incurred or that the Company will not incur additional environmental liabilities in the future. See Legal Proceedings for additional information.



Accordingly, actual results may differ materially from those set forth in forward-looking statements.







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Contractual Obligations



The following table provides a summary of our contractual obligations at December 31, 2004.



|                         | Payments due by period  (in thousands)
|------------------------ | --------------------------------------
|Contractual Obligations  | Total                                 
|Long-term debt (1)       | $   12,990                            
|Operating leases (2)     | 995                                   
|Pension plan funding (3) | 78                                    
|Total                    | $   14,063                            



Notes to Contractual Obligations:

(1)  The nature of our long-term debt obligations is described more fully in Note 3 of the Consolidated Financial Statements.

(2)   The operating lease obligations are attributable to the leasing of facilities and equipment.

(3)   The pension plan funding was determined by the Company's actuary using the expected return on plan assets, the relative weighting of the plan assets, and the historical performance of the plan assets and other economic indicators of future performance.The Company has been advised by its Actuary that the future obligation may decline based on pending legislation. Based on this uncertainty, future period obligations have not been estimated at this time.



Off Balance Sheet Transactions



As part of its ongoing business, the Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities ("SPE's"), or SPE's which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.  As of December 31, 2004, the Company is not involved in any unconsolidated SPE transactions.



Critical Accounting Policies and Estimates



The Company's financial statements reflect the selection and application of accounting policies that require management to make significant estimates and assumptions. Management believes that the following points are some of the more critical judgment areas in the application of accounting policies that currently affect the Company's financial condition and results of operations. Preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues, and expenses and related contingent liabilities.  On an on-going basis, the Company evaluates its estimates for propriety, including those related to revenues, accounts receivable and inventory reserves, income taxes, and contingencies and litigation.  The Company bases its reserve estimates on historical experience, current market and operating trends, and on various assumptions that are believed to be reasonable under current operating circumstances.  Actual results may differ from these estimates under different assumptions or conditions.





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The Company recognizes sales when products are shipped.  Net sales reflect deductions for cores returned for credit and other customary returns and allowances.  Such deductions and returns and allowances are recorded currently based upon continuing customer relationships and other criteria.  The Company's customers are encouraged to trade-in rebuildable cores for products that are included in the Company's current product line.



Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities.  At December 31, 2004, the Companys deferred tax asset consisted principally of net inventory reserves and net operating loss carryforwards.  The Companys deferred tax asset has been reduced by a valuation allowance to the extent such benefits are not expected to be fully utilized.





Recent Accounting Pronouncements



In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No. 123, as revised, requires recognition of the cost of employee services provided in exchange for stock options and similar equity instruments based on the fair value of the instrument at the date of grant. Statement 123, as originally issued, is effective until the provisions of Statement 123(R) are fully adopted. Statement 123(R) is effective the first interim reporting period after June 15, 2005. The Company will adopt this guidance as of June 15, 2005 and begin recognizing compensation expense related to stock options should any be issued. The requirements of SFAS No. 123 will also be applied to stock options granted subsequent to June 15, 2005.



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.  The Company does not expect the adoption of the statement to have a material effect on its financial statements.











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Item 7a.      Quantitative and Qualitative Disclosures about Market Risk



The Company has a credit facility, which bears interest at various rates that are based on the bank prime rate.  Interest on $11,061,000, or 85.2%, of the Company's debt was variable based on the lenders prime rate.  Consequently, a general increase of 1% in the lenders prime rate would result in additional interest cost of approximately $111,000 on an annual basis if the same debt level and structure were to be maintained.



Item 8.       Financial Statements and Supplementary Data



The financial statements and supplementary data called for by this item are listed in the accompanying table of contents for consolidated financial statements and financial statement schedule and are filed herewith (See page 36).





Item 9.      Changes in and Disagreements with Accountants and Accounting and

Financial Disclosure



None



Item 9a.    Controls and Procedures





(a)

The Company's certifying officers have concluded based on their evaluation of the Company's disclosure controls and procedures that the disclosure controls and procedures as of the fiscal year ended December 31, 2004 are effective in ensuring that material information relating to the Company, including its consolidated subsidiaries, is made known to the certifying officers by others within those entities, as appropriate to allow timely decisions regarding required disclosure, particularly during the period in which this Form 10-K was being prepared and that information required to be disclosed by the Company in its reports that it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.



(b)

There was no change in internal control over financial reporting during the fourth quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.







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PART III





Item 10.      Directors and Executive Officers of the Registrant



(a)Directors and Executive Officers of Registrant



Persons elected as directors of the Company hold office until the next annual meeting of shareholders at which directors are elected.  The last annual meeting of shareholders was held on September 4, 2003.



The by-laws of the Company provide that officers shall be elected by the board of directors at its first meeting after each annual meeting of shareholders, to hold office until their successors have been elected and have qualified.



|Name (Age)               | Directors of the Company                                                                               | Served as Director Since
|------------------------ | ------------------------------------------------------------------------------------------------------ | ------------------------
|John R. Gross  (73)      | Owner, Chaney Auto Parts, Inc.
Crest Hill,  Illinois                                                   | 1966                    
|Raymond F. Gross  (66)   | Vice President, Erecta Shelters, Inc.
Ft. Smith,  Arkansas                                             | 1968                    
|W. Jason Guzek (31)      | Vice President of Operations,  Belmont Holdings Corporation ,  Wilmington, Delaware                    | 2003                    
|Barry L. Katz (53)       | President and General Counsel,
Belmont Holdings Corporation,
Wilmington, Delaware                      | 1993                    
|Raymond G. Perelman (87) | Chairman of the Board and CEO
RGP Holding, Inc. and
Belmont Holdings Corporation,
Wilmington, Delaware | 1988                    



|Name (Age)               | Officers of the Company                                 
|------------------------ | --------------------------------------------------------
|Jerry A. Bragiel  (53)   | President and CEO of the Company                        
|Richard W. Simmons  (62) | Vice President Finance, CFO and Secretary of the Company



Jerry A. Bragiel joined the Company in May 1997 as President and CEO of the Company.  He held the positions of General Manager and Vice President of Business Development of IPM Products Corporation from 1994 to 1997. Prior to 1994, Mr. Bragiel had 20 years of employment with the Company in various capacities. His final position prior to his resignation from the Company in 1994 was Vice President and General Manager of Operations.



Richard W. Simmons joined the Company in April 1996 as Division Controller of the Hope Facility.  In August 1998, he was promoted to Corporate Controller and was elected Secretary of the Corporation in January 1999.  In March 2000, he was promoted to Vice President Finance and CFO of the Corporation.  Mr. Simmons held the position of Vice President of Finance with the New West Group of Winsloew Furniture, Inc. prior to joining the Company.  He has been the CFO of four corporations and has fifteen years experience in the remanufacturing industry.



John R. Gross is the owner of Chaney Auto Parts, Inc., a retailer of auto parts.  John R. Gross is the brother of Raymond F. Gross.





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Raymond F. Gross has been the Vice President of Erecta Shelters Inc., a manufacturer and distributor of metal buildings, since 1985.  Prior to 1985, he was a Vice President of the Company.  Raymond F. Gross is the brother of John R. Gross.



Jason Guzek has been the Vice President of Operations of Belmont Holdings Corporation since 2000.  From 1999 to 2000, Mr. Guzek was Operations Manager of Belmont Holdings Corporation.  From 1996 to 1998, Mr. Guzek worked as an accountant for Belmont Holdings Corporation.  Mr. Guzek is also a Vice President of RPG Holding, Inc., and serves on the Board of Directors at the request of Mr. Perelman.



Barry L. Katz has served as a director of the Company since December 1993.  From December 16, 1992 to January 19, 1993 he held the position of Senior Vice President of the Company.  Since 1993 Mr. Katz has been President and General Counsel for RGP Holding, Inc., and was its Senior Vice President and General Counsel since May 1992.  Since 1994 Mr. Katz has been President and General Counsel for Belmont Holdings, Corp., a Company with subsidiaries operating mining and processing businesses. Mr. Katz serves on the Board of Directors at the request of Mr. Perelman.



Raymond G. Perelman had served as Chairman of the Board from December 16, 1992 until November 1995 and was President and Chief Executive Officer from December 16, 1992 to January 19, 1993.  He has been Chairman of the Board of RGP Holding, Inc., a privately held holding Company, since May 1992.  Since 1994, Mr. Perelman has been Chairman of the Board and CEO of Belmont Holdings Corp., a company with subsidiaries operating mining and processing businesses.



(b)Arrangements Concerning the Board of Directors



Directors received a fee of $10,000 for service as a director during the Company's fiscal year ended December 31, 2004.  In addition, directors are reimbursed for their reasonable travel expenses incurred in attending meetings and in connection with Company business.



The Company has an indemnification agreement with each director of the Company that provides that the Company shall indemnify the director against certain claims that may be asserted against him by reason of serving on the Board of Directors.



Board Committees



The Board of Directors currently has the following committees:



Audit Committee - The Audit Committee oversees and monitors the Company's financial reporting process and internal control system, and reviews the audit performed by the Company's outside auditors. The Audit Committee is also directly responsible for the appointment, compensation and oversight of the work of the Company's independent auditors. In addition, the committee performs such other duties as are specified in the Audit Committee Charter. The members of the audit committee are Messrs. Raymond Gross and Jason Guzek. The Company's Board of Directors believes that the members of the Audit Committee, by virtue of their experience in managing or operating businesses, are capable of analyzing and evaluating the Company's financial statements without the assistance of an "audit committee financial expert", as defined in Item 410(h) of SEC Regulation S-K.  The Audit Committee Charter is incorporated by reference to Registrant's December 31, 2004 Form 10-K Annual Report as Exhibit 99.



Compensation Committee -The Compensation Committee is responsible for establishing, administering and reviewing compensation programs for the Companys Officers, subject to approval of the Board of Directors as a whole. At present, the entire Board of Directors performs the function of this committee.





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Code of Ethics



The Company has a Code of Ethics for its Chief Executive Officer and its Chief Financial Officer.  The Code of Ethics is incorporated by reference to Registrant's December 31, 2003 Form 10-K Annual Report as Exhibit 14.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file with the Securities Exchange Commission reports of ownership of Company securities and changes in reported ownership. Officers, directors and greater than 10% shareholders are required by SEC rules to furnish the Company with copies of all Section 16(a) reports filed.



Based solely upon oral confirmations from reporting persons that all reportable transactions were reported, the Company believes that during 2004 the Company's officers, directors and greater than 10% owners timely filed all reports they were required to file under Section 16(a).





Item 11.      Executive Compensation



(a)  Executive Officer Compensation and Arrangements



Executive Compensation



The following table sets forth information with respect to all compensation paid to the Company's Chief Executive Officer.  There were no other executives whose compensation exceeded $100,000 for services rendered in all capacities to the Company, during 2004.



|                   |      |                                           |                                    |                    | ----------  Long Term Compensation  ----------
|------------------ | ---- | ----------------------------------------- | ---------------------------------- | ------------------ | ----------------------------------------------
|                   |      | ---------- Annual Compensation ---------- | --------  Awards Pay-out  -------- |                   
|(a)                | (b)  | (c)                                       | (d)                                | (e)                | (f)                                           
|Name and Principal |      | Salary                                    | Bonus                              | Other Annual Comp. | Restricted Stock Award's                      
|Position           | Year | ($)                                       | ($)                                | ($)                | ($)                                           
|Jerry A. Bragiel   |      |                                           |                                    |                    |                                               
|President & CEO    | 2004 | 222,205                                   | -0-                                | -0-                | -0-                                           
|                   | 2003 | 222,646                                   | -0-                                | -0-                | -0-                                           
|                   | 2002 | 216,371                                   | -0-                                | -0-                | -0-                                           



Mr. Bragiel has a severance compensation agreement with the Company that provides for severance pay equal to six months salary following termination from the Company.



The by-laws of the Company provide that officers shall be elected annually by the board of directors at its first meeting after each annual meeting of shareholders, to hold office until their successors have been elected and have qualified.





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The Company also has an indemnification agreement with each officer of the Company that provides that the Company shall indemnify the officer against certain claims, which could be asserted against him by reason of serving as an officer of the Company.



The following table provides certain information with respect to the number and value of unexercised options outstanding as of December 31, 2004.  (No options were exercised by the named executive officer during 2004.)



Aggregated 2004 Option Exercises and December 31, 2004 Option Values





|Name                  | Shares Acquired on Exercise | $ Value Realized | Number of Securities Underlying Unexercised Options Exercisable/ Unexercisable | Value of Unexercised
In-the-money Options Exercisable/ Unexercisable
|--------------------- | --------------------------- | ---------------- | ------------------------------------------------------------------------------ | --------------------------------------------------------------------
|Jerry A. Bragiel, CEO | -0-                         | -0-              | 125,000/0                                                                      | $101,563/$0                                                         
|Officer & Managers    | -0-                         | -0-              | 52,000/0                                                                       | $26,000/$0                                                          



Compensation Committee Interlocks and Insider Participation



A compensation committee has not been elected at this juncture.See Item 10 above for details.





(b)  Director Compensation Arrangements



Information regarding director compensation is set forth under Item 10(b) above.









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Item 12.      Security Ownership of Certain Beneficial Owners and Management



The following tabulation shows, as of December 31, 2004, (a) the name, address and Common Share ownership for each person known by the Company to be the beneficial owner of more than five percent of the Companys outstanding Common Shares,   (b) the Common Share ownership of each director, (c) the Common Share ownership for each executive officer named in the compensation table, and (d) the Common Share ownership for all directors and executive officers as a group.



|                                                                | Number of Common    |                   
|--------------------------------------------------------------- | ------------------- | ------------------
|                                                                | Shares Beneficially | Percent of Common 
|BENEFICIAL OWNER:                                               | Owned (Note 1)      | Shares Outstanding
|RGP Holding, Inc.
Wilmington, Delaware   (Note 2)               | 1,296,612           | 35.5%             
|Champion Parts, Inc.
Employee Stock Ownership Plan(Notes 3 & 4) | 21,111              | 0.6%              
|DIRECTORS & OFFICERS AS A GROUP:                                |                     |                   
|John R. Gross,
Director                                         | 165,313             | 4.5%              
|Raymond F. Gross,
Director                                      | 31,164              | 0.8%              
|W. Jason Guzek
Director                                         | ---                 | ---               
|Barry L. Katz,
Director  (Note 2)                               | 250                 | **                
|Raymond G. Perelman,
Director   (Note 2)                        | 1,296,612           | 35.5%             
|Jerry A. Bragiel,
President & CEO  (Note 5)                     | 138,984             | 3.8%              
|Richard W. Simmons,
V.P. Finance, CFO & Secretary  (Note 5)     | 14,000              | 0.4%              
|Total directors and executive officers
As a group (7 persons)   | 1,646,323           | 45.0%             



**Not greater than 0.1%.



Item 12. - Notes:



(1)

Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of 1934. Information with respect to beneficial ownership is based on information furnished to the Company or contained in filings made with the Securities Exchange Commission.



(2)

RGP Holding, Inc. has sole voting and dispositive power with respect to all 1,296,612 shares.  Mr. Perelman is the Chairman and Chief Executive Officer of RGP Holding, Inc. and directly or indirectly owns or controls all of the common stock of RGP Holding, Inc.  Accordingly, Mr. Perelman may be deemed to be the beneficial owner of the shares owned by RGP Holding, Inc.  Mr. Katz is the President and General Counsel of RGP Holding, Inc. Accordingly, Mr. Katz may also be deemed to be the beneficial owner of the 1,296,612 shares owned by RGP Holding, Inc.  Mr. Katz disclaims beneficial ownership of shares of shares owned by RPG Holding, Inc. The business address of Mr. Perelman and Mr. Katz is 225 City Avenue, Suite 14, Bala Cynwyd, PA  19004.





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Item 12. - Notes:



(3)

Mr. Jerry A. Bragiel votes on behalf of shares held in trust for employees by this plan as trustee.  Employees participating in the Stock Ownership Plan are entitled to direct the trustees as to the voting of shares allocated to their accounts. Unallocated Stock Ownership Plan shares will be voted in the same manner, proportionately, as the allocated Stock Ownership Plan shares for which voting instructions are received from employees.



(4)

Does not include 21,111 shares allocated to the accounts of employees other than executive officers under the Stock Ownership Plan. Each of the participants in the Stock Ownership Plan is entitled to direct the trustees as to the voting of shares allocated to his or her account.



(5)

Shares shown as beneficially owned for Mr. Bragiel and Mr. Simmons include shares available through exercisable options: Mr. Bragiel, 125,000 shares; and Mr. Simmons, 10,000 shares; all executive officers as a group, 135,000 shares.





Equity Compensation Plans



The following table sets forth the equity compensation plan information for the Company's Stock Option Plans:



|Plan Category:                                             | No. of securities to
be issued upon exercise
of outstanding options
(a) | Weighted-average exercise price of outstanding options
(b) | No. of securities remaining avail. for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|---------------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     | 177,000                                                                 | $ 0.5293                                                   | -0-                                                                                                                                      
|Equity compensation plans not
approved by security holders | -0-                                                                     | -0-                                                        | -0-                                                                                                                                      
|Total                                                      | 177,000                                                                 | $ 0.5293                                                   | -0-                                                                                                                                      



See Note 5 to the Financial Statements for further discussion of the Stock Option Plans.







Item 13.

Certain Relationships and Related Transactions



None





27





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Item 14.

Principal Accountant Fees and Services



The following table summarizes the total fees paid to the Company's Independent Certified Public Accountants, Cogen, Sklar, LLP and BDO Seidman, LLP for professional services provided during the twelve month period ended:



|Twelve months ended December 31,             | 2004       | 2003      
|-------------------------------------------- | ---------- | ----------
|Audit fees (1)                               |            |           
|Cogen, Sklar LLP                             | 130,500    | -0-       
|BDO Seidman, LLP                             | 34,000     | 168,500   
|Audit-related fees (Pension Plan Audits) (2) |            |           
|Cogen, Sklar LLP                             | 19,600     | -0-       
|BDO Seidman, LLP                             | -0-        | 23,600    
|Tax fees (3)                                 |            |           
|Cogen, Sklar LLP                             | 1,500      | -0-       
|BDO Seidman, LLP                             | 6,600      | 10,000    
|Total                                        | $  192,200 | $  202,100



(1)

Audit fees consist of fees for professional services rendered for the audit of the Companys consolidated financial statements and review of financial statements included in the quarterly reports and services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements.



(2)

Audit-related pension plan fees are fees billed for assurance and related services that are reasonably related to the performance of the Companys four pension plan statements, but not included in audit fees for the Company.  These services included the review of various pension trust statements for years 2003 and 2002 and the Form 5500 filings for those reporting periods.



(3)

Tax services fees consist of professional fees billed for services rendered by Cogen, Sklar LLP and BDO Seidman, LLP for tax compliance, tax advice and tax planning.



Pursuant to the Company's Audit Committee Charter, all of the audit and non-audit fees listed above were approved by the Audit Committee prior to their performance.





28





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PART IV





Item 15.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K



(a)

Consolidated Financial Statements and Schedule and Exhibits:



1. and 2. The consolidated financial statements and schedules listed in the accompanying table of contents for consolidated financial statements are filed herewith.



3.

The exhibits required by Item 601 of Regulation S-K are listed in the exhibit index, which follows the consolidated financial statements and financial statement schedule and immediately precedes the exhibits filed.  Pursuant to Regulation S-K, Item 601(b)(4)(iii), the Company has not filed with Exhibit (4) any instrument with respect to long-term debt (including individual bank lines of credit and mortgages) where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis.  The Company agrees to furnish a copy of each such instrument to the Securities and Exchange Commission on request.





(b)

Reports on Form 8-K



I.

The Company filed a Current Report on Form 8-K on March 22, 2005. The Form 8-K reported that in accordance with Item 1.01. Entry into a Material Definitive Agreement, on March 18, 2005, Champion Parts, Inc. entered into an amendment to the Credit, Loan and Security Agreement dated August 10, 2004 with PNC Bank, National Association. The Amendment No. 1 set forth the terms for temporary modification of the revolving interest rate, the terms for temporary over-formula advances resulting from a change in the lenders formula for calculating Eligible Receivables, definition of collateral monitoring fees and redefinition of the fixed charge coverage ratio covenant.



II.

The Company filed a Current Report on Form 8-K on November 10, 2004. The Form 8-K reported that in accordance with Item 2.02. Results of Operations and Financial Conditions, on November 10, 2004, Champion Parts, Inc. issued a press release announcing earnings for the Third Quarter of 2004 ended September 26, 2004.  The Companys Form 10-Q was filed with the Securities and Exchange Commission on November 10, 2004.



III.

The Company filed a Current Report on Form 8-K on August 13, 2004. The Form 8-K reported that in accordance with Item 12. Regulation FD Disclosure, on August 13, 2004, Champion Parts, Inc. issued a press release announcing earnings for the Second Quarter of 2004 ended June 27, 2004.  The Companys Form 10-Q was filed with the Securities and Exchange Commission on August 11, 2004.





29





---



IV.

The Company filed a Current Report on Form 8-K on August 11, 2004. The Form 8-K reported that in accordance with Item 5. Other Events andRegulation FD Disclosure, on August 11, 2004, the Registrant issued a press release announcing it has entered into a three-year secured revolving credit facility on August 10, 2004, with PNC Bank, National Association, replacing its prior credit facility. The Registrant also announced in the press release that it had entered into a commercial property loan on its Hope, Arkansas properties with Elk Horn Bank and Trust Company acting as lead bank for a group of five lending institutions.



V.

The Company filed a Current Report on Form 8-K on July 20, 2004. The Form 8-K reported that in accordance with Item 4. Change in Accountants, on July 20, 2004, Champion Parts, Inc. dismissed BDO Seidman, LLP as independent auditors and engaged Cogen Sklar LLP as independent auditors. The Companys audit committee approved the dismissal of BDO Seidman, LLP and the engagement of Cogen Sklar LLP.



VI.

The Company filed a Current Report on Form 8-K on July 6, 2004. The Form 8-K reported that in accordance with Item 5. Other Events andRegulation FD Disclosure, on June 28, 2004, the Company consummated the sale of its Beech Creek, Pennsylvania plant and property.









30





---







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.





CHAMPION PARTS, INC.



|Date: April 14, 2005 | By:  /s/ Richard W. Simmons              
|-------------------- | -----------------------------------------
|                     | Richard W. Simmons                       
|                     | Vice President Finance, CFO and Secretary





Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons have signed this report below on April 14, 2005.



|By:   /s/ Jerry A. Bragiel        | By:   /s/ W. Jason Guzek  
|--------------------------------- | --------------------------
|Jerry A. Bragiel, President & CEO | W. Jason Guzek, Director  
|                                  |                           
|                                  |                           
|By :   /s/ Raymond G. Perelman    | By:   /s/ John R. Gross   
|Raymond G. Perelman, Director     | John R. Gross, Director   
|                                  |                           
|                                  |                           
|By :   /s/ Barry L. Katz          | By:   /s/ Raymond F. Gross
|Barry L. Katz, Director           | Raymond F. Gross, Director
|                                  |                           







31





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Exhibit 31.1



SECTION 302 OFFICERS CERTIFICATION





|I, Jerry A. Bragiel, President and Chief Executive Officer, certify that:
|-------------------------------------------------------------------------



|1. |  | I have reviewed this annual report on Form 10-K of Champion Parts, Inc.;
|-- |  | ------------------------------------------------------------------------



|2. |  | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |    | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
|-- | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | a) |                                                                                                                                                                                                                                
|   | b) |                                                                                                                                                                                                                                
|   | c) |                                                                                                                                                                                                                                



|5. |    | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
|-- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | a) |                                                                                                                                                                                                                                                                                             
|   | b) |                                                                                                                                                                                                                                                                                             



|Date:  April 14, 2005 |  | /s/  Jerry A. Bragiel |  |                                                       
|--------------------- |  | --------------------- |  | ------------------------------------------------------
|                      |  |                       |  | Jerry A. Bragiel
President and Chief Executive Officer







32





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Exhibit 31.2



SECTION 302 OFFICERS CERTIFICATION





|I, Richard W. Simmons, Vice President Finance, Chief Financial Officer, certify that:
|-------------------------------------------------------------------------------------



|1. |  | I have reviewed this annual report on Form 10-K of Champion Parts, Inc.;
|-- |  | ------------------------------------------------------------------------



|2. |  | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |    | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
|-- | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | a) |                                                                                                                                                                                                                                
|   | b) |                                                                                                                                                                                                                                
|   | c) |                                                                                                                                                                                                                                



|5. |    | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
|-- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | a) |                                                                                                                                                                                                                                                                                             
|   | b) |                                                                                                                                                                                                                                                                                             



|Date:  April 14, 2005 | /s/ Richard W. Simmons                                            
|--------------------- | ------------------------------------------------------------------
|                      | Richard W. Simmons
Vice President Finance, Chief Financial Officer







33





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Exhibit 32.1









CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PERSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003





In connection with the Annual Report of Champion Parts, Inc., (the Company) on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Jerry A. Bragiel, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, that to my knowledge:



(1)   The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and



(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.





|April 14, 2005 | /s/ Jerry A. Bragiel
Jerry A. Bragiel
President and Chief Executive Officer
|-------------- | ---------------------------------------------------------------------------







A signed original of this written statement required by Section 906 has been provided to Champion Parts, Inc. and will be retained by Champion Parts, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.









34





---



Exhibit 32.2







CERTIFICATION PERSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PERSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003





In connection with the Annual Report of Champion Parts, Inc.  (the Company) on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Richard W. Simmons, Vice President Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, that to my knowledge:



(1)   The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and



(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.





|April 14, 2005 | /s/ Richard W. Simmons
Richard W. Simmons
Vice President, Chief Financial Officer
|-------------- | ---------------------------------------------------------------------------------







A signed original of this written statement required by Section 906 has been provided to Champion Parts, Inc. and will be retained by Champion Parts, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.









35





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CHAMPION PARTS, INC. AND SUBSIDIARIES





Item 8.      Financial Statements and Supplementary Data



Consolidated Financial Statements and Financial Statement Schedule comprising Item 8 and Items 14(a)(1) and  (2) for the Years Ended December 31, 2004, December 31, 2003, and December 31, 2002 and Report of Independent Certified Public Accountants.

































































36





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CHAMPION PARTS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS





|                                                                                                                                | Page 
|------------------------------------------------------------------------------------------------------------------------------- | -----
|Reports of Independent Registered Public Accounting Firms                                                                       | 38-39
|                                                                                                                                |      
|Consolidated Financial Statements (Item 14(a)(1)):                                                                              |      
|The following consolidated financial statements of
Champion Parts, Inc. and subsidiaries are included in Part II, Item 8:       |      
|                                                                                                                                |      
|Consolidated balance sheets - years ended
December 31, 2004 and December 31, 2003                                               | 40-41
|                                                                                                                                |      
|Consolidated statements of income - years ended
December 31, 2004, December 31, 2003 and December 31, 2002                      | 42   
|                                                                                                                                |      
|Consolidated statements of stockholders' equity - years ended
December 31, 2004, December 31, 2003 and December 31, 2002        | 43   
|                                                                                                                                |      
|Consolidated statements of comprehensive income/(loss) - years ended
December 31, 2004, December 31, 2003 and December 31, 2002 | 44   
|                                                                                                                                |      
|Consolidated statements of cash flows - years ended
December 31, 2004, December 31, 2003 and December 31, 2002                  | 45   
|                                                                                                                                |      
|Notes to consolidated financial statements                                                                                      | 46-61
|                                                                                                                                |      
|Consolidated Financial Statement Schedule (Item 14(a)(2)):                                                                      |      
|                                                                                                                                |      
|Schedule II - Valuation and qualifying accounts                                                                                 | 62   
|                                                                                                                                |      
|Exhibit Index                                                                                                                   | 63-65







All other schedules are omitted because they are not applicable, not required, or because the required information is included in the consolidated financial statements or notes thereto.





37





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







To the Board of Directors of

Champion Parts, Inc.

Hope, Arkansas



We have audited the accompanying consolidated balance sheets of Champion Parts, Inc. and Subsidiaries (the "Company") as of December 31, 2004 the related consolidated statements of income, stockholders equity, comprehensive income (loss) and cash flow for the year ended December 31, 2004.  We have also audited the accompanying Schedule II, Valuation and Qualifying Accounts.  These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules.  We believe that our audit provides a reasonable basis for our opinion.



As described in Note 9, 74% of the Companys net sales in the year ended December 31, 2004 are concentrated in four customers.  A reduction in the level of net sales to or the loss of one or more of these customers could have a material adverse effect on the Companys financial condition and results of operations.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Champion Parts, Inc. and Subsidiaries at December 31, 2004, the results of their operations and their cash flow for year ended December 31, 2004 in conformity with accounting principles generally accepted in the United States.



Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein.







/s/ Cogen, Sklar LLP

Bala Cynwyd, Pennsylvania

February 25, 2005





38





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







To the Board of Directors of

Champion Parts, Inc.

Hope, Arkansas



We have audited the accompanying consolidated balance sheet of Champion Parts, Inc. and Subsidiaries (the "Company") as of December 31, 2003 and the related consolidated statements of income, stockholders equity, comprehensive income (loss) and cash flows for each of the two years in the period ended December 31, 2003.  We have also audited the accompanying Schedule II, Valuation and Qualifying Accounts.  These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule 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 and schedule are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules.  We believe that our audits provide a reasonable basis for our opinion.



As described in Note 9, 77% of the Companys net sales in the year ended December 31, 2003 are concentrated in four customers.  A reduction in the level of net sales to or the loss of one or more of these customers could have a material adverse effect on the Companys financial condition and results of operations.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Champion Parts, Inc. and Subsidiaries at December 31, 2003, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States.



The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 (to the 2003 financial statements) to the consolidated financial statements, the Company's amended credit facility expires on May 8, 2004. This factor raises substantial doubt about the Company's ability to continue as a going concern. Presently, the Company is seeking to replace the credit facility. Management's plans in regard to this matter are also described in Note 1 (to the 2003 financial statements). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Also, in our opinion, the 2002 and 2003 schedules presents fairly, in all material respects, the information set forth therein.





/s/ BDO Seidman, LLP

Chicago, Illinois

March 22, 2004





39





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CHAMPION PARTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS





|                                                             | December 31, 2004 | December 31, 2003
|------------------------------------------------------------ | ----------------- | -----------------
|ASSETS                                                       |                   |                  
|                                                             |                   |                  
|CURRENT ASSETS:                                              |                   |                  
|Cash                                                         | $   358,000       | $   135,000      
|Accounts receivable trade, less allowance for uncollectibles |                   |                  
|of $1,121,000 and $945,000 in 2004 and 2003, respectively    | 10,410,000        | 9,956,000        
|                                                             |                   |                  
|Miscellaneous receivables                                    | 197,000           | 83,000           
|                                                             |                   |                  
|Inventories, net of reserves                                 | 12,710,000        | 10,864,000       
|                                                             |                   |                  
|Prepaid expenses and other assets                            | 634,000           | 334,000          
|                                                             |                   |                  
|Deferred income tax asset                                    | 73,000            | 36,000           
|Total current assets                                         | 24,382,000        | 21,408,000       
|PROPERTY, PLANT AND EQUIPMENT:                               |                   |                  
|Land                                                         | 70,000            | 70,000           
|Buildings                                                    | 4,453,000         | 4,405,000        
|Machinery and equipment                                      | 14,383,000        | 14,272,000       
|Gross property, plant & equipment                            | 18,906,000        | 18,747,000       
|Less:  Accumulated depreciation                              | 16,625,000        | 16,423,000       
|Net property, plant & equipment                              | 2,281,000         | 2,324,000        
|                                                             |                   |                  
|Total assets held for sale                                   | -0-               | 1,475,000        
|                                                             |                   |                  
|Total other assets                                           | 408,000           | 434,000          
|                                                             |                   |                  
|Total assets                                                 | $27,071,000       | $25,641,000      





The accompanying notes are an integral part of these statements.





40





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CHAMPION PARTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS





|                                                              | December 31, 2004 | December 31, 2003
|------------------------------------------------------------- | ----------------- | -----------------
|LIABILITIES AND STOCKHOLDERS EQUITY                          |                   |                  
|                                                              |                   |                  
|CURRENT LIABILITIES:                                          |                   |                  
|Accounts payable                                              | $8,001,000        | $7,681,000       
|Accrued expenses:                                             |                   |                  
|Salaries, wages and employee benefits                         | 393,000           | 549,000          
|Other accrued expenses                                        | 4,833,000         | 4,803,000        
|Taxes other than income                                       | 51,000            | 101,000          
|Current maturities of long-term debt:                         |                   |                  
|Current maturities  revolver                                 | -0-               | 8,386,000        
|Current maturities  term notes                               | -0-               | 1,602,000        
|Current maturities  mortgage note                            | 104,000           | -0-              
|Current maturities  subordinated debt                        | 6,000             | 67,000           
|Current maturities  asset purchase note                      | -0-               | 65,000           
|Total current maturities of long-term debt                    | 110,000           | 10,120,000       
|                                                              |                   |                  
|Total current liabilities                                     | 13,388,000        | 23,254,000       
|                                                              |                   |                  
|DEFERRED INCOME TAXES                                         | 73,000            | 36,000           
|                                                              |                   |                  
|LONG-TERM DEBT:                                               |                   |                  
|Long-term notes payable  revolver                            | 10,195,000        | -0-              
|Long-term notes payable  mortgage note                       | 762,000           | -0-              
|Long-term notes payable  subordinated debt                   | 1,793,000         | 1,799,000        
|Long-term notes payable  City of Hope, Arkansas note         | -0-               | 250,000          
|Long-term notes payable  asset purchase note                 | 130,000           | 65,000           
|Total long-term debt                                          | 12,880,000        | 2,114,000        
|                                                              |                   |                  
|STOCKHOLDERS' EQUITY:                                         |                   |                  
|                                                              |                   |                  
|Preferred stock - No par value; authorized, 10,000,000        |                   |                  
|shares; issued and outstanding, none                          | -0-               | -0-              
|Common stock - $.10 par value; authorized, 50,000,000 shares, |                   |                  
|issued and outstanding, 3,655,266 shares                      | 366,000           | 366,000          
|Additional paid-in capital                                    | 15,578,000        | 15,578,000       
|Accumulated (deficit)                                         | (12,972,000)      | (13,687,000)     
|Accumulated other comprehensive (loss)                        | (2,242,000)       | (2,020,000)      
|Total stockholders equity                                    | 730,000           | 237,000          
|                                                              |                   |                  
|Total liabilities and stockholders equity                    | $27,071,000       | $25,641,000      



The accompanying notes are an integral part of these statements.





41





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CHAMPION PARTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR YEARS ENDED





|                                       | December  31, 2004 | December 31,  2003 | December  31, 2002
|-------------------------------------- | ------------------ | ------------------ | ------------------
|                                       |                    |                    |                   
|Net Sales                              | $19,998,000        | $24,038,000        | $24,790,000       
|Costs and Expenses:                    |                    |                    |                   
|Cost of products sold                  | 16,588,000         | 19,813,000         | 20,804,000        
|Selling, distribution & administration | 2,358,000          | 2,699,000          | 2,680,000         
|Relocation and restructuring costs     | -0-                | -0-                | 455,000           
|Total costs and expenses               | 18,946,000         | 22,512,000         | 23,939,000        
|                                       |                    |                    |                   
|Operating income                       | 1,052,000          | 1,526,000          | 851,000           
|                                       |                    |                    |                   
|Non-operating expense/(income):        |                    |                    |                   
|Interest expense, net                  | 606,000            | 468,000            | 529,000           
|Other non-operating (income)           | (424,000)          | (109,000)          | (50,000)          
|Total non-operating expense/(income)   | 182,000            | 359,000            | 479,000           
|                                       |                    |                    |                   
|Income before income taxes             | 870,000            | 1,167,000          | 372,000           
|                                       |                    |                    |                   
|Income Taxes                           | 155,000            | 37,000             | 5,000             
|                                       |                    |                    |                   
|Net Income                             | $  715,000         | $  1,130,000       | $   367,000       
|                                       |                    |                    |                   
|Weighted Average Common Shares         |                    |                    |                   
|Shares Outstanding at Year-end:        |                    |                    |                   
|Basic                                  | 3,655,266          | 3,655,266          | 3,655,266         
|Diluted                                | 3,756,452          | 3,704,465          | 3,655,266         
|                                       |                    |                    |                   
|Earnings Per Common Share  Basic:     |                    |                    |                   
|Net income per common share            | $ 0.20             | $ 0.31             | $ 0.10            
|                                       |                    |                    |                   
|Earnings Per Common Share - Diluted:   |                    |                    |                   
|Net income per common share            | $ 0.19             | $ 0.31             | $ 0.10            





The accompanying notes are an integral part of these statements





42





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CHAMPION PARTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT)

THREE YEARS ENDED DECEMBER 31, 2004





|                                 | Common Shares | Stock Amount | Additional Paid-In Capital | Accumulated (Deficit) | Accumulated Other Comprehensive Income/(Loss)
|-------------------------------- | ------------- | ------------ | -------------------------- | --------------------- | ---------------------------------------------
|                                 |               |              |                            |                       |                                              
|Balance, December 31, 2001       | 3,655,266     | $  366,000   | $ 15,578,000               | $(15,184,000)         | $      (415,000)                             
|Net Income                       | -             | -            | -                          | 367,000               | -                                            
|Minimum pension liability (loss) | -             | -            | -                          | -                     | (1,564,000)                                  
|Balance, December 31, 2002       | 3,655,266     | $  366,000   | $ 15,578,000               | $(14,817,000)         | $   (1,979,000)                              
|Net Income                       | -             | -            | -                          | 1,130,000             | -                                            
|Minimum pension liability (loss) | -             | -            | -                          | -                     | (41,000)                                     
|Balance, December 31, 2003       | 3,655,266     | $  366,000   | $ 15,578,000               | $(13,687,000)         | $   (2,020,000)                              
|Net Income                       | -             | -            | -                          | 715,000               | -                                            
|Minimum pension liability (loss) | -             | -            | -                          | -                     | (222,000)                                    
|Balance, December 31, 2004       | 3,655,266     | $  366,000   | $ 15,578,000               | $(12,972,000)         | $   (2,242,000)                              





The accompanying notes are an integral part of these statements.







43





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CHAMPION PARTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

THREE YEARS ENDED DECEMBER 31, 2004







|                            | Years Ended   
|--------------------------- | --------------
|                            | Dec.  31, 2004
|Net Income                  | $   715,000   
|Minimum pension liability   | (222,000)     
|Comprehensive income/(loss) | $   497,000   



Components of accumulated other comprehensive income/(loss), included in the Companys consolidated balance sheet, consists of the minimum pension liability.





The accompanying notes are an integral part of these statements





44





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CHAMPION PARTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED



|                                                                                            | Dec.  31, 2004 | Dec.  31,  2003 | Dec. 31,  2002
|------------------------------------------------------------------------------------------- | -------------- | --------------- | --------------
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |                |                 |               
|Net Income                                                                                  | $    715,000   | $    1,130,000  | $    367,000  
|Adjustments to reconcile net income to net cash
Provided by/(used in) operating activities: |                |                 |               
|Net cash from the sale of assets                                                            | 1,383,000      | -0-             | -0-           
|Depreciation and amortization                                                               | 477,000        | 450,000         | 472,000       
|Provision for inventory write-offs                                                          | 615,000        | 879,000         | 528,000       
|Provision for doubtful accounts                                                             | 298,000        | 365,000         | 327,000       
|Write-off of City of Hope (Arkansas) loan agreement                                         | 250,000        | -0-             | -0-           
|Changes in assets and liabilities (Net of acquisition):                                     |                |                 |               
|Accounts receivable trade                                                                   | (630,000)      | (1,139,000)     | (1,860,000)   
|Accounts receivable miscellaneous                                                           | (114,000)      | 2,000           | 257,000       
|Inventories                                                                                 | (2,461,000)    | (866,000)       | (14,000)      
|Prepaid expenses                                                                            | (300,000)      | 197,000         | 142,000       
|Accounts payable                                                                            | 321,000        | (375,000)       | 1,171,000     
|Accrued expenses and other                                                                  | (649,000)      | (1,138,000)     | (153,000)     
|NET CASH  (USED IN)/ PROVIDED BY
OPERATING ACTIVITIES                                       | (605,000)      | (495,000)       | 1,237,000     
|                                                                                            |                |                 |               
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |                |                 |               
|Capital expenditures                                                                        | (178,000)      | (365,000)       | (166,000)     
|NET CASH (USED) IN INVESTING ACTIVITIES                                                     | (178,000)      | (365,000)       | (166,000)     
|                                                                                            |                |                 |               
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                       |                |                 |               
|Borrowings /(payments) under revolving loan                                                 | 1,809,000      | 1,485,000       | (144,000)     
|(Net Payments) under term note agreements                                                   | (1,602,000)    | (463,000)       | (463,000)     
|Net borrowings under mortgage loan                                                          | 866,000        | -0-             | -0-           
|Net payments on subordinated debt obligations                                               | (67,000)       | (190,000)       | (190,000)     
|Net payments on acquisition note                                                            | -0-            | (83,000)        | (417,000)     
|Borrowings under City of Hope note agreement                                                | -0-            | -0-             | 250,000       
|NET CASH  PROVIDED BY/(USED IN)
FINANCING ACTIVITIES                                        | 1,006,000      | 749,000         | (964,000)     
|                                                                                            |                |                 |               
|NET  INCREASE / (DECREASE) IN CASH                                                          |                |                 |               
|AND EQUIVALENTS                                                                             | 223,000        | (111,000)       | 107,000       
|                                                                                            |                |                 |               
|CASH AND EQUIVALENTS - Beginning of year                                                    | 135,000        | 246,000         | 139,000       
|                                                                                            |                |                 |               
|CASH AND EQUIVALENTS - End of year                                                          | $   358,000    | $   135,000     | $   246,000   







The accompanying notes are an integral part of these statements.





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CHAMPION PARTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED

DECEMBER 31, 2004, DECEMBER 31, 2003, AND DECEMBER 31, 2002



Note 1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Consolidation Policy - The consolidated financial statements include the accounts of Champion Parts, Inc. and its subsidiaries (the "Company").  All significant intercompany transactions and balances have been eliminated in consolidation.



Fair Value of Financial Instruments -The Companys financial instruments consist of cash, receivables, and accounts payable and accrued expenses. The carrying values of cash, receivables, and accounts payable and accrued expenses approximate fair value because of their short maturities.



The carrying value of the term loans and demand note payable approximates fair value since the interest rate associated with the debt approximates the current market interest rate.



Accounts Receivable - Accounts receivables are customer obligations due under trade terms.  The Company sells remanufactured products to retailers, original equipment manufacturers and warehouse distributors.  The Company performs continuing credit evaluations of its customers' financial condition and generally does not require collateral.



Senior management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible.  The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for doubtful accounts.  Based on the information available, the Company believes its allowance for doubtful accounts as of December 31, 2004 is adequate.  However, actual write-offs could exceed the recorded allowance.



From time to time, the Company's customers may be in a net credit balance position due to the timing of sales and core returns.  At December 31, 2004 and December 31, 2003 customers in a net credit balance position totaled approximately $4,200,000 and $3,700,000, respectively, and are reported as a component of accounts payable.  The Company periodically reviews the aging of unused credits and from time to time may reduce this balance on account of unclaimed credits or when otherwise appropriate.



Inventories - Inventories are stated at the lower of cost (first-in, first-out method) or market.  Inventory consists of material, labor and overhead costs.



Property, Plant and Equipment - Property, plant and equipment are carried at cost, less accumulated depreciation.  The assets are being depreciated over their estimated useful lives, principally by the straight-line method.  The range of useful lives of the various classes of assets is 10-40 years for buildings and 4-10 years for machinery and equipment. Leasehold improvements are amortized over the terms of the leases or their useful lives, whichever is shorter.



Expenditures for maintenance and repairs are charged to operations; major expenditures for renewals and betterments are capitalized and depreciated over their estimated useful lives.





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Long-Lived Assets -The Company reviews the carrying values of its long-lived assets and identifiable intangible assets for possible impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable.  Any long-lived assets held for disposal are reported at the lower of their carrying amounts or fair value less cost to sell.  As of December 31, 2004, there has been no impairment of long-lived assets.



Assets Held for Sale - Represents the land, buildings and building improvements for the Beech Creek, Pennsylvania facility that ceased operation on March 15, 2002.  Sale of these assets was consummated on June 28, 2004.



Deferred Charges - Costs of issuing long-term debt are deferred and amortized over the terms of the related issues.



Business Segments - The Company previously adopted Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information. Management views the entire corporation as one business segment.



Revenue Recognition - The Company recognizes sales when products are shipped.  Net sales reflect deductions for cores returned for credit and other customary returns and allowances. Such deductions and returns and allowances are recorded currently based upon continuing customer relationships and other criteria.  The Company's customers are encouraged to trade-in rebuildable cores for product included in the Company's current product line.



Credits for cores are allowed only against purchases of similar remanufactured products. The dollar volume of purchases further limits total available credits.  Product and core returns, reflected as reductions in net sales, were $10,900,000 (2004), $11,500,000 (2003) and $12,000,000 (2002).



Net Income per common share  The Company follows Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No.128 Earnings Per Share, which requires disclosure of basic and diluted earnings per share.  Basic EPS is calculated by dividing the income available to common shareholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS gives effect to all dilutive potential common shares outstanding for the period.



|                                        | 2004      | 2003      | 2002     
|--------------------------------------- | --------- | --------- | ---------
|Average common shares outstanding       | 3,655,266 | 3,655,266 | 3,655,266
|Dilutive effect of:
Stock options       | 101,186   | 49,199    | -0-      
|Dilutive Common Shares Outstanding      | 3,756,452 | 3,704,465 | 3,655,266
|Anti-Dilutive Common Shares Outstanding | 177,000   | 128,000   | 177,000  



Estimates - The accompanying financial statements include estimated amounts and disclosures based on managements assumptions about future events.  Actual results may differ from these estimates.





47





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Stock-based Compensation -At December 31, 2004, the Company has a stock-based compensation plan, which is described in Note 5. The Company applies the recognition and intrinsic value measurement principles of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for the plan.



Shipping and Handling Fees and Costs - The Company follows EITF No. 00-10, Accounting for Shipping and Handling Fees and Costs.  The Company classifies shipping and handling fees as part of net revenue and the related cost as operating expenses.  For the years ended December 31, 2004, 2003 and 2002 shipping and handling fees were $325,000, $401,000 and $443,000, respectively.



Recent Accounting Pronouncements



In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No. 123, as revised, requires recognition of the cost of employee services provided in exchange for stock options and similar equity instruments based on the fair value of the instrument at the date of grant. Statement 123, as originally issued, is effective until the provisions of Statement 123(R) are fully adopted. Statement 123(R) is effective the first interim reporting period after June 15, 2005. The Company will adopt this guidance as of June 15, 2005 and begin recognizing compensation expense related to stock options should any be issued. The requirements of SFAS No. 123 will also be applied to stock options granted subsequent to June 15, 2005.



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.  The Company does not expect the adoption of the statement to have a material effect on its financial statements.





48





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Note 2.      INVENTORIES



Inventories consist of the following:

|                         | December 31, 2004 | December 31, 2003
|------------------------ | ----------------- | -----------------
|Gross Inventories:       |                   |                  
|Raw cores                | $    7,019,000    | $    6,863,000   
|Parts                    | 2,766,000         | 2,369,000        
|Sub-total raw materials  | 9,785,000         | 9,232,000        
|Work-in-process          | 3,321,000         | 3,545,000        
|Finished goods           | 6,894,000         | 4,762,000        
|Total inventories, gross | $  20,000,000     | $  17,539,000    
|                         |                   |                  
|Inventory Reserves:      |                   |                  
|Core devaluation reserve | $  (3,384,000)    | $  (3,089,000)   
|Obsolescence reserves    | (3,298,000)       | (3,062,000)      
|Valuation reserves       | (608,000)         | (524,000)        
|Total inventory reserves | $  (7,290,000)    | $  (6,675,000)   
|                         |                   |                  
|Total Inventories, net   | $  12,710,000     | $  10,864,000    



Inventories are stated at the lower of cost (first-in, first-out method) or market.  Inventory consists of material, labor and overhead costs.





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Note 3.      DEBT



|                                                                                                                                                                                                               | December 31, 2004  | December 31, 2003 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------------------
|                                                                                                                                                                                                               |                    |                   
|Debt consists of the following:                                                                                                                                                                                |                    |                   
|1. Revolving credit at lender prime rate  (5.25%) at
December 31, 2004 plus 0.75%, interest
payable monthly.  Secured by receivables and inventory.                                                            | $  10,195,000      | -0-               
|2. Revolving credit at lender prime rate  (4.0%) at
December 31, 2003 plus 2.75%, interest
payable monthly.  Secured by receivables, inventory,
and certain other fixed assets.                                | -0-                | $  8,386,000      
|3. $900,000 mortgage note secured by Hope, Arkansas
property . Monthly principal payments of $13,687.
monthly interest  due at  bank prime (4.75%) plus 2%
on unpaid principal balance. Term of note, 7 years. | 866,000            | -0-               
|4. $2,098,000 term note secured by property
monthly principal payments of $24,976.  Monthly
interest at prime plus 3% on unpaid principal balance.                                                             | -0-                | 1,249,000         
|5. $815,000 term note secured by certain machinery
and equipment.  Monthly principal payments of
$13,583. Monthly interest at prime plus 3% on unpaid
principal balance                                        | -0-                | 353,000           
|6. Note payable to City of Hope, Arkansas, secured by
Second position on property, non-interest bearing.                                                                                                       | -0-                | 250,000           
|7. Promissory notes payable, non-interest bearing,
Payable in 28 payments quarterly through 1stQtr. 2005.                                                                                                      | 6,000              | 73,000            
|8. Earnout notes payable, non-interest bearing,
Contingent to the availability of defined
Free Cash Flow, payable up to $500,000
Annually in years 2005-2009.                                                  | 1,793,000          | 1,793,000         
|9. Asset purchase promissory note payable.  Payable
Monthly contingent on attaining certain sales levels.                                                                                                      | 130,000
__________ | 130,000
__________
|Total debt                                                                                                                                                                                                     | $  12,990,000      | $  12,234,000     
|Less portion due within one year                                                                                                                                                                               | 110,000            | 10,120,000        
|Total long-term debt                                                                                                                                                                                           | $  12,880,000      | $   2,114,000     



Long-term debt maturities under the loan facility in place at December 31, 2004 are: $110,000 (2005), $627,000 (2006), $10,829,000 (2007), $578,000 (2008) and $588,000 (2009).



On February 6, 2004, the Company entered into an amendment to the Loan and Security Agreement with Congress Financial Corporation extending the maturity date of its revolving line of credit and its term loan from February 8, 2004 to May 8, 2004. A Second Amendment was entered into on May 7, 2004 extending the expiration date to June 8, 2004 and a third amendment was entered into on June 6, 2004 extending the expiration date to August 8, 2004.  Under the terms of the amendments, the availability to borrow on the line of credit decreased from $14,000,000 to $10,500,000. The revolving loan interest and term loan interest rates increased to 2.75% and 3.00% in excess of the lender prime rate, respectively.





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Note 3.      DEBT (Continued)



On August 10, 2004, the Company entered into a three-year secure revolving credit facility with PNC Bank, National Association, replacing the Congress Financial Corporation credit facility.  Maximum credit available under the new PNC facility is $14,000,000, including available letter of credit accommodations of $1,000,000.  The interest rate on the revolving debt facility was lender prime plus 1/4 % or LIBOR plus 2%, and for letters of credit, the rate is 3.25% per annum on the daily outstanding balance.



On March 18, 2005, the Company entered into an amendment to the Credit, Loan and Security Agreement dated August 10, 2004 with PNC Bank, National Association. The Amendment No. 1 set forth the terms for temporary modification of the revolving interest rate to 1.25% above bank prime through April 12, 2005, the terms for temporary over-formula advances resulting from a change in the Lenders interpreting the formula for calculating Eligible Receivables, definition of collateral monitoring fees and redefinition of the fixed charge coverage ratio covenant from a quarterly basis to a rolling twelve month basis.



At December 31, 2004, the balance outstanding on the Companys revolver loan facility with PNC Bank, National Association was $10,195,000 and letter of credit accommodations were $40,000. Also at December 31, 2004, the balance outstanding on the Companys commercial mortgage loan with Elk Horn Bank was $866,000. The total of the loan balances was $11,061,000, which compares to a total loan balance at December 31, 2003 with Congress Financial Corporation of $9,988,000 and letter of credit accommodations of $50,000. At December 31, 2004, the Company is in compliance with the amended fixed charge coverage ratio covenant.



At March 28, 2004, the Company met job expansion incentives and the $250,000 City of Hope, Arkansas note was forgiven.The forgiveness of the debt was taken into non-operating income in March.



On June 28, 2004, the Company consummated the sale of its Beech Creek facility and property. The plant was vacated after consolidating operations in March of 2002.  The gross value of the transaction was $1.5 million and the net proceeds were used to reduce property term debt and revolver debt in July. The net difference between sales proceeds received, assets held for sale and other costs of approximately $118,000 was recorded against the asset restructuring reserve provided for this transaction. A $200,000 escrow account was established at the closing of the sale of the property to cover future EPA issues. Sale of the Beech Creek property has allowed the Company to proceed with replacing the Congress loan facility with new lenders.



August 10, 2004, the Company entered into a commercial property loan on its Hope, Arkansas properties with Elk Horn Bank and Trust Company acting as lead bank for a group of five lending institutions.  The loan with Elk Horn is for $900,000, with seven-year amortization and an interest rate of New York prime plus 2% adjusted quarterly.





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Note 4.      INCOME TAXES



The Company uses an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns.



The income tax provision consists of the following:



|                | 2004        | 2003        | 2002         
|--------------- | ----------- | ----------- | -------------
|Current:        |             |             |              
|Federal         | $ 22,000    | $ 19,000    | $      -0-   
|State and local | 133,000     | 18,000      | 5,000        
|Total Current   | $ 155,000   | $ 37,000    | $  5,000     
|Deferred:       |             |             |              
|Federal         | $       -0- | $       -0- | $         -0-
|Foreign         | -0-         | -0-         | -0-          
|State and local | -0-         | -0-         | -0-          
|Total Deferred  | -0-         | -0-         | -0-          
|Grand Total     | $ 155,000   | $ 37,000    | $      5,000 



The Company has provided a valuation reserve to write-down deferred tax assets due to the uncertainty of its ability to utilize them in future periods.



At December 31, 2004, the Company had federal, state and foreign net operating loss carry forwards of $7,567,000, $0 and $1,284,000, respectively.   At the end of 2003, net operating loss carry forwards were federal $8,992,000, state $2,961,000 and foreign $2,256,000.  Federal loss carry forwards begin to expire in 2010.  The Company also had $326,000 of tax credits.



The effective tax rate differs from the U.S. statutory federal income tax rate of 34% as described below:



|                                        | 2004        | 2003        | 2002         
|--------------------------------------- | ----------- | ----------- | -------------
|Income tax at statutory rate            | $   296,000 | $   414,000 | $     125,000
|Changes in valuation  allowance         | 211,000     | (165,000)   | (94,000)     
|State income taxes net of federal taxes | 38,000      | 11,000      | 3,000        
|Other                                   | (390,000)   | (223,000)   | (29,000)     
|Net totals                              | $   155,000 | $    37,000 | $      5,000 







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Note 4.      INCOME TAXES (Continued)



Deferred tax assets and liabilities are comprised of the following at December 31, 2004 and

December 31, 2003.



|                                 | 2004          | 2003        
|-------------------------------- | ------------- | ------------
|                                 | Assets        | Liabilities 
|                                 |               |             
|Inventory reserves               | $ 2,873,000   | -           
|Fringe benefits                  | 1,238,000     | -           
|Sales credit reserves            | 502,000       | -           
|Depreciation                     | 42,000        | -           
|Bad debt                         | 441,000       | -           
|Miscellaneous reserves           | 17,000        | -           
|Environmental                    | 34,000        | -           
|Net operating loss
carry forward | 2,573,000     | -           
|Tax credit carry forward         | 326,000       | -           
|Other                            | 601,000       | 73,000      
|Valuation allowance              | (8,574,000)   | _______-    
|Totals                           | $      73,000 | $     73,000







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Note 5.      EMPLOYEE STOCK OPTION AND AWARD PLANS



1995 Stock Option Plan - On November 16, 1995, the Company's shareholders approved a 1995 Stock Option Plan.  This plan provides for options to purchase up to 100,000 shares.  Participants in the plan shall be those employees selected by the Compensation Committee of the Board of Directors.



Options shall be granted at the fair market value of the Company's Common Stock at the date of grant. No option may be exercised until six months after the grant date or after 10 years after the grant date. The options vest ratably over a period not to exceed five years. There are no available options under the Plan at December 31, 2004.



On August 13, 1999 (the "Grant Date"), the Company granted its Chief Financial Officer and other key management non-qualifying options to purchase 52,000 Common Shares at a price of $.75 per share.  The options vest ratably at the rate of 20% of the shares granted per year, will expire in ten years from the Grant Date and are subject to the continuation of their employment.  As of December 31, 2004, 52,000 shares (100%) of these options were exercisable.



On March 28, 1997 (the "Grant Date"), the Company granted its President and Chief Executive Officer an option to purchase 100,000 Common Shares at a price of $.4375 per share under the 1995 Stock Option Plan.  In 1998, an additional 25,000 non-qualifying options, at a price of $.4375 per share, were granted to the President and are available for exercise. The options vest ratably at the rate of 25,000 shares per year and will expire in ten years from the Grant Date, subject to earlier termination of his employment.  As of December 31, 2004 he had not exercised any of these options.

Effective January 1, 1996, the Company adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation".  If the alternative accounting-related provisions of SFAS No. 123 had been adopted as of the beginning of 1995, the effect on 2004, 2003 and 2002 income before taxes and net income would have been de minimis.



Information with respect to stock options outstanding is as follows:



|                              | 2004       | 2003       | 2002      
|----------------------------- | ---------- | ---------- | ----------
|                              |            |            |           
|Outstanding:                  | 177,000    | 177,000    | 177,000   
|At year-end:                  |            |            |           
|Shares underlying options     | 177,000    | 177,000    | 177,000   
|Weighted average option price | $   0.5293 | $   0.5293 | $   0.5293
|Exercisable                   | 177,000    | 166,600    | 156,200   
|Available for grant           | -0-        | -0-        | -0-       





Note 6.      EMPLOYEE SAVINGS PLANS



Salaried employees and Group Leader hourly employees with one year of service are eligible to participate in a 401(k) plan ("Thrift Program").  Under this program, contributions are 100% vested.





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Note 7.      EMPLOYEE RETIREMENT PLANS



The Company sponsors funded defined pension benefit plans that cover hourly employees of the Hope facility and three former operating facilities. The benefits are based upon years of service.



The Company uses a December 31 measurement date for all of its pension plans.



|                                             | Pension Benefits 
|-------------------------------------------- | -----------------
|                                             | December 31, 2004
|Reconciliation of benefit obligations:       |                  
|Obligation at January 1                      | $ 10,453,000     
|Service cost                                 | 44,000           
|Interest cost                                | 606,000          
|Actuarial (gain)/loss                        | 222,000          
|Benefit payments                             | (453,000)        
|Obligation at December 31                    | $10,872,000      
|Reconciliation of fair value of Plan assets: |                  
|Fair value of Plan assets at January 1       | $  7,637,000     
|Actual return on Plan assets                 | 651,000          
|Employer contributions                       | 238,000          
|Benefit payments                             | (453,000)        
|Fair Value of Plan assets at December 31     | $  8,072,000     
|                                             |                  
|                                             | Pension Benefits 
|                                             | December 31, 2004
|Funded status:                               |                  
|Funded status at December 31                 | $  (2,799,000)   
|Unrecognized transition (asset) obligation   | (11,000)         
|Unrecognized prior service costs             | 15,000           
|Unrecognized net actuarial (gain)/loss       | 2,253,000        
|Net amount recognized                        | $     (542,000)  



Amounts recognized in the statement of financial position consist of:



|                                     | December 31, 2004 | December 31, 2003
|------------------------------------ | ----------------- | -----------------
|Accrued benefit cost                 | $  (2,799,000)    | $  (2,816,000)   
|Intangible asset                     | 15,000            | 17,000           
|Accumulated other comprehensive loss | 2,242,000         | 2,020,000        
|Totals                               | $     (542,000)   | $     (779,000)  



The plans accumulated benefit obligation was $10,872,000 at December 31, 2004 and $10,453,000 at December 31, 2003.





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Note 7.      EMPLOYEE RETIREMENT PLANS (Continued)





Information for pension plans with an accumulated benefit obligation in excess of plan assets:



|                               | December 31, 2004 | December 31, 2003
|------------------------------ | ----------------- | -----------------
|Projected benefit obligation   | $  10,872,000     | $  10,453,000    
|Accumulated benefit obligation | 10,872,000        | 10,453,000       
|Fair value of plan assets      | 8,072,000         | 7,637,000        



The following table provides the components of net periodic benefit cost for the plans for fiscal years 2004 and 2003:



Pension Benefits



|                                              | Dec.  31, 2004 | Dec.  31, 2003 | Dec.  31, 2002
|--------------------------------------------- | -------------- | -------------- | --------------
|Service cost                                  | $    44,000    | $    34,000    | $    24,000   
|Interest cost                                 | 606,000        | 605,000        | 588,000       
|Expected return on Plan assets                | (642,000)      | (544,000)      | (601,000)     
|Amortization of transition (asset) obligation | (5,000)        | (5,000)        | (5,000)       
|Amortization of prior service cost            | 2,000          | 2,000          | 2,000         
|Amortization of net (gain)/loss               | 77,000         | 91,000         | 19,000        
|Net periodic benefit cost/(benefit)           | $   82,000     | $  183,000     | $    27,000   



Additional Information:

|                                                                   | December 31, 2004 | December 31, 2003
|------------------------------------------------------------------ | ----------------- | -----------------
|Increase in minimum liability included in
other comprehensive loss | $    222,000      | $    41,000      





The assumptions used in the measurement of the Companys benefit obligation are shown in the following tables:

Weighted-average assumptions used to determine benefit obligations at:



|                              | December 31, 2004 | December 31, 2003
|----------------------------- | ----------------- | -----------------
|                              |                   |                  
|Discount rate                 | 5.75%             | 6.00%            
|Rate of compensation increase | N/A               | N/A              

Weighted-average assumptions used to determine net periodic benefit costs for years ended:



|                               | December 31, 2004 | December 31, 2003
|------------------------------ | ----------------- | -----------------
|                               |                   |                  
|Discount rate                  | 6.00%             | 6.50%            
|Expected return on Plan assets | 8.50%             | 8.50%            
|Rate of compensation increase  | N/A               | N/A              







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Note 7.      EMPLOYEE RETIREMENT PLANS (Continued)



In determining the expected return on plan assets, the Plan Trustees consider relative weighting of the plan assets, the historical performance of the plan assets and other economic indicators of future performance.  In addition, the Plan Trustees consult with and consider the opinion of the trust management advisors and other professionals in developing appropriate return benchmarks.



Pension Plan Assets



The Company's pension plan weighted-average asset allocations at December 31, 2004, and December 31, 2003, by asset category are as follows:



|Asset Category           | December 31, 2004 | December 31, 2003
|------------------------ | ----------------- | -----------------
|                         |                   |                  
|Equity securities        | 63.00%            | 63.00%           
|Debt securities          | 36.00%            | 36.00%           
|Cash or cash equivalents | 1.00%             | 1.00%            
|Total                    | 100.00%           | 100.00%          



Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and provide liquidity to meet present and future benefit payment requirements.  Plan assets are reviewed for performance and rebalanced to the target asset allocation objective periodically as needed.



Cash Flows



Plan Contributions



The Company expects to contribute $78,000 to its four pension plans in 2005.



Estimated Future Benefit Payments



The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



|Year              | Pension
Benefits
|----------------- | ----------------
|                  |                 
|2005              | $ 411,000       
|2006              | 420,000         
|2007              | 425,000         
|2008              | 437,000         
|2009              | 449,000         
|Years 2010 - 2014 | 2,530,000       







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Note 8.      LEASES



The Company leases certain plants and offices, and computer equipment. Certain of the real estate leases, constituting non-financing leases, have provisions for renewal. These lease renewals are primarily for five years.



Total rental expense charged to operations was $267,000 (2004), $220,000 (2003) and

$195,000 (2002).



Minimum commitments under all noncancelable-operating leases at December 31, 2004 for the following five years are as follows:



|Year              | Amount     
|----------------- | -----------
|2005              | $   269,000
|2006              | 248,000    
|2007              | 247,000    
|2008              | 231,000    
|2009              | -0-        
|Total 2005 - 2009 | $   995,000







Note 9.      SALES TO MAJOR CUSTOMERS



In 2004, net sales to the Company's four largest customers were approximately 24%, 24%, 18% and 8% of total net sales.  In 2003, net sales to the Company's four largest customers were approximately 23%, 21%, 17% and 16% of total net sales.  At December 31, 2004, accounts receivable balances of the Company's four largest customers were approximately 41%, 35%, 11% and 0% of total gross receivables. At December 31, 2003 accounts receivable balances of the Company's four largest customers were approximately 43%, 41%, 11% and 1% of total gross receivables.



The Company's largest product line is remanufactured carburetors, which accounted for 55% of 2004 net sales compared to 47% in 2003. The Company's main distribution channel is through two large retailers who accounted for 87% of net carburetor sales in 2004 and 95% in 2003.  The balance of the carburetor sales was to original equipment aftermarket customers and traditional warehouse distributors.



A reduction in the level of sales to or the loss of one or more of these customers would have a material adverse effect on the Companys financial condition and results of operations.







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Note 10.      COMMITMENTS AND CONTINGENCIES



A.   ENVIRONMENTAL MATTERS



The Company is subject to various Federal, state and local environmental laws and regulations incidental to its business.  The Company continues to modify, on an ongoing basis, processes that may have an environmental impact.



The Company has been named, along with a number of other companies, as a Potentially Responsible Party in several Federal and state sites where the Company had operations or where byproducts from the Company's manufacturing processes were disposed.  Two sites currently have active litigation, while the others have been settled or are dormant.  The Company has undertaken voluntary actions at its closed plant site ranging from periodic testing to modest amounts of soil and water remediation and storage tank removal.



The Company has $100,000 in reserves for anticipated future costs of pending environmental matters at December 31, 2004. Also, a $200,000 escrow account was established at the closing of the sale the Beech Creek, Pennsylvania property to cover future EPA issues. Future costs include the Company's estimated allocated share of remedial investigation/feasibility studies and clean up and disposal costs. The Company's ultimate costs are subject to further development of existing studies and possible readjustment of the Company's pro rata share of total costs.  The Company believes that it has adequate insurance to cover these costs.



B.  OTHER



From time to time the Company may be named in lawsuits during the normal course of its business.  Management intends to defend any lawsuits that may arise.  In the opinion of Management, legal matters now pending will not have a material adverse effect on the consolidated financial position of the Company.





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Note 11.      OTHER ACCRUED EXPENSES.



Other accrued expenses consist of the following:



|                               | December 31, 2004 | December 31, 2003
|------------------------------ | ----------------- | -----------------
|Pension                        | $  2,799,000      | $  2,816,000     
|Returned goods credit reserves | 1,027,000         | 633,000          
|Workers' compensation          | 711,000           | 808,000          
|Environmental costs            | 100,000           | 240,000          
|Legal & Professional fees      | 100,000           | 90,000           
|Rebates                        | 8,000             | 54,000           
|Interest                       | 48,000            | 42,000           
|Other items - net              | 40,000            | 120,000          
|Total other accrued expenses   | $  4,833,000      | $  4,803,000     



Note 12.      RESTRUCTURING CHARGES



On June 28, 2004, the Company consummated the sale of its Beech Creek facility and property. The plant was vacated after consolidating operations in March of 2002.  The gross value of the transaction was $1.5 million and the net proceeds were used to reduce property term debt and revolver debt in July. The net difference between sales proceeds received, assets held for sale and other costs of  $118,000 was recorded against the asset restructuring reserve provided for this transaction.



The Company adopted a plan in 2001 to consolidate the operations of its Beech Creek, Pennsylvania manufacturing facility into its Hope, Arkansas facility.  This plan was formally announced on January 10, 2002. The consolidation of these facilities eliminated having to operate two plants significantly under capacity, and allowed the Company to reduce costs and improve operating efficiencies.  The Pennsylvania facility ceased operation as of March 15, 2002.



The phase-down of the Pennsylvania facility was projected to take three to four months and a charge of $154,000 was recorded in the year ended December 31, 2001. The restructuring charge included estimates for increased property insurance, security for the idle plant and buyouts of service contracts. It was determined in the second quarter of 2002 that the estimated restructuring charge was higher than needed, consequently, a reversal of $127,000 was recorded in May 2002.



In 2002, the Company incurred expenses totaling $582,000 for inventory and equipment relocation, severance and other restructuring costs, which could not be accrued in 2001, as they did not qualify as exit costs.  The entire relocation plan was completed by December 31, 2002.



|Restructuring and Relocation Summary:                              |           
|------------------------------------------------------------------ | ----------
|Restructuring Reserve Balance December 31, 2001                    | $  154,000
|Reversal of unutilized accrual                                     | (127,000) 
|Relocation costs incurred (Severance, Legal, Equipment Relocation) | 582,000   
|Net Restructuring and Relocation Costs Incurred                    | $  609,000







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Note 13.      SUPPLEMENTAL CASH FLOW INFORMATION



Cash paid during the year for interest and income taxes was as follows:



|                      | 2004        | 2003        | 2002       
|--------------------- | ----------- | ----------- | -----------
|Interest expense, net | $   612,000 | $   464,000 | $   529,000
|Income taxes          | 142,000     | 2,000       | 11,000     



Supplemental Schedule of Non-cash Investing and Financing Activities:



There was an adjustment for additional minimum pension liability charged to "Other Comprehensive Loss" of $222,000 and $41,000 for the years 2004 and 2003, respectively.



In December 2003, the Company recorded assets and corresponding liabilities of $130,000 for obligations included in debt described in Note 3 to the financial statements.



Also in December 2003, the Company recorded assets and corresponding liabilities of $40,000 for obligations included in accounts payable.



In March 2002, the Company ceased operations at its Beech Creek, Pennsylvania facility.  The land, buildings and improvements totaling $1,487,000 that remained at the location were reclassified to "Assets Held for Sale". The sale of these assets was consummated on June 28, 2004.





Note 14.      SELECTED QUARTERLY FINANCIAL DATA:

(UNAUDITED)





(In Thousands, except per share data)



|               | Net Sales  | Operating Income | Net Income | Earnings Per Share Basic | Earnings Per Share Diluted
|-------------- | ---------- | ---------------- | ---------- | ------------------------ | --------------------------
|2004 Quarters: |            |                  |            |                          |                           
|First          | $    5,468 | $    231         | $    335   | $   0.09                 | $   0.09                  
|Second         | 5,124      | 479              | 322        | 0.09                     | 0.09                      
|Third          | 4,578      | 166              | 21         | 0.01                     | 0.00                      
|Fourth         | 4,828      | 176              | 37         | 0.01                     | 0.01                      
|Total 2004     | $  19,998  | $    1,052       | $    715   | $   0.20                 | $   0.19                  
|               |            |                  |            |                          |                           
|2003 Quarters: |            |                  |            |                          |                           
|First          | $    6,196 | $    390         | $    284   | $   0.08                 | $   0.08                  
|Second         | 6,973      | 722              | 613        | 0.17                     | 0.17                      
|Third          | 5,000      | 102              | 12         | 0.00                     | 0.00                      
|Fourth         | 5,869      | 312              | 221        | 0.06                     | 0.06                      
|Total 2003     | $  24,038  | $   1,526        | $  1,130   | $   0.31                 | $   0.31                  







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CHAMPION PARTS, INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS







|Allowance for
Uncollectible Accounts: | Balance at Beginning of Period | Charged to Operations | Additions to/ Deductions From Reserves | Balance at End of Period
|------------------------------------- | ------------------------------ | --------------------- | -------------------------------------- | ------------------------
|Year ended December 31, 2002          | $   339,000                    | $    327,000          | $    (11,000)                          | $    655,000            
|                                      |                                |                       |                                        |                         
|Year ended December 31, 2003          | $   655,000                    | $    365,000          | $    (75,000)                          | $    945,000            
|                                      |                                |                       |                                        |                         
|Year ended December 31, 2004          | $   945,000                    | $    298,000          | $  (122,000)                           | $ 1,121,000             







|Inventory Reserves:          | Balance at Beginning of Period | Charged to Operations | Additions to/ Deductions From Reserves | Balance at End of Period
|---------------------------- | ------------------------------ | --------------------- | -------------------------------------- | ------------------------
|Year ended December 31, 2002 | $  6,227,000                   | $    528,000          | $ (298,000)                            | $  6,457,000            
|                             |                                |                       |                                        |                         
|Year ended December 31, 2003 | $  6,457,000                   | $    879,000          | $  (661,000)                           | $  6,675,000            
|                             |                                |                       |                                        |                         
|Year ended December 31, 2004 | $  6,675,000                   | $    558,000          | $  (231,000)                           | $  7,290,000            

































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CHAMPION PARTS, INC.

EXHIBIT INDEX

_______



(Pursuant to Item 601 of Regulation S-K)





NO.

DESCRIPTION AND PAGE OR INCORPORATION REFERENCE



Articles of Incorporation and By-Laws



(3)(a)

Articles of Incorporation (incorporated by reference to Registrant's Quarterly Report on Form 10-Q "File No. 1-07807", for the quarter ended June 30, 1998).



(3)(b)

By Laws (incorporated by reference to Registrants current report on Form 8-K  "File No. 1-07807", filed June 5, 1997).



Instruments Defining the Rights of Security Holders, Including Indentures



(4)(a)

Specimen of Common Share Certificate



(4)(b)

Articles of Incorporation (see Exhibit (3)(a) above).



(4)(c)

By-Laws (see Exhibit (3)(b) above).



(With respect to long-term debt instruments, see "Item 14. Exhibits, Financial Statement   Schedules, and Reports on Form 8-K").



Material Contracts



(10)(a)

Agreement, as amended, between Registrant and Raymond G. Perelman dated September 20, 1993 (incorporated by reference to Registrant's annual Report on Form 10-K "File No. 1-07807", year ended December 31, 1998).



(10)(b)

Letter Agreement dated October 9, 1995 between Registrant and RGP Holding, Inc. (Incorporated by reference to Registrants quarterly report on Form 10-Q "File No.1-07807", filed November 24, 1995).



(10)(c) 1995 Stock Option Plan as of November 1, 1995 (Incorporated by reference to the Registrant's Definitive Proxy Statement for the 1995 Annual Meeting of Shareholders).



(10)(d) Severance Agreement dated March 28, 1997 between the Registrant and Jerry A. Bragiel (Incorporated by reference to the Registrants annual report on Form 10-K "File No. 1-07807", year ended December 28, 1997).





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CHAMPION PARTS, INC.

EXHIBIT INDEX

_______



Material Contracts (Continued)



(10)(e) Employment and Stock Option Agreement between the Registrant and Jerry A. Bragiel dated March 28, 1997 (Incorporated by reference to the Registrants annual report on Form 10-K "File No. 1-07807", year ended December 28, 1997).  (Note 1)



(10)(f) Stock Option Agreement between the Registrant and key management personnel dated August 13, 1999. (Incorporated by reference to the Registrants annual report on Form 10-K "File No. 1-07807", year ended December 31, 2000).  (Note 1)



(10)(g) Settlement Agreement dated July 1, 1997 between the Registrant and Unsecured Trade Creditors (Incorporated by reference to Current Report on Form 8-K "File No. 1-07807" quarter ended July 30, 1997).



(10)(h) Loan and Security Agreement dated February 8, 2001 between the Registrant and Congress Financial Corporation (Southern), a subsidiary of First Union Bank (incorporated by   reference to Registrants Annual Report on Form 10-K "File No. 1-07807", year ended December 31, 2000).



(10)(i)  First Amendment to Loan and Security Agreement dated February 8, 2001 between the Registrant and Congress Financial Corporation extending maturity date to May 8, 2004, (incorporated by reference to Registrants Current Report on Form 8-K "File No. 1-07807", dated February 6, 2004).



(10)(j)  Second Amendment to Loan and Security Agreement dated February 8, 2001 between the Registrant and Congress Financial Corporation extending maturity date to June 8, 2004, (incorporated by reference to Registrants Current Report on Form 8-K "File No. 1-07807", dated May 7, 2004).



(10)(k)  Third Amendment to Loan and Security Agreement dated February 8, 2001 between the Registrant and Congress Financial Corporation extending maturity date to August 8, 2004, (incorporated by reference to Registrants Current Report on Form 8-K "File No. 1-07807", dated June 7, 2004).



(10)(l)  Sale agreement dated June 28, 2004 between the Registrant and Your Business Centers, Inc. for sale of Beech Creek, Pennsylvania plant and property (incorporated by reference to Registrants Current Report on Form 8-K "File No. 1-07807", dated July 6, 2004).



(10)(m) Secured Revolving Credit facility dated August 10, 2004 between the Registrant and PNC Bank, National Association, and Commercial Property Loan dated August 10, 2004 between the Registrant and Elk Horn Bank and Trust Company (incorporated by reference to Registrants Current Report on Form 8-K "File No. 1-07807", dated August 11, 2004).









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CHAMPION PARTS, INC.

EXHIBIT INDEX

_______



Material Contracts (Continued)



(10)(n)  Amendment No. 1 to Secured Revolving Credit facility dated August 10, 2004 between the Registrant and PNC Bank, National Association (incorporated by reference to Registrants Current Report on Form 8-K "File No. 1-07807", dated March 22, 2005).



Additional Exhibits



(99)

Audit Committee Charter (incorporated by reference to Registrant's Annual Report on Form 10-K "File No. 1-07807", for the year ended December 31, 2004).



(14)

Officers Code of Ethics (incorporated by reference to Registrant's Annual Report on Form 10-K "File No. 1-07807", for the year ended December 31, 2003).



(21)

List of Subsidiaries of Registrant (incorporated by reference to Registrant's Annual Report on Form 10-K "File No. 1-07807", for the year ended December 31, 2001).



Note:

(1) Denotes management contract or compensatory plan or arrangement required to be

filed as an Exhibit to this report pursuant to item 601 of Regulation S-K.





65