<PAGE>   1
                                  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, 1999
                                       OR

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

For the transition period from _______________ to _______________

                        Commission File Number 333-45823

                           STANADYNE AUTOMOTIVE CORP.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                         <C>
                           Delaware                                                      22-2940378
(State or Other Jurisdiction of Incorporation or Organization)              (I.R.S. Employer Identification No.)

            92 Deerfield Road, Windsor, Connecticut                                      06095-4209
           (Address of Principal Executive Offices)                                      (Zip Code)
</TABLE>

Registrant's telephone number including area code (860) 525-0821

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X]           No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of December 31, 1999, there was no established public trading market for the
shares of the Registrant's common stock and no shares of common stock were held
by non-affiliates of the Registrant.

The number of Common Shares of the Company, $0.01 per share par value,
outstanding as of March 1, 2000 was 1,000.

                   DOCUMENTS INCORPORATED BY REFERENCE - None
<PAGE>   2
                           STANADYNE AUTOMOTIVE CORP.

                                    FORM 10-K

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                            PAGE
<S>                <C>                                                                      <C>
PART I:
       ITEM   1.   Business.............................................................      3
       ITEM   2.   Properties...........................................................      9
       ITEM   3.   Legal Proceedings....................................................      9
       ITEM   4.   Submission of Matters to a Vote of Security Holders..................      9

PART II:
       ITEM   5.   Market for the Registrant's Common Equity and Related Stockholder
                   Matters..............................................................     10
       ITEM   6.   Selected Financial Data..............................................     10
       ITEM   7.   Management's Discussion and Analysis of Financial Condition and
                   Results of Operations................................................     11
       ITEM  7A.   Quantitative and Qualitative Disclosures About Market Risk...........     15
       ITEM   8.   Financial Statements and Supplementary Data..........................     17
       ITEM   9.   Changes in and Disagreements with Accountants on Accounting
                   and Financial Disclosure.............................................     18

PART III:
       ITEM  10.   Directors and Executive Officers of the Registrant...................     19
       ITEM  11.   Executive Compensation...............................................     21
       ITEM  12.   Security Ownership of Certain Beneficial Owners and Management.......     25
       ITEM  13.   Certain Relationships and Related Transactions.......................     27

PART IV:
       ITEM  14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....     28
       Signatures  .....................................................................     30
</TABLE>


                                       2
<PAGE>   3
                                     PART I

ITEM 1.  BUSINESS

GENERAL

Stanadyne Automotive Corp. (the "Company") is a designer and manufacturer of
highly engineered, precision manufactured engine components, including fuel
injection equipment for diesel engines and hydraulic lash compensating devices
primarily for gasoline engines (the latter commonly known, and referred to
hereafter, as "hydraulic valve lifters"). The Company sells engine components to
original equipment manufacturers ("OEMs") in a variety of applications,
including automobiles, light duty trucks, agricultural and construction vehicles
and equipment, industrial products and marine equipment. The Company also sells
replacement units and parts through its aftermarket distribution network. The
Company conducts its business through two principal operating segments: the
Diesel Group, which accounted for 82% of the Company's 1999 net sales, and
Precision Engine Products Corp. ("Precision Engine"), a wholly-owned subsidiary,
which accounted for 18% of the Company's 1999 net sales. Additional segment
information can be found in Notes 20 and 21 of Notes to Consolidated Financial
Statements contained in Item 8 of this Report.

The Company is a wholly-owned subsidiary of Stanadyne Automotive Holding Corp.
("Holdings"). The Company and Holdings were formed by American Industrial
Partners Capital Fund II, L.P. ("AIP") upon the purchase of Stanadyne Automotive
Corp. and Subsidiaries (the "Predecessor") from Metromedia Company (the
"Sellers") on December 11, 1997 (the "Acquisition").

THE DIESEL GROUP

The Diesel Group is one of only four independent worldwide manufacturers selling
to the geographic areas in which the Company competes. Net sales for the Diesel
Group were $231.0 million, $256.6 million and $216.6 million for 1999, 1998 and
1997, respectively. Operating income for the Diesel Group was $15.4 million,
$12.7 million and $8.3 million for 1999, 1998 and 1997, respectively. Total
assets of the Diesel Group were $270.5 million, $283.7 million and $282.7
million at December 31, 1999, 1998 and 1997, respectively.

PRODUCTS

The Diesel Group produces fuel injection equipment for diesel engines of up to
250 horsepower, an engine range comprising approximately 90% of all diesel
engines produced worldwide. The Diesel Group sells its fuel injection products
to its customers on an individual component basis or by complete line with
primary focus on the off highway agricultural and industrial segment of the
market. Fuel pumps and injectors, the Diesel Group's primary products, are the
most highly engineered, precision manufactured components on a diesel engine and
comprise the core components of a diesel engine's fuel system. Because fuel
system components are so elemental to the proper functioning and optimal
performance of a diesel engine, they are essentially custom engineered for a
specific engine platform. As a result, the Company typically supplies these
components on a sole source basis for the life of engine platforms. The Diesel
Group also manufactures diesel fuel filters, fuel heaters and water separators
and distributes diesel fuel conditioners, stabilizers and diesel engine
diagnostic equipment.


                                       3
<PAGE>   4
CUSTOMERS

The Diesel Group's primary customers are OEMs of diesel engines. The Diesel
Group's four largest customers, Deere & Company ("Deere"), General Motors
Corporation ("GM"), Ford Motor Company ("Ford") and Perkins Engines Company
Limited, accounted for approximately $144.3 million, or approximately 62.5% of
the Diesel Group's net sales. The Diesel Group had two customers that accounted
for more than 10% of 1999 net sales: Deere accounted for 24.8% and GM accounted
for 19.6% of the Diesel Group's 1999 net sales.

To support the servicing of the engine and the Diesel Group's products, the
Diesel Group sells aftermarket units and parts to the service organizations of
its OEM customers and through its own global network of authorized distributors
and dealers.

PLANT CLOSING

On September 9, 1998, the Company announced the closure of its manufacturing
facility in Bari, Italy. The Bari plant was part of a wholly-owned subsidiary,
Stanadyne Automotive, SpA ("SpA"), which is headquartered in Brescia, Italy.
This action was taken because of continuing financial losses at Bari resulting
from worldwide excess manufacturing capacity for the types of diesel fuel
injectors produced there. The cost of closing the operation resulted in a charge
to 1998 earnings of $4.2 million. The Company favorably concluded the major cost
elements of the plant closure in the third quarter of 1999 and as a result
recorded a $1.9 million savings, primarily as a result of lower severance costs,
to the reserve established in 1998.

PRECISION ENGINE

Precision Engine is a major independent (non-captive) manufacturer of hydraulic
valve lifters primarily for gasoline engines. Net sales for Precision Engine
were $50.5 million, $50.5 million and $56.7 million for 1999, 1998 and 1997,
respectively. Operating income for Precision Engine was $6.5 million, $2.3
million and $4.0 million for 1999, 1998 and 1997, respectively. Total assets of
Precision Engine were $53.6 million, $58.0 million and $56.5 million at December
31, 1999, 1998 and 1997, respectively.

PRODUCTS

Precision Engine designs and manufactures four types of hydraulic valve lifters:
roller rocker arm assemblies, lash adjusters, roller valve lifters and slipper
valve lifters. These products convert the rotary motion of a camshaft into a
reciprocating motion and allow for the adjustment of lash (clearance) as valves
are opened and closed in the cylinder head of an engine. Roller rocker arms
accounted for 68.9% of Precision Engine's 1999 net sales.

CUSTOMERS

Precision Engine's primary customers are OEMs. DaimlerChrysler Corp. ("DC") and
Ford accounted for 67.6% and 13.7%, respectively, of Precision Engine's 1999 net
sales. Precision Engine also sells to several companies for distribution into
the aftermarket.


                                       4
<PAGE>   5
BRAZIL BUSINESS STATUS

Precision Engine was selected in 1997 as the sole supplier of roller rocker arm
assemblies for use on an engine to be manufactured in Brazil by Tritec Motors
LTDA. ("Tritec"), a Brazilian joint venture company formed by DC and BMW AG. To
support this new business opportunity, Precision Engine established a new
subsidiary in Brazil, Precision Engine Products LTDA. ("PEPL"), on October 16,
1998. PEPL is wholly-owned by Precision Engine (except for a fraction of 1%
which is owned by the Company). This new limited liability company will
manufacture, assemble and test roller rocker arm assemblies for supply to
Tritec. Investment in PEPL began in the first quarter of 1999. Initial pilot
production at PEPL began in the second half of 1999 and production is expected
to begin in the third quarter of 2000.

COMPETITION

Because of the technical expertise required to design and manufacture the
Company's products to the tolerances required, the existence of longstanding
supply relationships in the engine component business and the significant
capital expenditures and lead time required to enter the business, there are a
limited number of manufacturers selling to the global markets in which the
Company operates. The Company competes on the basis of technological innovation,
product quality, processing and manufacturing capabilities, service support and
price.

The main competitors of the Diesel Group are Robert Bosch GmbH, Delphi
Automotive Systems ("Delphi") and Denso (formerly Nippondenso of Japan). In
1999, several acquisitions occurred within the diesel fuel injection industry.
Robert Bosch GmbH, the largest fuel injection manufacturer, acquired the
controlling share of ownership in Zexel of Japan. Also, Delphi entered the
diesel market through the purchase of Lucas Diesel Systems from TRW Inc., which
had earlier in the year purchased Lucas from LucasVarity.

The main competitors of Precision Engine are INA Walzlager Schaeffler KG, Eaton
Corporation, Delphi and in the aftermarket, WA Thomas (formerly the Hylift
division of SPX Corporation).

RAW MATERIALS AND COMPONENT PARTS

The Company's products are made largely of specially designed metal parts, most
of which are designed, purchased, cast or stamped and machined by the Company to
its own technical specifications. Metallic raw materials such as steel,
aluminum, copper and brass are commodity items readily available from a number
of suppliers. Certain parts, such as electronic components, are made to the
Company's specifications. Other parts such as fasteners, are purchased by the
Company from outside suppliers as standardized parts or are made to the
Company's specifications. Although from time to time the Company has experienced
temporary supply shortages due to localized conditions, no such shortage has
materially adversely affected the Company.


                                       5
<PAGE>   6
PATENTS AND TRADEMARKS

The Company relies upon patent, trademark and copyright protection as well as
upon unpatented technological know-how and other trade secrets for certain
products, components, processes and applications. However, the Company's
operations are not dependent upon any single or related group of patents,
copyrights or trademarks or their duration. The Company considers its
proprietary information important, especially in the maintenance of its
competitive position in the aftermarket business, and takes actions to protect
its intellectual property rights.

EMPLOYEES

At December 31, 1999, the Company employed 2,207 persons of whom approximately
27% were salaried and 73% were hourly employees. All of the Company's employees
are non-unionized with the exception of those in SpA. The Company believes its
relations with its employees are good.

TECHNOLOGY, RESEARCH AND DEVELOPMENT

Engine manufacturers are required to continually improve engine performance and
fuel economy. Accordingly, the Company's research and development investment is
significant. In general, the Company funds its own research and development
expenses, although during the pre-production program phase some of those
expenses may be customer-funded. Research and development costs incurred for
1999, 1998 and 1997 were $9.1 million, $10.3 million and $9.9 million,
respectively, of which $0.6 million, $0.7 million, and $1.6 million,
respectively, were reimbursed by customers. The Diesel Group accounts for over
95% of these amounts.

Once an OEM commits to purchasing a product from the Company, usually one to
three years into the development or application process, the Company may need to
allocate capital for the machinery, equipment and tooling necessary for engine
program launch, ramp-up and product volume increases. Furthermore, given the
significant existing capital investment in plant and equipment already made by
the Company, the Company has on-going programs to maintain, upgrade and replace
its investments. In 1999, 1998 and 1997, the Company spent $11.5 million, $14.4
million and $13.5 million, respectively, on capital investments.


                                       6
<PAGE>   7
FINANCIAL INFORMATION ABOUT INTERNATIONAL AND DOMESTIC OPERATIONS AND EXPORT
SALES

The Company has manufacturing operations in the United States, Italy and Brazil.
The products manufactured at all locations are sold within their respective
domestic markets, as well as exported throughout the world. These products are
sold to both OEM and aftermarket customers.

The sales to OEM and aftermarket customers during 1999, 1998 and 1997 were as
follows:

<TABLE>
<CAPTION>
                                              1999           1998           1997
                                              ----           ----           ----
                                                    (dollars in millions)
<S>                                         <C>            <C>            <C>
Original Equipment:
     Diesel Group                           $  153.7       $  159.4       $  135.5
     Precision Engine                           45.0           44.8           49.4
Aftermarket:
     Diesel Group                               77.4           97.2           81.1
     Precision Engine                            5.5            5.7            7.3
                                            --------       --------       --------
         Total Net Sales                    $  281.6       $  307.1       $  273.3
                                            ========       ========       ========
</TABLE>


Detailed results of operations and assets by geographic area for the years ended
December 31, 1999, 1998 and 1997 appear below and appear in Note 21 of Notes to
Consolidated Financial Statements contained in Item 8 of this Report.

<TABLE>
<CAPTION>
                                                 1999         1998         1997
                                                 ----         ----         ----
                                                     (dollars in millions)
<S>                                            <C>          <C>          <C>
Net Sales:
     United States                             $  168.5     $  195.6     $  183.6
     England                                       43.5         51.0         40.4
     All Other Geographic Areas                    69.6         60.5         49.3
                                               --------     --------     --------
         Total Net Sales                       $  281.6     $  307.1     $  273.3
                                               ========     ========     ========

Operating Income (Loss):
     United States                             $   19.3     $   21.7     $   12.5
     Italy                                          3.0         (6.7)         (.2)
     Brazil                                         (.4)      --           --
                                               --------     --------     --------
         Total Operating Income                $   21.9     $   15.0     $   12.3
                                               ========     ========     ========

Identifiable Assets:
     United States                             $  264.9     $  271.4     $  273.9
     Italy                                         40.1         50.5         47.4
     Brazil                                         1.1       --           --
                                               --------     --------     --------
         Total Identifiable Assets             $  306.1     $  321.9     $  321.3
                                               ========     ========     ========
</TABLE>

The Company's worldwide operations are subject to the risks normally associated
with foreign operations, including but not limited to, the disruption of
markets, changes in export or import laws, labor unrest, political instability,
restrictions on transfers of funds, unexpected changes in regulatory
environments, difficulty in obtaining distribution and support, and potentially
adverse tax consequences. In addition, even though the Company generally
matches, to the extent possible, related costs and revenues in a single
currency, and generally includes exchange rate protections in its sales
contracts, the U.S. dollar value of the Company's foreign sales varies with
foreign currency


                                       7
<PAGE>   8
exchange rate fluctuations. There can be no assurance that any of the foregoing
factors will not have a material adverse effect on the Company.

ENVIRONMENTAL MATTERS

The Company's facilities are subject to federal, state and local environmental
requirements, including those governing discharges to the air and water, the
handling and disposal of industrial and hazardous wastes, and the remediation of
contamination associated with releases of hazardous substances. The Company's
manufacturing operations involve the use of hazardous substances and, as is the
case with manufacturers in general, if a release of hazardous substances occurs
or has occurred on or from the Company's facilities, the Company may be held
liable and may be required to pay the cost of remedying the condition. The
amount of any such liability could be material. Pursuant to the terms of the
Acquisition, the Sellers have agreed to conduct and complete remediation of soil
and groundwater contamination at the Company's Windsor, CT and Jacksonville, NC
facilities. Although the Sellers have agreed to complete these remediations and
have indemnified the Company with respect to these matters and certain other
environmental matters, there can be no assurance that the Sellers will have the
ability to completely fulfill their obligations to indemnify the Company for
such matters. If the Sellers are unable to fulfill their obligations, the
Company will be responsible for such matters and the cost could be material.
Estimates of the cost at the time of the Acquisition for the remediations to be
completed by the Sellers at the Windsor, CT and Jacksonville, NC facilities were
$1.7 million and $0.3 million, respectively. Additional information can be found
in Note 19 of Notes to Consolidated Financial Statements contained in Item 8 of
this Report.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains certain forward-looking statements with respect to
the financial condition, results of operations and business of the Company,
including financial statements, notes to financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations. All of
these forward-looking statements are based on estimates and assumptions made by
the management of the Company which, although believed to be reasonable, are
inherently uncertain. Therefore, undue reliance should not be placed upon such
estimates and statements. No assurance can be given that any such estimates will
be realized, and actual results may differ materially from those contemplated by
such forward-looking statements. Factors that may cause such differences
include: (1) increased competition; (2) increased costs; (3) loss or retirement
of key members of management; (4) increases in the Company's cost of borrowing
or inability or unavailability of additional debt or equity capital; (5) adverse
state or federal legislation or regulation or adverse determinations in pending
litigation; and (6) changes in general economic conditions and/or in the markets
in which the Company competes. Many of such factors are beyond the control of
the Company and its management.


                                       8
<PAGE>   9
ITEM 2.  PROPERTIES

The Company's executive offices are located in Windsor, Connecticut. The Company
believes that substantially all of its properties and equipment are in good
condition, and that it has sufficient capacity to meet its current and projected
manufacturing and distribution needs.

Below is a summary of the existing facilities:

<TABLE>
<CAPTION>
                             Square        Type of
            Location        Footage        Interest   Description of Use
            --------        -------        --------   ------------------
<S>                         <C>            <C>        <C>
  DIESEL GROUP:
      Windsor, CT             571,000       Owned     Corporate Offices, Diesel Group Headquarters, Sales and
                                                      Marketing, Engineering Center, Manufacturing
      Jacksonville, NC        110,000       Owned     Manufacturing, Distribution
      Washington, NC          177,000       Owned     Manufacturing
      Trappes, France          23,000       Leased    Engineering, Sales
      Huntingdon, England       3,000       Leased    Engineering, Sales
      Brescia, Italy          175,000       Owned     SpA Headquarters, Engineering, Sales, Manufacturing

  PRECISION ENGINE:
      Windsor, CT             119,000       Owned     Manufacturing
      Tallahassee, FL         125,000       Owned     Precision Engine Headquarters, Manufacturing, Engineering
      Elmhurst, IL              1,100       Leased    Sales
      Curitiba, Brazil         10,000       Leased    Manufacturing
</TABLE>

ITEM 3.  LEGAL PROCEEDINGS

The Company is involved in various legal and regulatory proceedings generally
incidental to its business. While the results of any litigation or regulatory
issue contain an element of uncertainty, management believes that the outcome of
any known, pending or threatened legal proceeding, or all of them combined, will
not have a materially adverse effect on the Company's financial position or
results of operations.

The Company is subject to potential environmental liability and various claims
and legal actions, which are pending or may be asserted against the Company
concerning environmental matters. Reserves for such liabilities have been
established and no insurance recoveries have been anticipated in the
determination of the reserves. In management's opinion, the aforementioned
claims will be resolved without materially adverse effects on the results of
operations, financial position or cash flows of the Company. In conjunction with
the Acquisition of the Company from the Sellers on December 10, 1997, the
Sellers agreed to partially indemnify the Company and AIP relating to certain
environmental matters. See "Environmental Matters" in Item 1 of this report.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 1999.


                                       9
<PAGE>   10
                                     PART II

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

As of March 1, 2000, Holdings was the holder of record of all the shares of
common stock, par value, $.01 per share (the "Common Stock"), of the Company.
There is no established trading market for the Common Stock. The Company has
never paid or declared a cash dividend on the Common Stock. Furthermore, the
Company is restricted from paying dividends under the covenants of its revolving
credit and term loan agreements.


ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth selected consolidated historical financial and
operating data of the Company and its subsidiaries for the years ended 1999 and
1998, the 21 day period ended December 31, 1997, the 344 day period ended
December 10, 1997 and the years ended December 31, 1996 and 1995. All data prior
to December 11, 1997 was taken from the consolidated financial statements of the
Predecessor and represents the results of operations of the Predecessor through
the date of the Acquisition. The selected consolidated financial data for the
years ended December 31, 1999 and 1998 and the 21 day period ended December 31,
1997 were derived from the consolidated financial statements of the Company and
represent the results of operations of the Company subsequent to the
Acquisition. The data presented below should be read in conjunction with the
consolidated financial statements and the related footnotes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                      Company                              Predecessor
                                        -----------------------------------    ------------------------------------
                                                                  21 Days      344 Days
                                        Year Ended   Year Ended    Ended         Ended      Year Ended   Year Ended
                                         December     December    December      December      December     December
                                            31,          31,         31,           10,           31,          31,
                                           1999         1998        1997          1997          1996         1995
                                        ----------   ----------   ---------    ---------    ----------   ----------
Statements of Operations Data:                                        (dollars in thousands)
<S>                                     <C>          <C>          <C>          <C>          <C>          <C>
   Net sales                            $ 281,580    $ 307,053    $  14,154    $ 259,144    $ 275,639    $ 272,145
   Cost of goods sold (a)                 224,204      251,730       11,418      219,642      234,756      235,645
                                        ---------    ---------    ---------    ---------    ---------    ---------
   Gross profit                            57,376       55,323        2,736       39,502       40,883       36,500
   Selling, general and
     administrative expenses (a)           35,516       40,291        1,845       28,098       30,976       31,740
                                        ---------    ---------    ---------    ---------    ---------    ---------
   Operating income                        21,860       15,032          891       11,404        9,907        4,760
   Interest expense, net                  (13,576)     (15,138)        (880)      (6,673)      (8,259)      (9,292)
                                        ---------    ---------    ---------    ---------    ---------    ---------
   Income (loss) before income
     taxes, extraordinary item and
     cumulative effect of change
     in accounting principle                8,284         (106)          11        4,731        1,648       (4,532)
   Income tax expense (benefit)             3,128        1,581           23        1,789          376       (1,297)
                                        ---------    ---------    ---------    ---------    ---------    ---------
   Income (loss) before
     extraordinary item and
     cumulative effect of change
     in accounting principle                5,156       (1,687)         (12)       2,942        1,272       (3,235)
   Extraordinary item (b)                     750         --           --           --           --         (1,711)
   Effect of change in accounting
     principle (c)                             --           --           --           --        4,330           --
                                        ---------    ---------    ---------    ---------    ---------    ---------
   Net income (loss)                        5,906       (1,687)         (12)       2,942        5,602       (4,946)
   Preferred dividend requirement            --           --           --           (450)        (600)        (600)
                                        ---------    ---------    ---------    ---------    ---------    ---------
   Net income (loss) applicable to
     common shareholders                $   5,906    $  (1,687)   $     (12)   $   2,492    $   5,002    $  (5,546)
                                        =========    =========    =========    =========    =========    =========

Balance Sheet Data (at year end):
   Fixed assets, net of
     accumulated depreciation           $ 119,611    $ 125,966    $ 124,443    $    --      $  96,116    $ 103,202
   Total assets                           306,105      321,916      321,310         --        194,917      219,417
   Long-term debt (including              142,280      160,486      161,152         --         85,912      112,199
     current portion)
   Stockholders' equity                    61,681       59,191       59,845         --          8,879        3,116
</TABLE>

(a)     Net income in 1999 included $1.9 million of savings in selling, general
        and administrative expenses as a result of favorably concluding the
        major elements of plant closure costs. Net


                                       10
<PAGE>   11
         loss for 1998 includes plant closure costs of $4.2 million, of which
         approximately $0.8 million is included in cost of goods sold and the
         remaining $3.4 million is included in selling, general and
         administrative expenses.

(b)      Net income for 1999 includes an extraordinary gain of $0.8 million and
         1995 includes an extraordinary loss of $1.7 million, net of income
         taxes, for the early extinguishment of debt.

(c)      Net income for 1996 includes a gain of $4.3 million, net of income
         taxes, for the cumulative effect of a change in accounting principle
         for postretirement benefits to amortize unrecognized gains and losses
         exceeding 10% of the accumulated postretirement benefit obligation over
         twelve months. Previously, such gains and losses were amortized over
         the average remaining service period of the plan participants.

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

INTRODUCTION

The following discussion provides an assessment of the consolidated results of
operations and liquidity and capital resources of the Company. Information
provided for 1999 and 1998 represents a full calendar year of operations. In
December of 1997, the Company was acquired by AIP. The Acquisition was accounted
for using the purchase method of accounting and, accordingly, the 1997 figures
reflect the operating results of the Company for the 21 day period ended
December 31, 1997, and the operating results of the Predecessor for the 344 days
ended December 10, 1997. The operating results for the 21 day period of the
Company are not material in comparison to the 344 day period of the Predecessor.
Unless otherwise indicated, 1997 historical results represent the combined
operating results of the Predecessor for the 344 day period through the date of
the Acquisition and the Company for the 21 day period subsequent to the
Acquisition.

BASIS OF PRESENTATION

The following table sets forth certain performance details for the periods
shown. Net sales, cost of goods sold, gross profit, selling, general and
administrative expense ("SG&A"), amortization of intangibles, management fees,
operating income and net income (loss) of the Company and Predecessor are
presented in thousands of dollars and as a percentage of net sales.

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                        1999                      1998                      1997
                                                --------------------       -------------------       ------------------
                                                                         (dollars in thousands)
                                                   $             %            $            %            $           %
                                                -------        -----       -------       -----       -------      -----
<S>                                             <C>            <C>         <C>           <C>         <C>          <C>
Net sales..............................         281,580        100.0       307,053       100.0       273,298      100.0
Cost of goods sold.....................         224,204         79.6       251,730        82.0       231,060       84.5
Gross profit...........................          57,376         20.4        55,323        18.0        42,238       15.5
SG&A...................................          28,515         10.1        33,223        10.8        28,470       10.4
Amortization of intangibles............           5,901          2.1         5,968         1.9           944        0.3
Management fees........................           1,100          0.4         1,100         0.4           529        0.2
Operating income.......................          21,860          7.8        15,032         4.9        12,295        4.5
Net income (loss)......................           5,906          2.1        (1,687)       (0.5)        2,930        1.1
</TABLE>


                                       11
<PAGE>   12
COMPARISON OF RESULTS OF OPERATIONS

OVERVIEW

After a disappointing first quarter, operating results for 1999 showed improved
earnings from the prior year on lower sales. Several programs targeted to
improve profitability were concluded during 1999 including: indirect staff
reductions in the Diesel Group; Bari, Italy plant closure; cost reduction and
labor efficiency improvement programs in Windsor, Connecticut and Jacksonville,
North Carolina facilities involving assistance from outside consultants; and
Precision Engine's vertical integration of rocker arm machining. Start-up
activities reached the pre-production phase for the new Brazilian subsidiary,
PEPL, and are ready to proceed with the July, 2000 scheduled supply of Tritec
Motors, LTDA.

1999 COMPARED TO 1998

Net Sales. Net sales decreased to $281.6 million in 1999 from $307.1 million in
1998, a decrease of $25.5 million or 8.3%. The decrease was attributable to a
sales decline at Diesel Group of $25.5 million, or 10.0%, which resulted from
lower sales of GMDS pumps of $18.9 million during 1999, as compared to 1998 when
General Motors completed stocking a service inventory for their extended
warranty program, and lower sales of Ford injectors of $3.2 million. Precision
Engine's sales in 1999 were equal to 1998, with higher demand for DC products
offset by lower sales to European customers.

Gross Profit. Gross profit increased to $57.4 million in 1999 from $55.3 million
in 1998, an increase of $2.1 million or 3.7%. As a percentage of net sales,
gross profit increased to 20.4% from 18.0%. Most of the improvement occurred in
Precision Engine due to the vertical integration of its manufacturing process
for the roller-rocker product line, a $0.7 million reduction of a liability
established in 1998 and a combination of price increases and other cost
reduction efforts. Lower earnings on reduced sales volumes in the Diesel Group
were offset by $3.9 million in revenue from a major customer for volumes not
purchased under a supply agreement, indirect staff reductions and cost reduction
programs in the Windsor, Connecticut and Jacksonville, North Carolina facilities
involving assistance from outside consultants.

Selling, General and Administrative Expense. SG&A expense decreased to $28.5
million in 1999 from $33.2 million in 1998, a decrease of $4.7 million or 14.2%.
As a percentage of net sales, SG&A decreased to 10.1% from 10.8%. The lower 1999
SG&A expense was primarily attributable to lower severance costs associated with
the successful conclusion of closure activities at the Bari, Italy location
which resulted in $1.9 million of savings compared to the $3.4 million estimate
recorded to SG&A in 1998. Lower research and development costs in the Diesel
Group, as a result of staffing reductions completed in 1999, further contributed
to the year-to-year reduction in SG&A.

Amortization of Intangibles. Amortization of intangible assets totaled $5.9
million in 1999 and $6.0 million in 1998. Amortization of goodwill was $1.9
million in both 1999 and 1998.

Operating Income. Operating income increased to $21.9 million in 1999 from $15.0
million in 1998, an increase of $6.9 million or 45.4%. As a percentage of sales,
operating income increased to 7.8% from 4.9%. The increase was due to an
improved gross profit and lower SG&A expenses.


                                       12
<PAGE>   13
Net Income (Loss). Net income increased to $5.9 million in 1999 from a net loss
of ($1.7) million in 1998, an increase of $7.6 million. The increase in net
income was due to a combination of a $6.9 million improvement in operating
income, a $1.6 million reduction in net interest expense, an increase of $1.5
million in income taxes and an extraordinary gain of $0.8 million, net of taxes,
associated with the early retirement of $10.0 million in Senior Subordinated
Notes.

1998 COMPARED TO 1997

Net Sales. Net sales increased to $307.1 million in 1998 from $273.3 million in
1997, an increase of $33.8 million or 12.4%. The increase was attributable to an
increase in net sales of $40.0 million or 18.5% in the Diesel Group, which was
partially offset by a decline at Precision Engine of $6.2 million, or 11.0%. The
increase in the Diesel Group's net sales resulted from increased OEM sales of
$23.9 million, as well as increased demand for replacement parts of $16.1
million. These higher revenues were primarily due to an increase in demand for
the DS electronic pump of $17.2 million, mechanical-style pumps of $12.3 million
and the RSN injector of $11.6 million. Precision Engine's net sales decline was
due primarily to a $2.2 million reduction in demand by DC for the roller rocker
arm product and a $1.5 million reduction in demand by Ford for roller valve
lifters due to decreased vehicle demand.

Gross Profit. Gross profit increased to $55.3 million in 1998 from $42.2 million
in 1997, an increase of $13.1 million or 31.0%. As a percentage of net sales,
gross profit increased to 18.0% from 15.5%. These changes were primarily the
result of higher sales volumes reported by the Diesel Group. Cost of goods sold
for 1998 included $0.8 million of inventory write-downs associated with the
plant closure costs in Bari.

Selling, General and Administrative Expense. SG&A expense increased to $33.2
million in 1998 from $28.5 million in 1997, an increase of $4.7 million or
16.7%. As a percentage of sales, SG&A increased to 10.8% from 10.4%. This
increase was due to a $3.4 million charge in the fourth quarter of 1998 for
employee-related costs associated with the plant closure in Bari, Italy. Net
product development costs increased $1.5 million and postretirement benefit
expenses increased $1.7 million in 1998 over 1997 when actuarial gains were
recorded. Bonuses decreased $1.8 million from 1997, when bonuses of $2.7 million
related to the sale of the Company were incurred. Excluding the effect of the
plant closure costs incurred in 1998, SG&A was up $1.3 million, or 4.6%, from
1997.

Amortization of Intangibles. Amortization of intangible assets increased to $6.0
million in 1998 from $0.9 million in 1997. The increase includes amortization of
goodwill of $1.9 million and other intangible assets amortization of $4.1
million. These increases are a direct result of the Acquisition.

Operating Income. Operating income increased to $15.0 million in 1998 from $12.3
million in 1997, an increase of $2.7 million or 22.3%. As a percentage of net
sales, operating income increased to 4.9% from 4.5%. The growth primarily
reflects the effect of higher sales volume and gross profit in the Diesel Group,
which was partially offset by the plant closure costs of $4.2 million and higher
amortization costs of $5.1 million.


                                       13
<PAGE>   14
Net (Loss) Income. The net loss of ($1.7) million in 1998 was a $4.6 million
reduction from net income of $2.9 million in 1997. The decrease in net income
reflects a $2.7 million increase in operating income offset by $7.6 million in
higher interest expense, a result of the additional debt from the Acquisition.

LIQUIDITY AND CAPITAL RESOURCES

The Company is highly leveraged as a result of the Acquisition and will continue
to have a significant amount of indebtedness. As of December 31, 1999, the
Company had $142.3 million of indebtedness. The Company's principal sources of
liquidity are cash flow from operations supplemented by borrowings under a
revolving credit facility. The Company occasionally has utilized capital leases
and, for its Italian subsidiary, SpA, has overdraft facilities with local
financial institutions. In addition, subject to the restrictions in the
Company's lending agreements, additional senior or other indebtedness may be
incurred from time to time to finance acquisitions or capital expenditures or
for other general corporate purposes.

Net cash flow provided by operating activities was $27.2 million, $20.6 million
and $10.2 million in 1999, 1998 and 1997, respectively. The increase in cash
flows in 1999 was primarily due to a $6.9 million increase in operating income
and lower interest expense of $1.5 million, partially offset by a $3.4 million
year-to-year increase in funds required for working capital, noncurrent asset
and noncurrent liability accounts. Notable changes in asset and liability
accounts during 1999 included prepaid tooling reimbursements from DC totaling
$1.7 million, cash payments for Bari, Italy plant closure of approximately $3.7
million and working capital account investments in PEPL totaling $0.4 million.

Capital expenditures were $11.4 million, $14.4 million and $13.5 million in
1999, 1998 and 1997, respectively. These amounts primarily reflect cash outlays
for the purchase of machinery and equipment and the maintenance of existing
facilities. Management estimates that the Company has historically spent, and
will continue to spend, approximately $3.0 million annually on maintenance of
plant and equipment. The remaining non-maintenance capital expenditures
represent cash outlays for equipment, machinery or plant expansion in order to
support new engine platforms on which the Company intends to supply engine
components or to increase capacity to support increased production volumes on
existing engine platforms. The Company's capital expenditures of $11.4 million
in 1999 were primarily for cost reduction programs in the Diesel Group, general
maintenance projects and machinery and equipment in Brazil for PEPL. The
Company's capital expenditures of $14.4 million in 1998 were primarily for added
capacity in the Diesel Group of $7.7 million associated with pump and injector
programs which began in 1997 and for the completion of the Precision Engine
vertical integration project of $2.2 million to machine in-house roller rocker
arm castings.

At December 31, 1999, 1998 and 1997, the Company did not establish a valuation
allowance to offset any deferred tax assets. The Company has reported operating
income on the consolidated statements of operations as well as income for tax
purposes in 1999, 1998 and 1997. Based on projections for future taxable income
over the periods during which the deferred tax assets are deductible, and the
expectation that a significant portion of these deferred tax assets are to be
realized by offsetting them against temporary items, it is management's belief
that it is more likely than not that all deferred tax assets will be fully
realized.


                                       14
<PAGE>   15
Management believes that cash flows from operations and availability under the
revolving credit facility will provide adequate funds for the Company's
foreseeable working capital needs, planned capital expenditures and debt service
obligations. At December 31, 1999, the Company had $30 million in revolving
credit lines of which $3.6 million was used for standby letters of credit,
leaving $26.4 million available for borrowings. The Company's ability to fund
its operations, make planned capital expenditures, make scheduled debt payments,
refinance indebtedness and remain in compliance with all of the financial
covenants under its debt agreements will depend on its future operating
performance and cash flow, which, in turn, are subject to prevailing economic
conditions and to financial, business and other factors, some of which are
beyond its control.

YEAR 2000 MATTERS

The Company has not experienced any problems related to the Year 2000 issue that
affected its operations. The Company continues to monitor its operations
including transactions between the Company and its customers and vendors to
detect any possible problems that could have a future impact on the Company.

The Company has spent $0.7 million to complete the projects on its Year 2000
compliance conversion and does not anticipate any additional Year 2000 costs. As
of the date of this filing, the Company believes there are no remaining
significant risks or exposures as a result of the Year 2000 issue.

NEW ACCOUNTING STANDARD

In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Gains or losses resulting
from changes in the values of those derivatives would be recognized immediately
or deferred depending on the use of the derivative and if the derivative is a
qualifying hedge. The Company plans to adopt SFAS No. 133 by January 1, 2001, as
required. The Company is currently assessing the impact of this statement on the
Company's consolidated financial statements.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks which include changes in interest rates
and changes in foreign currency exchange rates as measured against the U.S.
dollar.

Interest Rate Risk. The carrying value of the Company's revolving credit lines
and term loans approximate fair value. The term loans are primarily LIBOR
borrowings and are repriced approximately every month based on prevailing market
rates. A 10% change in the interest rate on the term loans would have increased
or decreased the 1999 interest expense by $0.4 million. The 10-1/4% Senior
Subordinated Notes bear interest at a fixed rate and, therefore, are not
sensitive to interest rate fluctuation. The fair value of the Senior
Subordinated Notes based on quoted market prices at December 31, 1999 was
approximately $70.2 million.


                                       15
<PAGE>   16
Foreign Currency Risk. The Company has subsidiaries in Italy and Brazil and
branch offices in France and England, thereby creating exposures to changes in
foreign currency exchange rates. Changes in exchange rates may positively or
negatively affect the Company's sales, gross margins, and retained earnings.
However, historically, these locations have contributed less than 15% of the
Company's net sales and retained earnings, with most of these sales attributable
to the Italian subsidiary. The Company also sells its products from the United
States to foreign customers for payment in foreign currencies as well as
dollars. Historically, foreign currency exchange gains and losses have been
immaterial. The Company does not hedge against foreign currency risk.


                                       16
<PAGE>   17
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                         <C>
                                    STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT..............................................................................   F-1
      Consolidated Balance Sheets as of December  31, 1999 and 1998.......................................   F-2
      Consolidated Statements of Operations for the Years Ended December 31, 1999 and 1998, the 21 Day
          Period Ended December 31, 1997 and the 344 Day Period Ended December 10, 1997...................   F-3
      Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income (Loss) for
          the Years Ended December 31, 1999 and 1998, the 21 Day Period Ended December 31, 1997 and the
          344 Day Period Ended December 10, 1997..........................................................   F-4
      Consolidated Statements of Cash Flows for the Years Ended December 31, 1999 and 1998, the 21 Day
          Period Ended December 31, 1997 and the 344 Day Period Ended December 10, 1997...................   F-5
      Notes to the Consolidated Financial Statements......................................................   F-6

</TABLE>


                                       17
<PAGE>   18
INDEPENDENT AUDITORS' REPORT


The Board of Directors
Stanadyne Automotive Corp.:

         We have audited the accompanying consolidated balance sheets of
Stanadyne Automotive Corp. and subsidiaries (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of operations, changes in
stockholders' equity and comprehensive income (loss) and cash flows for the
years ended December 31, 1999 and 1998 and the period from December 11, 1997 to
December 31, 1997. We have also audited the consolidated statements of
operations, changes in stockholders' equity and comprehensive income (loss) and
cash flows of Stanadyne Automotive Corp. and subsidiaries (the "Predecessor")
for the period from January 1, 1997 to December 10, 1997. These consolidated
financial statements are the responsibility of the Company's and the
Predecessor's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

         In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Stanadyne Automotive Corp.
and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998,
the period from December 11, 1997 to December 31, 1997 and the period from
January 1, 1997 to December 10, 1997, in conformity with generally accepted
accounting principles.



February 4, 2000

Deloitte & Touche LLP
Hartford, Connecticut


                                      F-1
<PAGE>   19
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                  (dollars in thousands, except share amounts)



<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                              1999         1998
                                                                           ---------    ---------
<S>                                                                        <C>          <C>
                                       ASSETS
Current Assets:
     Cash and cash equivalents                                             $   4,057    $   5,132
     Accounts receivable, net of allowance for uncollectible accounts of
         $610 in 1999 and $500 in 1998 (Notes 18 and 22)                      40,296       41,564
     Inventories, net (Notes 3 and 22)                                        36,582       36,560
     Prepaid expenses and other assets                                         1,451        2,635
     Deferred income taxes (Note 12)                                           8,360        6,128
                                                                           ---------    ---------
                  Total current assets                                        90,746       92,019
Property, plant and equipment, net (Note 4)                                  119,611      125,966
Intangible and other assets, net (Note 5)                                     91,687       99,870
Due from Stanadyne Automotive Holdings Corp. (Note 17)                         4,061        4,061
                                                                           ---------    ---------
                  Total assets                                             $ 306,105    $ 321,916
                                                                           =========    =========

                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                                      $  22,354    $  20,222
     Accrued liabilities (Note 7)                                             27,788       31,113
     Current maturities of long-term debt (Notes 9 and 23)                     5,198        8,808
     Current installments of capital lease obligations (Note 6)                  819        1,295
                                                                           ---------    ---------
                  Total current liabilities                                   56,159       61,438
Long-term debt, excluding current maturities (Notes 9 and 23)                135,671      148,821
Deferred income taxes (Note 12)                                                5,747        2,998
Capital lease obligations, excluding current installments (Note 6)               592        1,562
Other noncurrent liabilities (Note 8)                                         46,255       47,906
                                                                           ---------    ---------
                  Total liabilities                                          244,424      262,725
                                                                           ---------    ---------

Commitments and Contingencies (Notes 6 and 19)

Stockholders' Equity:
     Common stock, par value $.01, authorized 10,000 shares, issued and
         outstanding 1,000 shares (Note 14)                                     --           --
     Additional paid-in capital                                               59,858       59,858
     Other accumulated comprehensive (loss) income (Note 13)                  (2,384)       1,032
     Retained earnings (accumulated deficit)                                   4,207       (1,699)
                                                                           ---------    ---------
                  Total stockholders' equity                                  61,681       59,191
                                                                           ---------    ---------
                  Total liabilities and stockholders' equity               $ 306,105    $ 321,916
                                                                           =========    =========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-2
<PAGE>   20
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (dollars in thousands)


<TABLE>
<CAPTION>
                                                                                           Company       Predecessor
                                                            Company         Company        21 Days        344 Days
                                                          Year Ended      Year Ended        Ended          Ended
                                                         December 31,    December 31,    December 31,    December 10,
                                                             1999            1998           1997            1997
                                                         ------------    ------------    ------------    ------------
<S>                                                        <C>             <C>             <C>             <C>
Net sales (Notes 18, 20, 21)                               $ 281,580       $ 307,053       $  14,154       $ 259,144
Costs of goods sold                                          224,204         250,943          11,418         219,642
Plant closure costs (Note 15)                                   --               787            --              --
                                                           ---------       ---------       ---------       ---------
     Gross profit                                             57,376          55,323           2,736          39,502
Selling, general and administrative expenses
     (includes related party payments to AIP of
     $1,100 in 1999 and 1998 and $59 in the 21
     day period ended December 31, 1997 and
     payments to Metromedia of $470 in the 344
     day period ended December 10, 1997) (Note 17)            37,446          36,863           1,845          28,098
Plant closure costs (Note 15)                                 (1,930)          3,428            --              --
                                                           ---------       ---------       ---------       ---------
     Operating income                                         21,860          15,032             891          11,404
Other income (expense):
     Interest income                                             522             121               2              21
     Interest expense                                        (14,098)        (15,259)           (882)         (6,694)
                                                           ---------       ---------       ---------       ---------
     Income (loss) before income taxes and
         extraordinary item                                    8,284            (106)             11           4,731
Income tax expense (Note 12)                                   3,128           1,581              23           1,789
                                                           ---------       ---------       ---------       ---------
Income (loss) before extraordinary item                        5,156          (1,687)            (12)          2,942
Extraordinary gain related to early retirement of
     debt, net of income tax expense of $500
     (Note 9)                                                    750            --              --              --
                                                           ---------       ---------       ---------       ---------
Net income (loss)                                              5,906          (1,687)            (12)          2,942
Dividend to Stanadyne Automotive Holding Corp.                  --              --              --              (450)
                                                           ---------       ---------       ---------       ---------
Net income (loss) applicable to common shareholders        $   5,906       $  (1,687)      $     (12)      $   2,492
                                                           =========       =========       =========       =========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-3
<PAGE>   21
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                         AND COMPREHENSIVE INCOME (LOSS)
                   (dollars in thousands except share amounts)


<TABLE>
<CAPTION>
                                                                                  Accumulated
                                                                                     Other
                                                                                    Compre-      Retained      Compre-
                                                                      Additional    hensive      Earnings      hensive
                                                     Common Stock      Paid-in      Income     (Accumulated    Income
                                                   Shares    Amount    Capital      (Loss)       Deficit)      (Loss)       Total
                                                   ------    ------   ----------  -----------  ------------    -------      -----
<S>                                                <C>      <C>       <C>         <C>          <C>             <C>        <C>
January 1, 1997                                     1,000   $     -   $  35,000    $   (164)     $ (24,370)               $ 10,466

Comprehensive income:
   Net income for the 344 day period ended
      December 10, 1997                                 -         -           -           -          2,942     $  2,942      2,942
                                                                                                               --------
   Other comprehensive loss, net of tax:
      Foreign currency translation adjustments          -         -           -      (1,149)             -       (1,149)    (1,149)
      Minimum pension liability                         -         -           -        (123)             -         (123)      (123)
                                                                                                               --------
   Other comprehensive loss                                                                                      (1,272)
                                                                                                               --------
Comprehensive income                                                                                           $  1,670
                                                                                                               ========
Dividends to Stanadyne Automotive Holding Corp.         -         -           -           -           (450)                   (450)
                                                    -----   -------   ---------    --------      ---------                --------
December 10, 1997                                   1,000   $     -   $  35,000    $ (1,436)     $ (21,878)               $ 11,686
                                                    =====   =======   =========    ========      =========                ========

Initial capitalization -
  December 11, 1997                                 1,000   $     -   $  59,858    $      -      $       -                $ 59,858

Comprehensive income:
  Net loss for the 21 day period ended December
      31, 1997                                          -         -           -           -            (12)    $    (12)       (12)
                                                                                                               --------
  Other comprehensive loss, net of tax - Foreign
      currency translation adjustments                  -         -           -          (1)             -           (1)        (1)
                                                                                                               --------
  Other comprehensive loss                                                                                           (1)
                                                                                                               --------
Comprehensive loss                                                                                             $    (13)
                                                                                                               ========

                                                    -----   -------   ---------    --------      ---------                --------
December 31, 1997                                   1,000         -      59,858          (1)           (12)                 59,845
Comprehensive income:
  Net loss                                              -         -           -           -         (1,687)    $ (1,687)    (1,687)
                                                                                                               --------
  Other comprehensive income, net of tax -
      Foreign currency translation adjustments          -         -           -       1,033              -        1,033      1,033
                                                                                                               --------
  Other comprehensive income                                                                                      1,033
                                                                                                               --------
Comprehensive loss                                                                                             $   (654)
                                                                                                               ========

                                                    -----   -------   ---------    --------      ---------                --------
December 31, 1998                                   1,000         -      59,858       1,032         (1,699)                 59,191

Comprehensive income:
  Net income                                            -         -           -           -          5,906     $  5,906      5,906
                                                                                                               --------
  Other comprehensive loss, net of tax -
      Foreign currency translation adjustments          -         -           -      (3,416)             -       (3,416)    (3,416)
                                                                                                               --------
  Other comprehensive loss                                                                                       (3,416)
                                                                                                               --------
Comprehensive income                                                                                           $  2,490
                                                                                                               ========

                                                    -----   -------   ---------    --------      ---------                --------
December 31, 1999                                   1,000   $     -   $  59,858    $ (2,384)     $   4,207                $ 61,681
                                                    =====   =======   =========    ========      =========                ========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-4
<PAGE>   22
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)


<TABLE>
<CAPTION>
                                                                            Company       Company      Company      Predecessor
                                                                            -------       -------      -------      -----------
                                                                                                       21 Days       344 Days
                                                                          Year Ended    Year Ended      Ended          Ended
                                                                         December 31,  December 31,  December 31,  December 10,
                                                                              1999          1998         1997          1997
                                                                         ------------  ------------  ------------  ------------
<S>                                                                      <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                    $   5,906     $  (1,687)    $     (12)    $   2,942
     Adjustments to reconcile net income (loss) to net cash provided
         by (used in) operating activities:
         Depreciation and amortization                                       20,804        19,816           995        15,700
         Deferred income taxes                                                  394        (1,065)         (367)          445
         Loss (gain) on disposal of property, plant and equipment                77           105          --            (130)
         Changes in assets and liabilities (excluding effect of 1997
              acquisition by AIP):
              Accounts receivable                                               450         1,939         1,820        (8,045)
              Inventories                                                      (874)        2,505         1,181        (2,756)
              Prepaid expenses and other assets                               1,268        (2,335)          125          (898)
              Due to (from) Stanadyne Automotive Holding Corp.                 --              70        (4,733)        2,045
              Accounts payable                                                2,542        (4,068)         (621)        3,798
              Accrued liabilities                                            (2,213)        8,648        (2,820)        3,053
              Other noncurrent liabilities                                   (1,190)       (3,296)          309        (1,829)
                                                                          ---------     ---------     ---------     ---------
                  Net cash provided by (used in) operating activities        27,164        20,632        (4,123)       14,325
                                                                          ---------     ---------     ---------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures                                                   (11,449)      (14,379)         (378)      (13,162)
     Proceeds from disposal of property, plant and equipment                    689            30          --             758
     Acquisition, net of cash acquired                                         --            --        (121,654)         --
                                                                          ---------     ---------     ---------     ---------
                  Net cash used in investing activities                     (10,760)      (14,349)     (122,032)      (12,404)
                                                                          ---------     ---------     ---------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Contributions to capital                                                  --            --          57,402          --
     Payments of financing fees                                                --            --          (9,111)         --
     Proceeds from long-term debt                                              --            --         155,000          --
     Net (payments) proceeds on revolving credit notes and overdraft
         facilities                                                            (754)        1,755       (41,900)       12,895
     Payments on long-term debt                                             (15,496)       (1,000)      (40,875)       (9,941)
     Payments on capital lease obligations                                   (1,252)       (2,197)         (124)       (1,666)
     Dividends paid                                                            --            --            --            (450)
                                                                          ---------     ---------     ---------     ---------
                  Net cash (used in) provided by financing activities       (17,502)       (1,442)      120,392           838
                                                                          ---------     ---------     ---------     ---------

Net (decrease) increase in cash and cash equivalents                         (1,098)        4,841        (5,763)        2,759
Effect of exchange rate changes on cash and cash equivalents                     23           (34)            4           (46)
Cash and cash equivalents at beginning of period                              5,132           325         6,084         3,371
                                                                          ---------     ---------     ---------     ---------
Cash and cash equivalents at end of period                                $   4,057     $   5,132     $     325     $   6,084
                                                                          =========     =========     =========     =========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONS:
     During 1999, 1998, the 21 days ended December 31, 1997 and the 344 days
         ended December 10, 1997, the Company entered into capital leases for
         new equipment resulting in capital lease obligations of $30, $383, $0
         and $2,288, respectively.

                 See notes to consolidated financial statements.


                                      F-5
<PAGE>   23
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Description of Business. Stanadyne Automotive Corp. (the "Company"), a
wholly-owned subsidiary of Stanadyne Automotive Holding Corp. ("Holdings"), is a
producer of diesel fuel injection equipment which is sold worldwide to
agricultural, industrial and automotive diesel engine manufacturers and to the
diesel aftermarket. The Company's wholly owned subsidiary, Precision Engine
Products Corp. ("Precision Engine"), is a supplier of roller-rocker arms,
hydraulic valve lifters and lash adjusters to automotive engine manufacturers
and the independent automotive aftermarket.

         A majority of the outstanding equity of Holdings is owned by American
Industrial Partners Capital Fund II, L.P. ("AIP").

         Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and all of the Company's wholly-owned
subsidiaries: Precision Engine, Stanadyne Automotive SpA ("SpA"), DSD
International Corp. (dissolved October 6, 1998), Precision Engine Products LTDA
("PEPL") (incorporated as a limited liability company on October 16, 1998) and
Stanadyne Automotive Foreign Sales Corp. ("FSC"). Intercompany balances have
been eliminated in consolidation. The financial statements of SpA and PEPL are
consolidated on a fiscal year basis ending November 30.

         Cash and Cash Equivalents. The Company considers cash on hand and
short-term investments with an original maturity of three months or less to be
"cash and cash equivalents" for financial statement purposes.

         Inventories. Inventories are stated at the lower of cost or market. The
principal components of costs included in inventories are materials, labor,
subcontract cost and overhead. The Company uses the last-in/first-out ("LIFO")
method of valuing its inventory, except for the inventories of SpA and PEPL,
which are valued using the first-in/first-out ("FIFO") method. At December 31,
1999 and 1998, inventories valued at LIFO represented 86% and 82% of total
inventories, respectively.

         Property, Plant and Equipment. Property, plant and equipment, including
significant improvements thereto, are recorded at cost. Equipment under capital
leases is stated at the net present value of minimum lease payments.
Depreciation of plant and equipment is calculated using the straight-line method
over the estimated useful lives of the respective assets which are within the
following ranges:

<TABLE>
<S>                                                      <C>
               Buildings and improvements                15 to 45 years
               Machinery and equipment                    3 to 15 years
</TABLE>

         Intangibles and Other Assets. Intangible assets consist primarily of
goodwill, technological know-how, trademarks, patents and deferred debt issuance
costs. Intangible assets are amortized using the straight-line method over their
estimated useful lives of 3 to 40 years.

         Accounting for the Impairment of Long-Lived Assets. The Company
assesses impairment of long-lived assets such as property, plant and equipment
and intangible assets whenever changes or events indicate that the carrying
value may not be recoverable. Such long-lived assets are written down to fair
value if the sum of the expected future undiscounted cash flows is less than the
carrying amount.


                                      F-6
<PAGE>   24
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

         Fair Value of Financial Instruments. Statement of Financial Accounting
Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial
Instruments, requires the disclosure of fair value information for certain
assets and liabilities, whether or not recorded in the balance sheet, for which
it is practicable to estimate that value. The Company has the following
financial instruments: cash and cash equivalents, receivables, accounts payable,
accrued liabilities and long-term debt. The Company considers the carrying
amount of these items, excluding long-term debt, to approximate their fair
values because of the short period of time between the origination of such
instruments and their expected realization. Refer to Note 9 for fair value
disclosures of long-term debt.

         Product Warranty. The Company provides an accrual for the estimated
future warranty costs of its products. These estimates are based upon
statistical analyses of historical experience of product returns and the related
cost.

         Postretirement Benefits. Effective December 11, 1997, the Company
changed its accounting method of amortizing unrecognized gains and losses for
its postretirement benefits. Previously, unrecognized gains and losses exceeding
10% of the accumulated postretirement benefit obligation were amortized over
twelve months. The Company changed its policy whereby unrecognized gains or
losses exceeding 10% of the accumulated postretirement benefit obligation are
amortized over the average remaining service period of the plan participants.
This change was adopted because the new amortization method represents an
improvement in the financial reporting of the accrued postretirement benefit
obligation by distributing gains and losses over the benefit period of the
participants thereby minimizing any volatility caused by actuarial gains and
losses. The effect of the change was immaterial to the consolidated financial
statements.

         For the defined benefit pension plans, the Company amortizes
unrecognized gains and losses exceeding 10% of the accumulated benefit
obligation over the average remaining service life of plan participants as this
period approximates the benefit period.

         Income Taxes. Income taxes are accounted for in accordance with the
asset and liability method. Deferred tax assets and liabilities are recognized
for future tax consequences attributable to differences between the tax basis of
assets and liabilities and their financial reporting amounts.

         Foreign Currency Translation. The Company's policy is to translate
balance sheet accounts using the exchange rate at the balance sheet date and
statement of operations accounts using the average monthly exchange rate for the
month in which the transactions are recognized. The resulting translation
adjustment is recorded as accumulated other comprehensive income (loss) in the
consolidated balance sheets. Worldwide foreign currency transaction losses of
$145, $40, $1 and $102 are included in the consolidated statements of operations
for 1999, 1998, the 21 day period ended December 31, 1997 and the 344 day period
ended December 10, 1997, respectively.

         Revenue Recognition. Sales and related costs of sales are recorded when
products are shipped to customers. The Company enters into long-term contracts
with certain customers for the supply of parts during the contract period. Some
of these contracts have provisions which allow the Company to negotiate with its
customers if targeted volumes, as defined in each contract, are not achieved.
Those negotiations may result in payments which are recognized as revenue when
the amount of such payment is agreed upon by the Company and the customer and
when collection is deemed probable.


                                      F-7
<PAGE>   25
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

         Research and Development. Research and development ("R&D") costs
incurred for 1999, 1998, the 21 day period ended December 31, 1997 and the 344
day period ended December 10, 1997 were $9,075, $10,283, $413 and $9,492,
respectively, of which $596, $657, $18 and $1,622, respectively, were reimbursed
by customers. The net expenses of $8,479, $9,626, $395 and $7,870 in 1999, 1998,
the 21 day period ended December 31, 1997 and the 344 day period ended December
10, 1997, respectively, are included in the consolidated statements of
operations.

         Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

         Interest Rate Cap Agreement. The Company utilized an interest rate cap
agreement (the "Cap") to limit the impact of increases in interest rates on its
variable rate debt. The Cap required a premium payment of $7 to the counterparty
based on the agreement's notional amount and cap interest rate. The premium was
expensed in the Company's 1998 consolidated financial statements. The Cap
entitled the Company to receive from the counterparty the amounts by which the
selected market interest rates exceeded the Cap interest rate stated in the
agreement. The Cap expired December 30, 1999 (see Note 9).

         Accounting for Derivative Instruments and Hedging Activities. In June
1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS No. 133 requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Gains and losses resulting
from changes in the values of those derivatives would be recognized immediately
or deferred depending on the use of the derivative and if the derivative is a
qualifying hedge. The Company plans to adopt SFAS No. 133 by January 1, 2001, as
required and is currently assessing the impact of this statement on the
consolidated financial statements.

         Reclassifications. Certain amounts have been reclassified in the 1998
and 1997 financial statements to conform to the 1999 presentation.

(2)      ACQUISITION

         On December 11, 1997, AIP through SAC, Inc. ("New Holdings") acquired
substantially all the outstanding stock of Stanadyne Automotive Holding Corp.
("Old Holdings") (the "Acquisition"), and SAC Automotive, Inc. ("Automotive")
borrowed $100,000 on 10-1/4% Senior Subordinated Notes, $55,000 of term loans
and $11,500 under a $30,000 revolving credit line to partially fund the
Acquisition. Simultaneous with the Acquisition, Old Holdings and Automotive
merged with and into the Company and New Holdings changed its name to Stanadyne
Automotive Holding Corp.

         The Acquisition has been accounted for using the purchase method of
accounting, whereby the purchase cost has been allocated to the fair value of
the tangible and identifiable intangible assets acquired and liabilities assumed
with the excess identified as goodwill. The consolidated goodwill resulting from
the transaction was approximately $78,119 (see Note 5). Fair values were based
on valuations and other studies.


                                      F-8
<PAGE>   26
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(2)      ACQUISITION - (CONTINUED)

         The unaudited consolidated results of operations on a pro forma basis
as though the Acquisition had taken place at January 1, 1997 are as follows:

<TABLE>
<CAPTION>
                                                    COMPANY (a)    PREDECESSOR (b)
                                                      21 DAYS         344 DAYS
                                                       ENDED            ENDED
                                                   DECEMBER 31,      DECEMBER 10,      PRO FORMA
                                                        1997             1997         ADJUSTMENTS        PRO-FORMA
                                                   ------------    ---------------    -----------        ---------
<S>                                                <C>             <C>                <C>                <C>
Net sales                                          $    14,154      $   259,144       $        -         $ 273,298
Cost of goods sold                                      11,418          219,642           (1,520)(c)       229,540
                                                   -----------      -----------       ----------         ---------
     Gross profit                                        2,736           39,502           (1,520)           43,758
Selling, general and administrative expenses             1,845           28,098            5,300 (c)        35,243
                                                   -----------      -----------       ----------         ---------
     Operating income (loss)                               891           11,404           (3,780)            8,515
Interest, net                                             (880)          (6,673)          (7,874)(d)       (15,427)
                                                   -----------      -----------       ----------         ---------
     Income (loss) before taxes                             11            4,731          (11,654)           (6,912)
Income tax expense (benefit)                                23            1,789           (4,439)(e)        (2,627)
                                                   -----------      -----------       ----------         ---------
     Net (loss) income                             $       (12)     $     2,942       $   (7,215)        $  (4,285)
                                                   ===========      ===========       ==========         =========
</TABLE>


(a)      Represents the historical condensed consolidated statements of
         operations of the Company for the period indicated.

(b)      Represents the historical condensed consolidated statement of
         operations of Stanadyne Automotive Corp., the predecessor to the
         Company (the "Predecessor") for the period indicated.

(c)      The following table summarizes the pro forma adjustments to operating
         income:


<TABLE>
<S>                                                                              <C>
         Cost of goods sold: (i)
              Reduction in depreciation due to changes in lives partially
                  offset by the step-up of property, plant and equipment         $ (1,520)
                                                                                 ========
         Selling, general and administrative:
              Difference in Directors fees                                       $    142

              Difference in management fees (ii)                                      630

              Change in amortization of intangible assets (iii)                     4,528
                                                                                 --------
                                                                                 $  5,300
                                                                                 ========
</TABLE>

         (i)      Cost of goods sold does not include a one-time, non-cash
                  charge for the effect of the step-up in inventory carried on
                  the first-in, first-out method under purchase accounting of
                  $0.4 million.

         (ii)     Represents the difference between the new management fee and
                  the historical management fee.

         (iii)    The amortization of intangible assets is over a range of lives
                  from three to thirteen years. Goodwill is amortized over forty
                  years.


                                      F-9
<PAGE>   27
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(2)      ACQUISITION - (CONCLUDED)

(d) To reflect the pro forma adjustments to interest expense:


<TABLE>
<S>                                                                                  <C>
         Historical interest expense                                                 $     7,553
         Less: amounts in historical statement of operation for refinanced debt           (6,982)
         Add: New Credit Agreement and Senior Subordinated Notes                          14,856
                                                                                     -----------
         Pro forma interest expense                                                  $    15,427
                                                                                     ===========
</TABLE>


        A 1/8% increase in interest rates pertaining to variable interest debt
outstanding would increase interest expense by $68 in 1997.

(e) To adjust the income tax provision to result in a pro forma total of 38%
    effective income tax rate for 1997.


         The unaudited pro forma financial information is presented for
informational purposes only and does not purport to represent what the Company's
results of operations would have been if the Acquisition had taken place as of
the dates indicated, or what such results will be for any future period.

(3)      INVENTORIES

         Inventories at December 31, 1999 and 1998 consisted of:

<TABLE>
<CAPTION>
                                                       1999                1998
                                                       ----                ----
<S>                                                  <C>                 <C>
Raw materials                                        $ 1,968             $ 2,583
Work in process                                       24,891              25,192
Finished goods                                         9,723               8,785
                                                     -------             -------
                                                     $36,582             $36,560
                                                     =======             =======
</TABLE>

         The LIFO reserve at December 31, 1999 and 1998 was $940 and $577,
respectively.


                                      F-10
<PAGE>   28
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(4)      PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment including equipment under capital leases
at December 31, 1999 and 1998 consisted of:

<TABLE>
<CAPTION>
                                                        1999              1998
                                                        ----              ----
<S>                                                   <C>               <C>
Land                                                  $ 11,532          $ 11,836
Building and improvements                               22,296            22,034
Machinery and equipment                                106,165            95,451
Capitalized leases                                       3,530             5,291
Construction in progress                                 5,186             5,905
                                                      --------          --------
                                                       148,709           140,517
Less accumulated depreciation                           29,098            14,551
                                                      --------          --------
                                                      $119,611          $125,966
                                                      ========          ========
</TABLE>


         Depreciation expense including amortization of assets acquired under
capital leases was $14,904, $13,847, $692 and $15,060 for 1999, 1998, the 21 day
period ended December 31, 1997 and the 344 day period ended December 10, 1997,
respectively. The net book value of assets acquired under remaining capital
leases was $2,397 and $4,426 at December 31, 1999 and 1998, respectively.


(5)      INTANGIBLE AND OTHER ASSETS

         Major components of intangible and other assets at December 31, 1999
and 1998 consisted of:

<TABLE>
<CAPTION>
                                                        1999              1998
                                                        ----              ----
<S>                                                   <C>               <C>
Goodwill                                              $ 75,963          $ 78,119
Patents                                                  9,809             9,809
Debt issuance costs                                      9,111             9,111
Software                                                 3,822             3,822
Technological know-how                                   3,200             3,200
Customer contracts                                       2,690             2,690
Other                                                    2,352             2,560
                                                      --------          --------
                                                       106,947           109,311
Less accumulated amortization                           15,260             9,441
                                                      --------          --------
                                                      $ 91,687          $ 99,870
                                                      ========          ========
</TABLE>


                                      F-11
<PAGE>   29
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(6)      LEASES

         The Company is obligated under certain noncancelable operating leases.
Rent expense for 1999, 1998, the 21 day period ended December 31, 1997 and the
344 day period ended December 10, 1997 was $1,698, $1,608, $53 and $1,309,
respectively.

         Future minimum lease payments under noncancelable operating leases with
initial or remaining lease terms in excess of one year and future minimum
capital lease payments as of December 31, 1999 were as follows:

<TABLE>
<CAPTION>
                                                                         Capital         Operating
                                                                          leases          leases
                                                                         -------         ---------
<S>                                                                     <C>              <C>
Year ending December 31:
     2000                                                               $    903         $     842
     2001                                                                    571               603
     2002                                                                     48               334
     2003                                                                      -               196
     2004                                                                      -               107
                                                                        --------         ---------
Total minimum lease payments                                               1,522         $   2,082
                                                                                         =========
Less amount representing interest at a weighted average rate of
     7.3%                                                                    111
                                                                        --------
Present value of net minimum capital lease obligations                     1,411
Less current installments of capital lease obligations                       819
                                                                        --------
         Capital lease obligations, excluding current
             installments                                               $    592
                                                                        ========
</TABLE>


                                      F-12
<PAGE>   30
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(7)      ACCRUED LIABILITIES

         Accrued liabilities at December 31, 1999 and 1998 consisted of:


<TABLE>
<CAPTION>
                                                            1999           1998
                                                            ----           ----
<S>                                                       <C>            <C>
Salaries, wages and bonus                                 $ 7,625        $ 6,534
Vacation                                                    4,578          5,017
Retiree health benefits                                     4,116          3,079
Accrued warranty                                            3,447          2,342
Accrued taxes                                               2,123          1,982
Workers' compensation                                       1,916          1,317
Pensions                                                      937          1,473
Accrued interest payable                                      552            695
Health benefits                                               425            449
Professional fees                                             402            591
Plant closure costs (see Notes 10, 15)                        326          6,457
Other                                                       1,341          1,177
                                                          -------        -------
                                                          $27,788        $31,113
                                                          =======        =======
</TABLE>

(8)      OTHER NONCURRENT LIABILITIES

         Other noncurrent liabilities at December 31, 1999 and 1998 consisted
of:


<TABLE>
<CAPTION>
                                                            1999           1998
                                                            ----           ----
<S>                                                       <C>            <C>
Retiree health benefits                                   $24,314        $25,626
Pensions                                                   12,036         10,553
Italian leaving indemnity (see Note 10)                     4,427          5,075
Workers' compensation                                       1,953          3,440
Accrued warranty                                            1,700          1,500
Environmental                                               1,183          1,298
Other noncurrent liabilities                                  642            414
                                                          -------        -------
                                                          $46,255        $47,906
                                                          =======        =======
</TABLE>

(9)      LONG-TERM DEBT

         Long-term debt at December 31, 1999 and 1998 consisted of:

<TABLE>
<CAPTION>
                                                                     1999        1998
                                                                     ----        ----
<S>                                                                <C>         <C>
Revolving credit lines                                             $   --      $   --
Term A loans                                                         25,358      29,500
Term B loans                                                         23,146      24,500
Senior Subordinated Notes                                            90,000     100,000
Stanadyne Automotive SpA debt, payable to Italian banks through
     2000, bearing interest at rates ranging from
     3.75% to 7.5%                                                    2,365       3,629
                                                                   --------    --------
                                                                    140,869     157,629
Less current maturities of long-term debt                             5,198       8,808
                                                                   --------    --------
     Long-term debt, excluding current maturities                  $135,671    $148,821
                                                                   ========    ========
</TABLE>


                                      F-13
<PAGE>   31
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(9)      LONG-TERM DEBT - (CONTINUED)

         At December 31, 1999 and 1998, the Company had $30,000 in revolving
credit lines (the "Revolving Credit Lines") of which $0 was outstanding. In
addition, at December 31, 1999 and 1998, $3,572 and $3,590, respectively, was
used for standby letters of credit leaving $26,428 and $26,410, respectively,
available for borrowings. Any amounts outstanding are payable on December 11,
2003. The interest rate, had there been any borrowings against the Revolving
Credit Lines, would have been a maximum of 9.5% and 8.75% at December 31, 1999
and 1998, respectively. The Company also pays a commitment fee based on the
percentage of the unused portion of the Revolving Credit Lines. The percentage
used to calculate the commitment fee is .35% to .45% based on certain financial
ratios.

         At December 31, 1999 and 1998, the Company had $48,504 and $54,000,
respectively, in term loans (the "Term Loans") outstanding at various interest
rates ranging from 8.5% to 9.75%. The remaining $25,358 Term A loans outstanding
at December 31, 1999 are payable in quarterly installments of $650.25 from March
31, 2000 through December 31, 2000; $1,430.5 from March 31, 2001 through
December 31, 2001; $1,820.5 from March 31, 2002 through December 31, 2002;
$2,471 from March 31, 2003 through September 30, 2003; and $2,340 on December
11, 2003. The remaining $23,146 Term B loans outstanding at December 31, 1999
are payable in quarterly installments of $58 from March 31, 2000 through
September 30, 2004 with a final balloon payment of $22,044 on December 11, 2004.
The Term Loans are primarily LIBOR borrowings and are repriced approximately
every month based on prevailing market rates.

         Payment of the Revolving Credit Lines and Term Loans (collectively, the
"Credit Agreement") is guaranteed by Stanadyne Automotive Corp. (the "Parent")
and Precision Engine and DSD International Corp. through October 6, 1998,
(collectively, the "Subsidiary Guarantors"). The Credit Agreement is secured by
substantially all of the assets of the Parent and Subsidiary Guarantors and by a
pledge of substantially all the issued and outstanding capital stock of the
Parent and the Subsidiary Guarantors and 65% of the capital stock of SpA (see
Note 24). In addition, the Credit Agreement is subject to financial and other
covenants, including limits on indebtedness, liens and capital expenditures, and
restricts dividends or other distributions to stockholders.

         The Company had $90,000 and $100,000 of Senior Subordinated Notes (the
"Notes") at an interest rate of 10.25% outstanding at December 31, 1999 and
1998, respectively. On October 5, 1999 the Company retired $10,000 in Notes at a
discount price of $8,750. The resulting $1,250 gain on this transaction was
recorded as a net of tax extraordinary item in 1999. The Notes are due on
December 15, 2007. Payment of the Notes is guaranteed by the Subsidiary
Guarantors. In addition, the Notes are subject to covenants including
limitations on indebtedness, liens, and dividends or other distributions to
stockholders.

         At December 31, 1999 and 1998, the weighted average interest rate on
the Company's short term borrowings was 4.2% and 5.6%, respectively.

         The fair values of the Company's Term Loans and short-term borrowings
approximate their recorded values at December 31, 1999 based on similar
borrowing agreements offered by other major institutional banks. The fair value
of the Notes based on quoted market prices at December 31, 1999 was
approximately $70,200.


                                      F-14
<PAGE>   32
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(9)      LONG-TERM DEBT - (CONCLUDED)

         The aggregate maturities of long-term debt outstanding at December 31,
1999 were:

<TABLE>
<S>                                                                   <C>
 2000                                                                 $   5,198
 2001                                                                     5,954
 2002                                                                     7,514
 2003                                                                     9,985
 2004                                                                    22,218
 Thereafter                                                              90,000
                                                                      ---------
                                                                      $ 140,869
                                                                      =========
</TABLE>


         For 1999, 1998, the 21 day period ended December 31, 1997 and the 344
day period ended December 10, 1997, interest paid was $14,098, $15,380, $319 and
$6,931, respectively.

(10)     PENSIONS

         The Company has a noncontributory defined benefit pension plan which
covers substantially all of the domestic hourly and salaried employees except
for Tallahassee hourly employees. Benefits under the pension plan are based on
years of service and compensation levels during employment for salaried
employees and years of service for hourly employees. It is the Company's policy
to fund the pension plan based on the minimum permissible contribution as
determined by the plan's actuaries. Plan assets are invested primarily in a
diversified portfolio of equity and fixed income securities. The Company also
sponsors an unfunded defined benefit supplemental executive retirement plan.

         The following table sets forth the change in benefit obligation, change
in plan assets and funded status of the pension plans and amounts recognized in
the Company's consolidated balance sheet as of December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                            1999                                  1998
                                              ---------------------------------      --------------------------------
                                              Plans in Which     Plans in Which      Plans in Which    Plans in Which
                                              Assets Exceed       Accumulated         Assets Exceed      Accumulated
                                               Accumulated          Benefit            Accumulated         Benefit
                                                 Benefit           Obligation            Benefit         Obligation
                                                Obligation       Exceeds Assets        Obligation      Exceeds Assets
<S>                                           <C>                  <C>                <C>                 <C>
CHANGE IN PROJECTED BENEFIT OBLIGATIONS:
   Benefit obligation at beginning of year    $    46,016          $     2,377        $    41,945         $   2,272
   Service cost                                     2,455                   61              2,487                55
   Interest cost                                    3,214                  162              2,881               155
   Amendments                                         675                    -                  -                 -
   Curtailment gain                                  (336)                   -                  -                 -
   Actuarial (gain) loss                           (6,517)                (226)               141                 4
   Benefits paid                                   (1,135)                (109)            (1,438)             (109)
                                              -----------          -----------        -----------         ---------
   Benefit obligations at end of year         $    44,372          $     2,265        $    46,016         $   2,377
                                              ===========          ===========        ===========         =========
</TABLE>


                                      F-15
<PAGE>   33
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(10)     PENSIONS - (CONTINUED)

<TABLE>
<CAPTION>
                                                             1999                                   1998
                                              ---------------------------------      --------------------------------
                                              Plans in Which     Plans in Which      Plans in Which    Plans in Which
                                              Assets Exceed       Accumulated         Assets Exceed      Accumulated
                                               Accumulated          Benefit            Accumulated         Benefit
                                                 Benefit           Obligation            Benefit         Obligation
                                                Obligation       Exceeds Assets        Obligation      Exceeds Assets
<S>                                           <C>                <C>                 <C>               <C>
CHANGE IN PLAN ASSETS:
   Fair value of plan assets at
     beginning of year                         $   37,425          $       -          $    33,837          $     -
   Actual return on plan asset                      6,742                  -                4,262                -
   Employer contribution                              866                109                  764              109
   Benefits paid                                   (1,135)              (109)              (1,438)            (109)
                                               ----------          ---------          -----------          -------
   Fair value of plan asset at end
     of year                                   $   43,898          $       -          $    37,425          $     -
                                               ==========          =========          ===========          =======
</TABLE>


<TABLE>
<CAPTION>
                                                             1999                                   1998
                                              ---------------------------------      --------------------------------
                                              Plans in Which     Plans in Which      Plans in Which    Plans in Which
                                              Assets Exceed       Accumulated         Assets Exceed      Accumulated
                                               Accumulated          Benefit            Accumulated         Benefit
                                                 Benefit           Obligation            Benefit         Obligation
                                                Obligation       Exceeds Assets        Obligation      Exceeds Assets
<S>                                           <C>                <C>                 <C>               <C>
FUNDED STATUS:
   Funded status                               $     (474)         $   (2,265)        $    (8,591)       $   (2,377)
   Unrecognized prior service cost                    647                   -                   -                 -
   Unrecognized net actuarial gain                (10,609)               (229)               (994)               (2)
                                               ----------          ----------         -----------        ----------
   Accrued pension cost                        $  (10,436)         $   (2,494)        $    (9,585)       $   (2,379)
                                               ==========          ==========         ===========        ==========
</TABLE>


         The components of the net periodic pension costs for 1999, 1998, the 21
day period ended December 31, 1997 and the 344 day period ended December 10,
1997 were as follows:


<TABLE>
<CAPTION>
                                               Company          Company            Company         Predecessor
                                                                                   21 Days          344 Days
                                             Year Ended        Year Ended           Ended             Ended
                                            December 31,      December 31,       December 10,     December 10,
                                                1999              1998              1997              1997
                                            ------------      ------------       ------------     ------------
<S>                                         <C>               <C>                <C>              <C>
Service cost                                  $ 2,516           $ 2,542           $   136           $ 1,716
Interest cost                                   3,376             3,036               173             2,369
Expected return on plan assets                 (3,520)           (2,997)             (177)           (2,199)
Amortization of prior service costs                28              --                --                 209
Curtailment gain                                 (336)             --                --                --
Recognized net actuarial (gain) loss             (123)             --                --                  27
                                              -------           -------           -------           -------
   Net periodic pension cost                  $ 1,941           $ 2,581           $   132           $ 2,122
                                              =======           =======           =======           =======
</TABLE>


                                      F-16
<PAGE>   34
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(10)     PENSIONS - (CONCLUDED)

         Actuarial assumptions used in accounting for the pension plan during
1999, 1998, the 21 day period ended December 31, 1997 and the 344 day period
ended December 10, 1997 were:

<TABLE>
<CAPTION>
                                                    Company            Company             Company          Predecessor
                                                                                           21 Days           344 Days
                                                  Year Ended          Year Ended            Ended              Ended
                                                 December 31,        December 31,        December 10,      December 10,
                                                      1999               1998                1997               1997
                                                 ------------        ------------        ------------      ------------
<S>                                              <C>                 <C>                 <C>               <C>
Assumed average salary compensation
   increase                                           5.0%                5.0%                5.0%               5.0%
Discount rate                                         7.75%               7.0%                7.0%               7.0%
Expected long-term rate of return on
   assets                                             9.0%                9.0%                9.0%               9.0%
</TABLE>


         No compensation increase rate is applicable for the hourly plans, as
they are flat pay for each year of service (regardless of compensation earned).

         Effective July 1, 1999 the unit benefit for hourly participants and the
minimum benefit for salaried participants were increased by one dollar per month
for each year of service.

         Staff reductions in the first half of 1999 resulted in a curtailment
gain of $336.

         In accordance with Italian Civil Code, the Company provides employees
of SpA a leaving indemnity payable upon termination of employment. The amount of
this leaving indemnity is determined by the employee's category, length of
service, and overall remuneration earned during service. Amounts included as
part of other noncurrent liabilities at December 31, 1999 and 1998 were $4,427
and $5,075, respectively. Leaving indemnity expense was $634, $950, $60 and $939
for 1999, 1998, the 21 day period ended December 31, 1997 and the 344 day period
ended December 10, 1997, respectively.

(11)     POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE

         The Company and its domestic subsidiaries currently make available
certain health care and life insurance benefits for retired employees. Full-time
employees of the Company (except non-grandfathered employees at the Tallahassee
and Melrose Park locations) may become eligible for those benefits when they
reach retirement, provided they attain age 57 with a minimum of 10 consecutive
years of service immediately preceding retirement, if such programs are still in
effect.

         Employees who retired prior to January 1, 1987 are eligible for a
Basic/Major Medical Plan and, in certain cases, prescription drug benefits for a
basic monthly contribution by the retiree. Benefit levels vary depending upon
the retiree's benefit plan eligibility. The Company's health benefit cost
commitment for employees who retire between January 1, 1987 and December 31,
1997 is limited to the 1997 cost level. Furthermore, the Company's cost
commitment for employees who were hired prior to 1997 and retire after 1997 will
be one hundred dollars per month per eligible participant prior to becoming
Medicare eligible and fifty dollars per month when Medicare eligible. Employees
hired after 1996 are required to pay the full cost of postretirement medical
coverage. Employees who retire before 1998 are eligible for Company provided
life insurance benefits. Employees who retire after 1997 are allowed to purchase
life insurance through the Company at full cost.


                                      F-17
<PAGE>   35
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(11)     POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE - (CONTINUED)

         As discussed in Note 1, effective December 11, 1997, the Company
changed its accounting method of amortizing unrecognized gains and losses.
Unrecognized gains and losses exceeding 10% of the accumulated postretirement
benefit obligation are amortized over the average remaining service period of
the plan participants. The effect of the change was immaterial to the
consolidated financial statements.

         The following table presents the plan's change in benefit obligation,
change in plan assets and funded status reconciled with amounts recognized in
the Company's consolidated balance sheet at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                           1999          1998
                                                           ----          ----
<S>                                                      <C>           <C>
Change in benefit obligations:
   Benefit obligation at beginning of year               $ 29,739      $ 30,483
  Service cost                                                320           324
  Interest cost                                             2,311         2,026
  Actuarial loss                                            3,257         1,081
  Plan participants' contributions                            357           332
  Benefits paid                                            (3,855)       (4,507)
                                                         --------      --------
  Benefit obligation at end of year                      $ 32,129      $ 29,739
                                                         ========      ========

Change in plan assets:
  Fair value of plan assets at beginning of year         $   --        $   --
  Actual return on plan assets                               --            --
  Employer contribution                                     3,498         4,175
  Plan participants' contribution                             357           332
  Benefit paid                                             (3,855)       (4,507)
                                                         --------      --------
  Fair value of plan assets at end of year               $   --        $   --
                                                         ========      ========

Funded status:
  Funded status                                          $(32,129)     $(29,739)
  Unrecognized net actuarial loss                           3,961         1,055
                                                         --------      --------
  Accrued postretirement cost                            $(28,168)     $(28,684)
                                                         ========      ========
</TABLE>


                                      F-18
<PAGE>   36
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(11)     POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE - (CONTINUED)

         Net periodic postretirement benefit costs for 1999, 1998, the 21 day
period ended December 31, 1997 and the 344 day period ended December 10, 1997
included the following components:

<TABLE>
<CAPTION>
                                                  Company        Company        Company      Predecessor
                                                                                21 Days       344 Days
                                                Year Ended      Year Ended       Ended          Ended
                                               December 31,    December 31,   December 10,  December 10,
                                                   1999            1998           1997          1997
                                               ------------    ------------   ------------  ------------
<S>                                            <C>             <C>            <C>           <C>
Service cost                                    $      320      $      324     $     17      $      425
Interest cost                                        2,311           2,026          119           1,860
Amortization of unrecognized benefit
   obligation due to plan amendment                      -               -            -          (1,143)
Amortization of unrecognized net gain                    -               -            -            (893)
Recognition of net actuarial loss                      352               -            -               -
                                                ----------      ----------     --------      ----------
     Net periodic postretirement benefits
       cost                                     $    2,983      $    2,350     $    136      $      249
                                                ==========      ==========     ========      ==========
</TABLE>


        For measurement purposes, the following medical and dental cost trend
rates were assumed in determining the accumulated benefit obligation for 1999,
1998, the 21 day period ended December 31, 1997 and the 344 day period ended
December 10, 1997:

       Medical Cost Trend Rates

<TABLE>
<S>                                            <C>
       -   Medical prior to age 65             7.5%, 6.0%, 4.5% in 1997, 1998 and 1999, respectively,
           (Indemnity Plan)                    and 6.5% in 2000 decreasing 0.5% per year for 3 years,
                                               ultimately 4.5% in 2004 and thereafter.

       -   Medical prior to age 65 (HMOs);     4.5% in 1997, 1998 and 1999, 6.5% in 2000 decreasing
           medical age 65 and older            0.5% per year for 3 years, ultimately 4.5% in 2004 and
                                               thereafter.

       Dental Cost Trend Rate

       -   Dental costs                        4.5% in 1997 and thereafter.
</TABLE>


                                      F-19
<PAGE>   37
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)



(11)     POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE - (CONCLUDED)

         The effect of a 1% change in health care cost trend rates would have
the following impact on the accumulated postretirement benefit obligation and
the net annualized postretirement benefit costs:

<TABLE>
<CAPTION>
                                                          1999         1998         1997
                                                          ----         ----         ----
<S>                                                       <C>          <C>          <C>
         One percentage point increase:
               -   Service cost plus interest             $  34        $  44        $  42
               -   Postretirement benefit obligation        390          591          548

         One percentage point decrease:
               -   Service cost plus interest cost          (38)         (50)         (48)
               -   Postretirement benefit obligation       (457)        (698)        (648)

         Discount rate                                      7.75%         7.0%         7.0%
</TABLE>


(12)     INCOME TAXES

         Income tax expense (benefit) for 1999, 1998, the 21 day period ended
December 31, 1997 and the 344 day period ended December 10, 1997 consisted of:

<TABLE>
<CAPTION>
                                     Current                 Deferred                 Total
                                     -------                 --------                 -----
<S>                                <C>                     <C>                     <C>
        1999
        Company:
             Federal               $     1,897             $       213             $     2,110
             State                         916                    (383)                    533
             Foreign                       421                     564                     985
                                   -----------             -----------             -----------
                                   $     3,234             $       394             $     3,628
                                   ===========             ===========             ===========

        1998
        Company:
             Federal               $       769             $     1,507             $     2,276
             State                         403                     406                     809
             Foreign                       699                  (2,203)                 (1,504)
                                   -----------             -----------             -----------
                                   $     1,871             $      (290)            $     1,581
                                   ===========             ===========             ===========

        1997
        Company:
             Federal               $       345             $      (289)            $        56
             State                          39                     (78)                    (39)
             Foreign                         6                       -                       6
                                   -----------             -----------             -----------
                                   $       390             $      (367)            $        23
                                   ===========             ===========             ===========

        1997
        Predecessor:
             Federal               $       914             $       531             $     1,445
             State                         424                     129                     553
             Foreign                         6                    (215)                   (209)
                                   -----------             -----------             -----------
                                   $     1,344             $       445             $     1,789
                                   ===========             ===========             ===========
</TABLE>

                                      F-20
<PAGE>   38
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(12)     INCOME TAXES - (CONTINUED)

         The income tax expense for 1999 in the table above includes $500 which
offsets the extraordinary gain related to the early retirement of debt.

         Total income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rate of 34% for 1999, 1998, the 21 day period ended
December 31, 1997 and the 344 day period ended December 10, 1997 to income
before income taxes as follows:

<TABLE>
<CAPTION>
                                                          Company         Company         Company       Predecessor
                                                                                          21 Days         344 Days
                                                         Year Ended      Year Ended        Ended           Ended
                                                        December 31,    December 31,    December 10,    December 10,
                                                            1999            1998            1997            1997
                                                        ------------    ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>             <C>
Computed "expected" expense (benefit)                     $ 3,242         $   (36)        $     3         $ 1,608
Increase (reduction) in income tax resulting from:
     State taxes, net of federal tax effect                   352             534             (25)            365
     Foreign taxes                                            431           1,008               6              --
     Goodwill permanent difference                            662             676              32              --
     Federal R & D credit permanent difference
                                                               --             (99)             --              --
     Tax benefit of Foreign Sales Corp.                    (1,390)           (361)             --              --
     Rate difference on income of foreign
       operations                                             145            (222)             --              38
     Other, net                                               186              81               7            (222)
                                                          -------         -------         -------         -------
                                                          $ 3,628         $ 1,581         $    23         $ 1,789
                                                          =======         =======         =======         =======
</TABLE>

         U.S. Federal, state and foreign net income taxes paid amounted to
$2,623, $2,613, $346 and $1,865 for 1999, 1998, the 21 day period ended December
31, 1997 and the 344 day period ended December 10, 1997, respectively.

         Income before taxes from domestic operations amounted to $2,191,
$6,635, $11 and $5,243 for 1999, 1998, the 21 day period ended December 31, 1997
and the 344 day period ended December 10, 1997, respectively. Income (loss)
before taxes from foreign operations amounted to $7,343, $(6,741), $0 and $(512)
for 1999, 1998, the 21 day period ended December 31, 1997 and the 344 day period
ended December 10, 1997, respectively.

         As a result of losses in current and previous years, the Company has
unused net operating loss carryforwards for state income tax purposes of
approximately $3,223 at December 31, 1999, which, if not used to offset future
state taxable income, will begin to expire in 2000. The Company also has federal
general business credit carryforwards of $213 at December 31, 1999, which, if
not used to offset future federal taxable income, will begin to expire in 2004.
In addition, unused foreign net operating losses of $6,831 at December 31, 1999
will begin to expire in 2000.

         The Company has been subject to the U.S. Alternative Minimum Tax
("AMT") and, therefore, has a cumulative AMT credit carryforward of $4,360 as of
December 31, 1999. This carryforward has an unlimited life and may be used to
offset federal income taxes in excess of AMT in future periods.


                                      F-21
<PAGE>   39
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(12)     INCOME TAXES - (CONTINUED)

         The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1999 and 1998 are presented as follows:

<TABLE>
<CAPTION>
                                                            1999          1998
                                                            ----          ----
<S>                                                        <C>           <C>
Current:
   Deferred tax assets:
       Alternative minimum tax credit carryforwards        $2,087        $1,005
       Postretirement benefits                              1,892         1,676
       Compensated absences                                 1,603         1,528
       Workers' compensation                                  766           514
       Net operating losses                                   374          --
       Federal general business credit                        213         1,258
       Health benefits                                        170           175
       Other                                                2,401         1,380
                                                           ------        ------
           Deferred tax assets                              9,506         7,536
   Deferred tax liabilities:
       Inventories                                          1,146         1,408
                                                           ------        ------
           Net current deferred tax asset                  $8,360        $6,128
                                                           ======        ======
</TABLE>


<TABLE>
<CAPTION>
                                                             1999           1998
                                                             ----           ----
<S>                                                        <C>            <C>
Noncurrent:
   Deferred tax assets:
       Postretirement benefits                             $14,797        $14,283
       Alternative minimum tax credit carryforwards          2,273          4,077
       Net operating loss carryforwards                      2,230          1,832
       Workers' compensation                                   781          1,342
       Inventories                                            --            1,064
       Plant closure costs                                    --            1,382
       Other                                                 1,299          1,314
                                                           -------        -------
           Deferred tax assets                              21,380         25,294
   Deferred tax liabilities:
       Property, plant and equipment                        27,127         28,292
                                                           -------        -------
           Net noncurrent deferred tax liability           $ 5,747        $ 2,998
                                                           =======        =======
</TABLE>


         At December 31, 1999, the Company did not establish a valuation
allowance to offset any deferred tax assets. The Company has reported operating
income on the consolidated statements of operations as well as income for tax
purposes in 1999, 1998 and 1997. Based on projections for future taxable income
over the periods during which the deferred tax assets are deductible, and the
expectation that a significant portion of these deferred tax assets are to be
realized by offsetting them against temporary items, it is management's belief
that it is more likely than not that all deferred tax assets will be fully
realized. Projections indicate full utilization of the following deferred tax
assets: 1) Federal general business credit of approximately $213 by 2000, 2) AMT
credit carryforward of approximately $4,360 by 2003, 3) foreign net operating
losses of $6,831 by 2004, and 4) state net operating losses of approximately
$3,223 by 2003.



                                      F-22
<PAGE>   40
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(13)     CHANGES IN COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

         The changes in the components of accumulated other comprehensive income
(loss) for 1999, 1998, the 21 day period ended December 31, 1997 and the 344 day
period ended December 10, 1997 are as follows:

<TABLE>
<CAPTION>
                                                                  Accumulated
                               Cumulative        Additional         Other
                               Translation        Pension        Comprehensive
                               Adjustment        Liability       Income (Loss)
                               -----------       ----------     --------------
<S>                            <C>               <C>             <C>
January 1, 1997                 $   (23)          $  (141)          $  (164)
Net change                       (1,149)             (123)           (1,272)
                                -------           -------           -------
December 10, 1997               $(1,172)          $  (264)          $(1,436)
                                =======           =======           =======
Initial capitalization -

  December 11, 1997             $    --           $    --           $    --

Net change                           (1)               --                (1)
                                -------           -------           -------
December 31, 1997                    (1)               --                (1)
Net change                        1,033                --             1,033
                                -------           -------           -------
December 31, 1998                 1,032                --             1,032
Net change                       (3,416)               --            (3,416)
                                -------           -------           -------
December 31, 1999               $(2,384)          $    --           $(2,384)
                                =======           =======           =======
</TABLE>

(14)     CAPITAL STOCK

         The Certificate of Incorporation of Stanadyne Automotive Corp. provides
the Company with the authority to issue 10,000 shares of common stock, par value
$.01 of which 1,000 are issued and outstanding.

         Certain members of management of the Predecessor had individual
subscription agreements which became fully vested due to a change in control in
conjunction with the Acquisition. The Predecessor recorded expense for the 344
day period ended December 10, 1997 of $2,189 of which $1,705 resulted from the
Acquisition.




                                      F-23
<PAGE>   41
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(15)     PLANT CLOSURE COSTS

         On September 9, 1998, the Company announced the planned closure of the
manufacturing facility in Bari, Italy. The Bari Plant is a part of the wholly
owned subsidiary, Stanadyne Automotive, SpA. This closure was completed during
the second quarter of 1999. The estimated cost of closing the operation resulted
in a charge to fourth quarter 1998 earnings for $4,215. Inventory writedowns to
lower of cost or market totaled $787 and were recorded in cost of goods sold in
the 1998 consolidated statement of operations. Employee termination costs and
other plant closure expenses totaled $3,428 and were charged to operating income
in the 1998 consolidated statement of operations. Accrued liabilities at
December 31, 1998, included $6,457 to reflect the anticipated sum of plant
closure costs and leaving indemnity scheduled for payment in 1999.

         The Company favorably concluded the major cost elements of the plant
closure in the third quarter of 1999 and as a result recorded a $1,930 savings,
primarily as a result of lower severance costs, to the reserve established in
1998 which is reflected in the 1999 consolidated statement of operations.

(16)     401(k) PLAN

         Substantially all of the Company's domestic employees are eligible to
participate in 401(k) savings plans. The 401(k) savings plans provide such
employees with the opportunity to save for retirement on a tax deferred basis.
The Company contributes 50% of the employee's contribution per year up to a
limit, as defined in the plan documents. The Company made contributions of $396,
$404, $4 and $337 during 1999, 1998, the 21 day period ended December 31, 1997
and the 344 day period ended December 10, 1997, respectively.

(17)     RELATED PARTY TRANSACTIONS

         During 1999, 1998 and the 21 day period ended December 31, 1997, the
Company incurred management fees of $1,100, $1,100 and $59, respectively, from
AIP for management services provided. During the 344 day period ended December
10, 1997, the Company incurred management fees of $470 from Metromedia Company
("Metromedia") for management services provided. These charges are included in
selling, general and administrative expenses.

         In conjunction with the Acquisition described in Note 2, the Company
has an amount due from Stanadyne Automotive Holding Corp. of $4,061 as of
December 31, 1999 and 1998.





                                      F-24
<PAGE>   42
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(18)     SIGNIFICANT CUSTOMERS

         During 1999, 1998, the 21 day period ended December 31, 1997 and the
344 day period ended December 10, 1997, sales to customers and their affiliates,
which represented approximately 10% or more of consolidated total sales, were as
follows:

<TABLE>
<CAPTION>
                                      Company                 Company                Company                Predecessor
                                                                                     21 Days                 344 Days
                                     Year Ended              Year Ended               Ended                    Ended
                                     December 31,            December 31,           December 31,            December 10,
                    Segment             1999          %         1998          %        1997          %         1997          %
                    -------          ------------    ----   -------------    ----   ------------    ----    ------------    ----
<S>             <C>                  <C>             <C>    <C>              <C>    <C>             <C>     <C>             <C>
Customer A        Diesel Group        $45,359        16.1    $ 56,416        18.4    $  1,936       13.7     $ 37,231       14.4
Customer B      Precision Engine       34,143        12.1      33,188        10.8       1,182        8.4       34,039       13.1
Customer C        Diesel Group         57,203        20.3      58,445        19.0       2,761       19.5       42,824       16.5
</TABLE>


         Accounts receivable balances with these customers and their affiliates
were $18,913 and $16,555 at December 31, 1999 and 1998, respectively.



(19)     COMMITMENTS AND CONTINGENCIES

         The Company is involved in various legal and regulatory proceedings
generally incidental to its business. While the results of any litigation or
regulatory issue contain an element of uncertainty, management believes that the
outcome of any known, pending or threatened legal proceeding, or all of them
combined, will not have a material adverse effect on the Company's financial
position or results of operations.

         The Company is subject to potential environmental liability and various
claims and legal actions which are pending or may be asserted against the
Company concerning environmental matters. In conjunction with the Acquisition of
the Company from Metromedia on December 11, 1997, Metromedia agreed to partially
indemnify the Company and AIP for certain environmental matters.

         The effect of this indemnification is to limit environmental exposure
of known sites. However, there are limitations to this indemnification.
Estimates of the cost as of the date of the Acquisition for the remediations to
be completed by Metromedia at the Windsor, Connecticut and Jacksonville, North
Carolina facilities were $1,700 and $300, respectively. Estimates of future
costs of environmental matters are inevitably imprecise due to numerous
uncertainties, including the enactment of new laws and regulations, the
development and application of new technologies, the identification of new sites
for which the Company may have remediation responsibility and the apportionment
and collectibility of remediation costs among responsible parties. The Company
establishes reserves for these environmental matters when a loss is probable and
reasonably estimable and has accrued its best estimate, $1,344 and $1,460, with
respect to these matters at December 31, 1999 and 1998, respectively. It is
reasonably possible that the final resolution of some of these matters may
require the Company to make expenditures, in excess of established reserves,
over an extended period of time and in a range of amounts that cannot be
reasonably estimated. However, management does not believe that the costs
associated with resolution of these or any other environmental matters will have
a material adverse effect on the Company's financial position or results of
operations.



                                      F-25
<PAGE>   43
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(20)     SEGMENTS

         The Company has two reportable segments, the Diesel Systems Group (the
"Diesel Group") and Precision Engine. The Diesel Group manufactures diesel fuel
injection equipment including fuel pumps, injectors and filtration systems. This
segment accounted for approximately 82%, 84%, 80% and 79% of the Company's
revenues for 1999, 1998, the 21 day period ended December 31, 1997 and the 344
day period ended December 10, 1997, respectively. Precision Engine manufactures
roller-rocker arms, hydraulic valve lifters and lash adjusters for gasoline
engines. Revenues for Precision Engine accounted for 18%, 16%, 20% and 21% of
total revenues for 1999, 1998, the 21 day period ended December 31, 1997 and the
344 day period ended December 10, 1997, respectively. The Company's reportable
segments are strategic business units that offer similar products (engine parts)
to customers in related industries (agricultural, industrial and automotive
engine manufacturers). The Company considers the Diesel Group and Precision
Engine to be two distinct segments because the operating results of each are
compiled, reviewed and managed separately. In addition, the products and
services of each segment have an end use (gasoline versus diesel engines) which
entails different engineering and marketing efforts. There were no intersegment
sales between the Diesel Group and Precision Engine for any of the periods
presented below.

         The following summarizes key information used by the Company in
evaluating the performance of each segment as of and for 1999, 1998, the 21 day
period ended December 31, 1997 and the 344 day period ended December 10, 1997:

<TABLE>
<CAPTION>
                                                                     Company
                                                     As of and For the Year Ended December 31, 1999
                                               Diesel           Precision
                                               Group              Engine         Eliminations         Totals
                                               -----              ------         ------------         ------
<S>                                          <C>                <C>              <C>               <C>
Net sales                                    $ 231,048          $  50,532         $       -        $   281,580
Gross profit                                    48,001              9,375                 -             57,376
Depreciation and amortization expense           17,491              3,313                 -             20,804
Operating income                                15,340              6,520                 -             21,860
Net income                                       2,690              3,216                 -              5,906
Total assets                                   270,530             53,604           (18,029)           306,105
Total capital expenditures                       9,439              2,010                 -             11,449
</TABLE>

<TABLE>
<CAPTION>
                                                                         Company
                                                      As of and For the Year Ended December 31, 1998
                                               Diesel           Precision
                                               Group              Engine         Eliminations          Totals
                                               -----              ------         ------------          ------
<S>                                          <C>                <C>              <C>                 <C>
Net sales                                    $ 256,594          $  50,459         $       -          $ 307,053
Gross profit                                    48,641              6,682                 -             55,323
Depreciation and amortization expense           16,795              3,021                 -             19,816
Operating income                                12,764              2,268                 -             15,032
Net loss                                        (1,200)              (487)                -             (1,687)
Total assets                                   283,724             57,986           (19,794)           321,916
Total capital expenditures                      11,293              3,086                 -             14,379
</TABLE>





                                      F-26
<PAGE>   44
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(20)     SEGMENTS - (CONCLUDED)

<TABLE>
<CAPTION>
                                                                             Company
                                                        As of and For the 21 Days Ended December 31, 1997
                                                 Diesel            Precision
                                                 Group               Engine         Eliminations           Totals
                                                 -----               ------         ------------           ------
<S>                                            <C>                 <C>              <C>                   <C>
Net sales                                      $  11,276           $   2,878          $       -           $  14,154
Gross profit                                       2,239                 497                  -               2,736
Depreciation and amortization expense                817                 178                  -                 995
Operating income                                     708                 183                  -                 891
Net (loss) income                                   (186)                174                  -                 (12)
Total assets                                     282,707              56,474            (17,871)            321,310
Total capital expenditures                           352                  26                  -                 378
</TABLE>


<TABLE>
<CAPTION>
                                                                       Predecessor
                                                     As of and For the 344 Days Ended December 10, 1997
                                                Diesel           Precision
                                                Group             Engine         Eliminations          Totals
                                                -----             ------         ------------          ------
<S>                                            <C>               <C>             <C>                  <C>
Net sales                                      $205,335          $ 53,809          $      -           $259,144
Gross profit                                     32,383             7,119                 -             39,502
Depreciation and amortization expense            13,098             2,602                 -             15,700
Operating income                                  7,619             3,785                 -             11,404
Net income                                          660             2,282                 -              2,942
Total assets                                    189,306            32,136           (17,094)           204,348
Total capital expenditures                       11,804             1,358                 -             13,162
</TABLE>


(21)     FOREIGN AND GEOGRAPHIC INFORMATION

         The Company has manufacturing operations in the United States, Italy
and Brazil. The following is a summary of information by area as of December 31,
1999, 1998 and 1997 and for 1999, 1998, the 21 day period ended December 31,
1997 and the 344 day period ended December 10, 1997:

<TABLE>
<CAPTION>
                                       Company            Company          Company         Predecessor
                                                                           21 Days           344 Days
                                      Year Ended         Year Ended         Ended             Ended
                                     December 31,       December 31,     December 10,      December 10,
                                         1999               1998             1997              1997
                                     ------------       ------------     ------------      ------------
<S>                                  <C>                <C>              <C>               <C>
Net sales:
     Domestic - United States          $168,463          $195,595          $  8,783          $174,860
                                       --------          --------          --------          --------
     Foreign net sales:
         England                         43,547            51,009             2,277            38,092
         All other                       69,570            60,449             3,094            46,192
                                       --------          --------          --------          --------
     Total foreign sales                113,117           111,458             5,371            84,284
                                       --------          --------          --------          --------
Net sales                              $281,580          $307,053          $ 14,154          $259,144
                                       ========          ========          ========          ========
</TABLE>




                                      F-27
<PAGE>   45
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(21)     FOREIGN AND GEOGRAPHIC INFORMATION - (CONCLUDED)


<TABLE>
<CAPTION>
                                                            Company          Company
                                                          December 31,    December 31,
                                                              1999            1998
                                                          -----------     -----------
<S>                                                       <C>             <C>
         Long-lived assets:
              United States                               $   181,610     $   189,874
              Italy                                            29,341          35,962
              Brazil                                              347               -
                                                          -----------     -----------
                  Long-lived assets                       $   211,298     $   225,836
                                                          ===========     ===========

         Deferred tax assets (liabilities):
              United States                               $     2,520     $     2,056
              Italy                                               240           1,074
              Brazil                                             (147)              -
                                                          -----------     -----------
                  Deferred tax assets                     $     2,613     $     3,130
                                                          ===========     ===========
</TABLE>


(22)     VALUATION AND QUALIFYING ACCOUNTS

         The components of significant valuation and qualifying accounts for
1999, 1998, the 21 day period ended December 31, 1997 and the 344 day period
ended December 10, 1997 were as follows:

<TABLE>
<CAPTION>
                                                               Allowance for
                                                               Uncollectible
                                                                 Accounts         Inventory
                                                                Receivable        Reserves
                                                                ----------        --------
<S>                                                            <C>               <C>
         Balance December 31, 1996                             $       478       $     1,994

              Charged to costs and expenses                          1,055             1,503
              Recoveries (write-offs)                                   14              (596)
              Exchange                                                 (42)              (59)
                                                               -----------       -----------
         Balance December 11, 1997                                   1,505             2,842

              Charged (credited) to costs and expenses                   3               (11)
              Write-offs                                                 -              (172)
              Exchange                                                   -                 -
                                                               -----------       -----------
         Balance December 31, 1997                                   1,508             2,659

              Charged to costs and expenses                             44             1,896
              (Write-offs) recoveries                               (1,062)                7
              Exchange                                                  10                58
                                                               -----------       -----------
         Balance December 31, 1998                                     500             4,620

              Charged to costs and expenses                            208               378
              Write-offs                                               (54)           (1,781)
              Exchange                                                 (44)             (125)
                                                               -----------       -----------
         Balance December 31, 1999                             $       610       $     3,092
                                                               ===========       ===========
</TABLE>



                                      F-28
<PAGE>   46
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)



(23)     SUBSEQUENT EVENTS

         Between January 25, 2000 and February 2, 2000, the Company retired
$14,050 in Notes at a discounted price of $11,503. As a result of the early
retirement of the Notes, the Company realized a $1,585 gain which was recorded
net of tax and the write off of unamortized debt issuance cost of $962. The
transactions will be recorded as an extraordinary item in the first quarter of
2000.





                                      F-29
<PAGE>   47
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)



(24)     SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS

         Under the terms of the Notes issued by the Parent, the Notes are
guaranteed jointly, fully, severally and unconditionally by the Subsidiary
Guarantors on a subordinated basis and are not guaranteed by SpA, PEPL and FSC
(the "Non-Guarantors").

         The following are the supplemental combining condensed balance sheets
as of December 31, 1999 and 1998 and the supplemental combined condensed
statements of operations and cash flows for 1999, 1998, the 21 day period ended
December 31, 1997 and the 344 day period ended December 10, 1997. Separate
complete financial statements of the Guarantor are not presented because
management has determined that they are not material to investors.

<TABLE>
<CAPTION>
                                                                             (Company)
                                                                         December 31, 1999
                                           ------------------------------------------------------------------------------
                                             Stanadyne                                                         Stanadyne
                                            Automotive                       Non-                             Automotive
                                               Corp.       Subsidiary      Guarantor                            Corp. &
                                              Parent       Guarantors    Subsidiaries    Eliminations        Subsidiaries
                                              ------       ----------    ------------    ------------        ------------
<S>                                        <C>            <C>            <C>             <C>                 <C>
ASSETS
Cash and cash equivalents                  $     3,760    $         2    $        184    $        111        $      4,057
Accounts receivable, net                        28,068          8,213           4,112             (97)             40,296
Inventories                                     23,677          8,039           5,184            (318)(c)          36,582
Other current assets                             6,636          1,196           1,979               -               9,811
                                           -----------    -----------    ------------    ------------        ------------
         Total current assets                   62,141         17,450          11,459            (304)             90,746
Property, plant and equipment, net              83,467         21,476          14,668               -             119,611
Intangible and other assets, net                63,068         13,746          15,020            (147)(b)          91,687
Investment in subsidiaries                      36,516           (311)              -         (36,205)(a)               -
Due from Stanadyne Automotive Holding
   Corp.                                         4,061              -               -               -               4,061
                                           -----------    -----------    ------------    ------------        ------------
         Total assets                      $   249,253    $    52,361    $     41,147    $    (36,656)       $    306,105
                                           ===========    ===========    ============    ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities   $    37,857    $     6,511    $      5,842    $        (68)       $     50,142
Current maturities of long-term debt and
   capital lease obligations                     3,007              -           3,010               -               6,017
                                           -----------    -----------    ------------    ------------        ------------
         Total current liabilities              40,864          6,511           8,852             (68)             56,159
Long-term debt and capital lease
   obligations                                 135,671              -             592               -             136,263
Other noncurrent liabilities                    34,096         12,224           5,829            (147)(b)          52,002
Intercompany accounts                          (25,498)        15,567          10,023             (92)                  -
Stockholders' equity                            64,120         18,059          15,851         (36,349)(a)          61,681
                                           -----------    -----------    ------------    ------------        ------------
         Total liabilities and
           stockholders' equity            $   249,253    $    52,361    $     41,147    $    (36,656)       $    306,105
                                           ===========    ===========    ============    ============        ============
</TABLE>


(a) Amount represents the elimination of investments in subsidiaries.
(b) Reclassify Non-Guarantor deferred tax asset to deferred tax liability.
(c) Amount represents the elimination of inventory for out of period transfers.




                                      F-30
<PAGE>   48
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(24)    SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                             (Company)
                                                                         December 31, 1998
                                           ------------------------------------------------------------------------------
                                             Stanadyne                                                         Stanadyne
                                            Automotive                       Non-                             Automotive
                                               Corp.       Subsidiary      Guarantor                            Corp. &
                                              Parent       Guarantors    Subsidiaries    Eliminations        Subsidiaries
                                              ------       ----------    ------------    ------------        ------------
<S>                                        <C>            <C>            <C>             <C>                 <C>
ASSETS
Cash and cash equivalents                  $     4,859    $         5    $          5    $        263        $      5,132
Accounts receivable, net                        27,257          6,731           7,576               -              41,564
Inventories                                     22,466          7,418           6,852            (176)             36,560
Other current assets                             6,601          2,040             122               -               8,763
                                           -----------    -----------    ------------    ------------        ------------
         Total current assets                   61,183         16,194          14,555              87              92,019
Property, plant and equipment, net              86,501         22,284          17,181               -             125,966
Intangible and other assets, net                67,635         14,528          18,781          (1,074)(b)          99,870
Investment in subsidiaries                      23,285              -               -         (23,285)(a)               -
Due from Stanadyne Automotive Holding
   Corp.                                         4,061              -               -               -               4,061
                                           -----------    -----------    ------------    ------------        ------------
         Total assets                      $   242,665    $    53,006    $     50,517    $    (24,272)       $    321,916
                                           ===========    ===========    ============    ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities   $    29,640    $     7,725    $     13,970    $          -        $     51,335
Current maturities of long-term debt and
   capital lease obligations                     5,723              -           4,380               -              10,103
                                           -----------    -----------    ------------    ------------        ------------
         Total current liabilities              35,363          7,725          18,350               -              61,438
Long-term debt and capital lease
   obligations                                 148,995              -           1,388               -             150,383
Other noncurrent liabilities                    33,999         12,904           5,075          (1,074)(b)          50,904
Intercompany accounts                          (33,956)        17,563          16,141             252                   -
Stockholders' equity                            58,264         14,814           9,563         (23,450)(a)          59,191
                                           -----------    -----------    ------------    ------------        ------------
         Total liabilities and
           stockholders' equity            $   242,665    $    53,006    $     50,517    $    (24,272)       $    321,916
                                           ===========    ===========    ============    ============        ============
</TABLE>


(a) Amount represents the elimination of investments in subsidiaries.
(b) Reclassify Non-Guarantor deferred tax asset to deferred tax liability.



                                      F-31
<PAGE>   49
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(24)    SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<CAPTION>
                                                                             (Company)
                                                                   Year Ended December 31, 1999
                                             -------------------------------------------------------------------------------
                                               Stanadyne                                                          Stanadyne
                                              Automotive                        Non-                             Automotive
                                                 Corp.        Subsidiary      Guarantor                            Corp. &
                                                Parent        Guarantors    Subsidiaries    Eliminations        Subsidiaries
                                                ------        ----------    ------------    ------------        ------------
<S>                                          <C>             <C>            <C>             <C>                 <C>
Net sales                                    $   207,348     $    50,647    $     24,199    $       (614)(a)    $    281,580
Cost of goods sold                               161,004          41,235          22,474            (509)(a)         224,204
                                             -----------     -----------    ------------    ------------        ------------
         Gross profit                             46,344           9,412           1,725            (105)             57,376
Selling, general, administrative and
   other operating expenses                       40,291           2,415          (7,103)            (87)             35,516
                                             -----------     -----------    ------------    ------------        ------------
         Operating income                          6,053           6,997           8,828             (18)             21,860
Interest, net                                     11,036           1,127           1,423             (10)             13,576
                                             -----------     -----------    ------------    ------------        ------------
         (Loss) income before income
           taxes and extraordinary item           (4,983)          5,870           7,405              (8)              8,284
Income tax (benefit) expense                        (815)          2,285           1,658               -               3,128
                                             -----------     -----------    ------------    ------------        ------------
         (Loss) income before
           extraordinary item                     (4,168)          3,585           5,747              (8)              5,156
Extraordinary gain                                   750               -               -               -                 750
                                             -----------     -----------    ------------    ------------        ------------
         Net (loss) income                   $    (3,418)    $     3,585    $      5,747    $         (8)       $      5,906
                                             ===========     ===========    ============    ============        ============
</TABLE>




<TABLE>
<CAPTION>
                                                                             (Company)
                                                                   Year Ended December 31, 1998
                                           -------------------------------------------------------------------------------
                                             Stanadyne                                                          Stanadyne
                                            Automotive                       Non-                              Automotive
                                               Corp.       Subsidiary      Guarantor                             Corp. &
                                              Parent       Guarantors    Subsidiaries     Eliminations        Subsidiaries
                                              ------       ----------    ------------     ------------        ------------
<S>                                        <C>            <C>            <C>              <C>                 <C>
Net sales                                  $   231,215    $    50,459    $     26,138     $       (759)(a)    $    307,053
Cost of goods sold                             181,367         43,777          27,376             (790)(a)         251,730
                                           -----------    -----------    ------------     ------------        ------------
         Gross profit (loss)                    49,848          6,682          (1,238)              31              55,323
Selling, general, administrative and
   other operating expenses                     32,090          4,414           3,787                -              40,291
                                           -----------    -----------    ------------     ------------        ------------
         Operating income (loss)                17,758          2,268          (5,025)              31              15,032
Interest, net                                   11,851          1,539           1,730               18              15,138
                                           -----------    -----------    ------------     ------------        ------------
         Income (loss) before income
           taxes                                 5,907            729          (6,755)              13                (106)
Income tax expense (benefit)                     1,681          1,216          (1,316)               -               1,581
                                           -----------    -----------    ------------     ------------        ------------
         Net income (loss)                 $     4,226    $      (487)   $     (5,439)    $         13        $     (1,687)
                                           ===========    ===========    ============     ============        ============
</TABLE>


(a) To eliminate intercompany sales and cost of sales.


                                      F-32
<PAGE>   50
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands, except share amounts)


(24)    SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<CAPTION>
                                                                             (Company)
                                                               21 Day Period Ended December 31, 1997
                                           ---------------------------------------------------------------------------------
                                             Stanadyne                                                            Stanadyne
                                            Automotive                         Non-                              Automotive
                                               Corp.        Subsidiary       Guarantor                             Corp. &
                                              Parent        Guarantors     Subsidiaries     Eliminations        Subsidiaries
                                              ------        ----------     ------------     ------------        ------------
<S>                                        <C>             <C>             <C>              <C>                 <C>
Net sales                                  $    11,329     $     2,878     $          -     $        (53)(a)    $     14,154
Cost of goods sold                               9,091           2,380                -              (53)(a)          11,418
                                           -----------     -----------     ------------     ------------        ------------
         Gross profit                            2,238             498                -                -               2,736
Selling, general, administrative and
   other operating expenses                      1,531             314                -                -               1,845
                                           -----------     -----------     ------------     ------------        ------------
         Operating income                          707             184                -                -                 891
Interest, net                                      786              94                -                -                 880
                                           -----------     -----------     ------------     ------------        ------------
         Income (loss) before income
           taxes                                   (79)             90                -                -                  11
Income tax expense (benefit)                       108             (85)               -                -                  23
                                           -----------     -----------     ------------     ------------        ------------
         Net (loss) income                 $      (187)    $       175     $          -     $          -        $        (12)
                                           ===========     ===========     ============     ============        ============
</TABLE>


<TABLE>
<CAPTION>
                                                                           (Predecessor)
                                                              344 Day Period Ended December 10, 1997
                                           -------------------------------------------------------------------------------
                                             Stanadyne                                                          Stanadyne
                                            Automotive                       Non-                              Automotive
                                               Corp.       Subsidiary      Guarantor                             Corp. &
                                              Parent       Guarantors    Subsidiaries     Eliminations        Subsidiaries
                                              ------       ----------    ------------     ------------        ------------
<S>                                        <C>            <C>            <C>              <C>                 <C>
Net sales                                  $   177,204    $    53,809    $     28,986     $       (855)(a)    $    259,144
Cost of goods sold                             145,925         46,691          27,856             (830)(a)         219,642
                                           -----------    -----------    ------------     ------------        ------------
         Gross profit                           31,279          7,118           1,130              (25)             39,502
Selling, general, administrative and
   other operating expenses                     23,414          3,333           1,351                -              28,098
                                           -----------    -----------    ------------     ------------        ------------
         Operating income (loss)                 7,865          3,785            (221)             (25)             11,404
Interest, net                                    6,379              3             291                -               6,673
                                           -----------    -----------    ------------     ------------        ------------
         Income (loss) before income
           taxes                                 1,486          3,782            (512)             (25)              4,731
Income tax expense (benefit)                       504          1,500            (215)               -               1,789
                                           -----------    -----------    ------------     ------------        ------------
         Net income (loss)                 $       982    $     2,282    $       (297)    $        (25)       $      2,942
                                           ===========    ===========    ============     ============        ============
</TABLE>


(a) To eliminate intercompany sales and cost of sales.




                                      F-33
<PAGE>   51
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(24)     SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<CAPTION>
                                                                               (Company)
                                                                     Year Ended December 31, 1999
                                               ----------------------------------------------------------------------------
                                                 Stanadyne                                                       Stanadyne
                                                Automotive                         Non-                         Automotive
                                                   Corp.        Subsidiary       Guarantor                        Corp. &
                                                  Parent        Guarantors     Subsidiaries    Eliminations    Subsidiaries
                                                  ------        ----------     ------------    ------------    ------------
<S>                                            <C>             <C>             <C>             <C>            <C>
Cash flows from operating activities:
     Net (loss) income                         $    (3,418)    $     3,585     $      5,747    $        (8)   $      5,906
     Adjustments to reconcile net (loss)
       income to net cash provided by (used
       in) operating activities:
           Depreciation and amortization            15,902           3,306            1,596              -          20,804
           Other adjustments                           559            (652)             564              -             471
           Changes in operating assets and
              liabilities                           14,648          (5,039)          (9,422)          (204)            (17)
                                               -----------     -----------     ------------    -----------    ------------
           Net cash provided by (used in)
              operating activities                  27,691           1,200           (1,515)          (212)         27,164
                                               -----------     -----------     ------------    -----------    ------------

Cash flows from investing activities:
     Capital expenditures                           (8,854)         (1,792)            (803)             -         (11,449)
     Proceeds from disposal of property,
       plant and equipment                              71             618                -              -             689
     Investment in subsidiaries                     (3,963)            (29)               -          3,992               -
                                               -----------     -----------     ------------    -----------    ------------
           Net cash (used in) provided by
              investing activities                 (12,746)         (1,203)            (803)         3,992         (10,760)
                                               -----------     -----------     ------------    -----------    ------------

Cash flows from financing activities:
     Net change in debt                            (16,041)              -           (1,461)             -         (17,502)
     Net change in equity                                -               -            3,992         (3,992)              -
                                               -----------     -----------     ------------    -----------    ------------
           Net cash (used in) provided by
              financing activities                 (16,041)              -            2,531         (3,992)        (17,502)
                                               -----------     -----------     ------------    -----------    ------------

Net (decrease) increase in cash and cash
   equivalents                                      (1,096)             (3)             213           (212)         (1,098)
Effect of exchange rate changes on cash                 (3)              -              (34)            60              23
Cash and cash equivalents at
   beginning of year                                 4,859               5                5            263           5,132
                                               -----------     -----------     ------------    -----------    ------------
Cash and cash equivalents at
   end of year                                 $     3,760     $         2     $        184    $       111    $      4,057
                                               ===========     ===========     ============    ===========    ============
</TABLE>



                                      F-34
<PAGE>   52
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(24)    SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<CAPTION>
                                                                               (Company)
                                                                     Year Ended December 31, 1998
                                               ----------------------------------------------------------------------------
                                                 Stanadyne                                                       Stanadyne
                                                Automotive                         Non-                         Automotive
                                                   Corp.        Subsidiary       Guarantor                        Corp. &
                                                  Parent        Guarantors     Subsidiaries    Eliminations    Subsidiaries
                                                  ------        ----------     ------------    ------------    ------------
<S>                                            <C>             <C>             <C>             <C>            <C>
Cash flows from operating activities:
     Net income (loss)                         $     4,226     $      (487)    $     (5,439)   $        13    $     (1,687)
     Adjustments to reconcile net income
       (loss) to net cash provided by
       operating activities:
           Depreciation and amortization            15,193           3,021            1,602              -          19,816
           Other adjustments                           863             331           (2,154)             -            (960)
           Changes in operating assets and
              liabilities                           (3,239)            221            6,193            288           3,463
                                               ------------    -----------     ------------    -----------    ------------
           Net cash provided by operating
              activities                            17,043           3,086              202            301          20,632
                                               -----------     -----------     ------------    -----------    ------------

Cash flows from investing activities:
     Capital expenditures                          (10,095)         (3,086)          (1,198)             -         (14,379)
     Proceeds from disposal of property,
       plant and equipment                              21               1                8              -              30
                                               -----------     -----------     ------------    -----------    ------------
           Net cash used in investing
              activities                           (10,074)         (3,085)          (1,190)             -         (14,349)
                                               -----------     -----------     ------------    -----------    ------------

Cash flows from financing activities:
     Net change in debt                             (2,430)              -              988              -          (1,442)
     Net change in equity                                -               -                -              -               -
                                               -----------     -----------     ------------    -----------    ------------
           Net cash (used in) provided by
              financing activities                  (2,430)              -              988              -          (1,442)
                                               -----------     -----------     ------------    -----------    ------------

Net increase in cash and cash equivalents            4,539               1                -            301           4,841
Effect of exchange rate changes on cash                  3               -                1            (38)            (34)
Cash and cash equivalents at
   beginning of year                                   317               4                4              -             325
                                               -----------     -----------     ------------    -----------    ------------
Cash and cash equivalents at
   end of year                                 $     4,859     $         5     $          5    $       263    $      5,132
                                               ===========     ===========     ============    ===========    ============
</TABLE>


                                      F-35
<PAGE>   53
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(24)    SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<CAPTION>
                                                                               (Company)
                                                                 21 Day Period Ended December 31, 1997
                                               ----------------------------------------------------------------------------
                                                 Stanadyne                                                       Stanadyne
                                                Automotive                         Non-                         Automotive
                                                   Corp.       Subsidiary       Guarantor                        Corp. &
                                                  Parent       Guarantors      Subsidiaries    Eliminations    Subsidiaries
                                                  ------       ----------      ------------    ------------    ------------
<S>                                            <C>             <C>             <C>             <C>             <C>
Cash flows from operating activities:
     Net income (loss)                         $      (187)    $       175     $          -    $         -     $        (12)
     Adjustments to reconcile net income
       (loss) to net cash (used in) provided
       by operating activities:
           Depreciation and amortization               817             178                -              -              995
           Other adjustments                            81            (448)               -              -             (367)
           Changes in operating assets and
              liabilities                          (38,960)         20,466           13,760             (5)          (4,739)
                                               -----------     -----------     ------------    -----------     ------------
           Net cash (used in) provided by
              operating activities                 (38,249)         20,371           13,760             (5)          (4,123)
                                               -----------     -----------     ------------    -----------     ------------

Cash flows from investing activities:
     Capital expenditures                             (352)            (26)               -              -             (378)
     Acquisition, net of cash acquired             (87,549)        (20,345)         (13,760)             -         (121,654)
                                               -----------     -----------     ------------    -----------     ------------
           Net cash used in investing
              activities                           (87,901)        (20,371)         (13,760)             -         (122,032)
                                               -----------     -----------     ------------    -----------     ------------

Cash flows from financing activities:
     Net change in debt                             62,990               -                -              -           62,990
     Net change in equity                           57,402               -                -              -           57,402
                                               -----------     -----------     ------------    -----------     ------------
           Net cash provided by financing
              activities                           120,392               -                -              -          120,392
                                               -----------     -----------     ------------    -----------     ------------

Net decrease in cash and cash equivalents           (5,758)              -                -             (5)          (5,763)
Effect of exchange rate changes on cash                  4               -                -              -                4
Cash and cash equivalents at
   beginning of period                               6,071               4                4              5            6,084
                                               -----------     -----------     ------------    -----------     ------------
Cash and cash equivalents at
   end of period                               $       317     $         4     $          4    $         -     $        325
                                               ===========     ===========     ============    ===========     ============
</TABLE>



                                      F-36
<PAGE>   54
                   STANADYNE AUTOMOTIVE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


(24)    SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS - (CONCLUDED)


<TABLE>
<CAPTION>
                                                                             (Predecessor)
                                                                344 Day Period Ended December 10, 1997
                                               ------------------------------------------------------------------------------
                                                 Stanadyne                                                         Stanadyne
                                                Automotive                         Non-                           Automotive
                                                   Corp.        Subsidiary       Guarantor                          Corp. &
                                                  Parent        Guarantors     Subsidiaries      Eliminations    Subsidiaries
                                                  ------        ----------     ------------      ------------    ------------
<S>                                            <C>             <C>             <C>               <C>             <C>
Cash flows from operating activities:
     Net income (loss)                         $       982     $     2,282     $       (297)     $       (25)    $      2,942
     Adjustments to reconcile net income
       (loss) to net cash provided by
       operating activities:
           Depreciation and amortization            11,738           2,602            1,360                -           15,700
           Other adjustments                         1,327            (647)            (365)               -              315
           Changes in operating assets and
              liabilities                           (3,068)         (3,320)           1,713               43           (4,632)
                                               -----------     -----------     ------------     ------------     ------------
           Net cash provided by operating
              activities                            10,979             917            2,411               18           14,325
                                               -----------     -----------     ------------     ------------     ------------

Cash flows from investing activities:
     Capital expenditures                           (9,902)         (1,358)          (1,902)               -          (13,162)
     Proceeds from disposal of property,
       plant and equipment                             148             441              169                -              758
                                               -----------     -----------     ------------     ------------     ------------
           Net cash used in investing
              activities                            (9,754)           (917)          (1,733)               -          (12,404)
                                               -----------     -----------     ------------     ------------     ------------

Cash flows from financing activities:
     Net change in debt                              1,967               -             (679)               -            1,288
     Net change in equity                             (450)              -                -                -             (450)
                                               -----------     -----------     ------------     ------------     ------------
           Net cash provided by (used in)
              financing activities                   1,517               -             (679)               -              838
                                               -----------     -----------     ------------     ------------     ------------

Net increase (decrease) in cash and cash
   equivalents                                       2,742               -               (1)              18            2,759
Effect of exchange rate changes on cash                (32)              -               (1)             (13)             (46)
Cash and cash equivalents at
   beginning of period                               3,361               4                6                -            3,371
                                               -----------     -----------     ------------     ------------     ------------
Cash and cash equivalents at
   end of period                               $     6,071     $         4     $          4      $         5     $      6,084
                                               ===========     ===========     ============      ===========     ============
</TABLE>


                                     ******





<PAGE>   55
ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE

None.







                                       18
<PAGE>   56
                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age as of December 31, 1999 and
position with the Company of each person who is a member of the Board of
Directors or an executive officer of the Company. All directors serve for the
term for which they are elected or until their successors are duly elected and
qualified or until death, retirement, resignation or removal. All directors of
the Company are also directors of Holdings.

<TABLE>
<CAPTION>
Name                         Age                                Position
----                         ---                                --------

<S>                          <C>    <C>
William D. Gurley             51    President, Chief Executive Officer and Director, Stanadyne Automotive Corp.
Michael H. Boyer              50    Vice President, Chief Financial Officer, Secretary and Director, Stanadyne
                                    Automotive Corp.
Robert A. Massa               62    Vice President, Human Resources, Stanadyne Automotive Corp.
Arthur S. Caruso              56    Vice President and General Manager, Precision Engine Products Corp.
William W. Kelly              48    Vice President and General Manager, Fuel Pumps, Stanadyne Automotive Corp.
Donald Buonomo                60    Vice President, Quality and Reliability, Stanadyne Automotive Corp.
Leon P. Janik                 56    Vice President and General Manager, Power Products and Fuel Injectors, Stanadyne
                                    Automotive Corp.
W. Richard Bingham            64    Director
Robert Cizik                  68    Director and Chairman of the Board
Kenneth J. Diekroeger         37    Director
Theodore C. Rogers            65    Director
Kurtis J. Kaull               39    Director
</TABLE>


Mr. Gurley joined Stanadyne's Diesel Systems Division in 1984. In 1989, Mr.
Gurley became Executive Vice President, Marketing, Engineering and Operations
and was elected as a director of Stanadyne Automotive Corp. In 1995, he became
President and Chief Executive Officer of the Company.

Mr. Boyer joined Stanadyne in 1978. In 1989, Mr. Boyer became Vice President and
Chief Financial Officer and was elected Secretary and to the Board of Directors
for the Company in 1998.

Mr. Massa joined Stanadyne in October 1990 as Vice President, Human Resources.

Mr. Caruso joined Stanadyne's Precision Products Division (the predecessor
entity to Precision Engine) in 1965 and became Vice President and General
Manager, Precision Engine Products Corp. in 1988.

Mr. Kelly joined Stanadyne in 1982. Effective with the formation of Stanadyne
Automotive Corp. in 1988, Mr. Kelly was appointed to Vice President of
Engineering and Marketing for Diesel Systems Division and in 1998 became Vice
President and General Manager, Fuel Pumps.

Mr. Buonomo joined Stanadyne in 1997 as Vice President, Quality and Reliability.
Prior to joining Stanadyne, he served as Vice President, Corporate Quality with
C. Cowles & Company and Vice President, Quality & Reliability with Veeder-Root
Company.



                                       19
<PAGE>   57
Mr. Janik joined Stanadyne in 1970. In 1992, Mr. Janik was appointed Vice
President, Power Products Division and in 1998 became Vice President and General
Manager, Power Products and Fuel Injectors.

Mr. Bingham co-founded AIP with Theodore C. Rogers in 1988 and, with Mr. Rogers,
is responsible for the overall management of the firm. Mr. Bingham was a
Managing Director of Shearson Lehman Brothers from 1984 to 1987. Prior to
joining Shearson Lehman Brothers, Mr. Bingham was a Director of the Corporate
Finance Department, a member of the board, and head of Mergers and Acquisitions
at Lehman Brothers Kuhn Loeb Inc. Prior thereto, he directed investment-banking
operations at Kuhn Loeb & Company where he was a partner and member of the board
and executive committee. Mr. Bingham also serves as a director of Bucyrus
International, Great Lakes Carbon, MBA Polymers, RBX Group and Dearfield
Associates.

Mr. Cizik is Chairman of the Board of the Company and has held that position and
served on the Board since December 12, 1997. He served as Chairman and Chief
Executive Officer of Cooper Industries, Inc., a diversified international
manufacturing company, from 1975 to 1996. He served as Chairman of the Board of
Easco, Inc. from January 1997 until May 1998. Mr. Cizik served as a director of
Harris Corporation from October 1998 until October 1999. He currently serves as
Chairman of the Board of Koppers Industries, Inc. and as a director of Air
Products and Chemicals, Inc., and Temple-Inland, Inc.

Mr. Diekroeger joined the San Francisco office of AIP in 1996 from The Shansby
Group, a private equity investment firm, where he had been employed since before
1992, and where he sourced, executed and served as a director for several
middle-market investments and buyouts. He was elected to the Board of Directors
of the Company in December 1997.

Mr. Rogers co-founded AIP with W. Richard Bingham in 1988 and, with Mr. Bingham,
is responsible for the overall management of the firm. Mr. Rogers is former
President, Chairman, Chief Executive Officer and Chief Operating Officer of NL
Industries, a petroleum service and chemical company. Mr. Rogers currently
serves as a non-executive Chairman of the Board and Director of Great Lakes
Carbon Corporation. Additionally, he serves as a Director of Bucyrus
International, Central Industrial Supply Company, RBX Group, Steel Heddle Group
and Derby International, Incorporated.

Mr. Kaull joined the San Francisco office of AIP in 1996 from Pexco Holdings, a
private equity investment firm, where he had been employed since 1990. He was
elected to the Board of Directors of the Company in February 1999. Additionally,
he serves as a Director of Central Industrial Supply Company.

Directors do not receive compensation for their services as directors, with the
exception of the Chairman of the Board, who receives $150,000 per year.
Directors of the Company are entitled to reimbursement of their reasonable
out-of-pocket expenses in connection with their travel to and attendance at
meetings of the Board of Directors or committees thereof.




                                       20
<PAGE>   58
ITEM 11.     EXECUTIVE COMPENSATION

The compensation of executive officers of the Company is determined by the Board
of Directors of the Company. The following table sets forth information
concerning compensation received by the five most highly compensated officers of
the Company for services rendered in fiscal 1999, 1998 and 1997.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                         Long Term
                                                                                    Compensation Awards
                                                                                        Securities
                                                                 Other Annual           Underlying           All Other
Name and Position              Year     Salary      Bonus      Compensation (1)         Options (#)       Compensation (2)
-----------------              ----     ------      -----      ----------------         -----------       ----------------
<S>                            <C>      <C>        <C>         <C>                  <C>                   <C>
William D. Gurley              1999     $345,000   $395,715        $40,742                    468               ---
   (President, Chief           1998      320,000    261,754         34,667                  5,850               ---
   Executive Officer and       1997      300,000     68,400         33,681                    ---             $916,626
   Director)

Michael H. Boyer               1999      217,500    249,473         34,487                    170               ---
   (Vice President, Chief      1998      202,000    165,232         26,384                  2,125               ---
   Financial Officer,          1997      190,000     43,320         25,582                    ---             565,028
   Secretary and Director)

Arthur S. Caruso               1999      193,000    215,388         26,983                    ---               ---
   (Vice President and         1998      185,000     91,760         24,362                    ---               ---
   General Manager)            1997      160,000     45,440         29,645                    ---             248,870

Leon P. Janik                  1999      213,500    244,244         23,986                    180               ---
   (Vice President and         1998      185,000    156,977         23,357                  2,250               ---
   General Manager)            1997      140,000     27,300         25,720                    ---             294,054

William W. Kelly               1999      225,500    257,972         27,895                    240               ---
   (Vice President and         1998      210,000    178,731         24,992                  3,000               ---
   General Manager)            1997      200,000     39,000         22,054                    ---             567,602
</TABLE>

(1)      Other Annual Compensation was received in the form of taxable and
         nontaxable fringe benefits, which included, among other things, club
         allowances, personal umbrella insurance, executive life and disability
         insurance, medical reimbursement and automobile leases.

(2)      All Other Compensation was paid in 1997 in connection with the
         Acquisition. Prior to the Acquisition, the Company maintained two
         incentive plans for top level executives: the Debt Reduction Agreement
         ("DRA") and the Equity Participation Promotion Agreement ("EPP"). The
         DRA was an incentive plan whereby cash was awarded to plan members if
         certain performance objectives were achieved. The EPP was a stock
         incentive plan pursuant to which restricted stock granted to plan
         members in 1989 would vest upon achieving certain pre-designated
         performance benchmarks. Immediately prior to the Acquisition, the DRA
         was paid in full and all stock issued pursuant to the EPP was
         accelerated. The EPP and DRA were terminated and all stock owned by
         management was sold in connection with the Acquisition.



                                       21
<PAGE>   59
EMPLOYMENT AGREEMENTS

The Company has entered into identical employment agreements with Messrs.
Gurley, Boyer and Kelly. Mr. Caruso has entered into a comparable agreement with
Precision Engine. Pursuant to these agreements, Messrs. Gurley, Boyer, Caruso
and Kelly serve in their current capacities at their current base salaries of
$345,000, $217,500, $201,000 and $225,500, respectively. These salaries are
reviewed at least annually and shall be increased to be consistent with
increases in base salary awarded in the ordinary course of business to other key
executives.

Each employment agreement is renewed automatically for a term of one year on the
anniversary of the effective date, unless notice is given by the Company no
later than thirty days before the end of the current term. If the Company does
not renew the agreement within the three-year period following a change of
control, the change of control provisions will continue to apply and the
executive may be entitled to certain payments under the agreement in the event
of termination.

The Company may terminate the executive for cause, as defined in the agreement,
as well as for death and disability. Moreover, the executive may terminate the
agreement for "Good Reason," which includes, among other circumstances, when the
executive is assigned duties inconsistent with, or is subject to any other
action by the Company that results in a diminution of, his position, authority,
duties or responsibilities. Upon the termination of the employment agreement by
the executive upon Good Reason, the Company shall pay to the executive within
thirty days of the date of termination (i) his base salary through the date of
termination, as well as any outstanding bonus payments; (ii) the previous year's
bonus payment prorated for the fiscal year of the termination; (iii) an amount
equal to the executive's base salary; (iv) any deferred compensation; and (v)
any other amount due the executive under any other separation or severance pay
plan of the Company.

Upon any termination within three years of a change of control, as defined in
the agreements, the executive is entitled to certain payments, unless the
termination is because of the death or retirement of the executive, by the
Company for cause or disability, or by the executive for other than Good Reason.
Such payments shall include (i) the executive's base salary through the date of
termination, as well as any outstanding bonus payments; (ii) the previous year's
bonus payment prorated for the fiscal year of termination; (iii) an amount equal
to three times the executive's current base salary, plus three times the average
amount paid to the executive in bonus payments over the prior three years; (iv)
any deferred compensation; and (v) certain payments with respect to the
executive's automobile. The executive shall be entitled to continued
participation under the welfare benefit plans of the Company for one year
following the date of termination. Payments under (iii) of this paragraph shall
be payable in three equal installments: the first on the date of termination;
the second on the first anniversary of the date of termination; and the third on
the second anniversary of the date of termination.

Mr. Janik is an at-will employee. In 1999, Mr. Janik was paid an annual salary
of $213,500 and a bonus of $244,244.




                                       22
<PAGE>   60
STOCK OPTION PLAN

The Board of Directors of Holdings adopted the Management Stock Option Plan (the
"Stock Plan") as of June 5, 1998. The Stock Plan provides for the grant of stock
options to certain management employees of Holdings and its subsidiary, the
Company, for the purchase of shares of Holdings, which options are non-qualified
for federal income tax purposes. Subject to the requirements and limitations of
the Stock Plan, the President and Chief Executive Officer of Holdings shall have
the authority to select the participants in the Stock Plan. The Board of
Directors of Holdings, or a committee designated by the Board of Holdings, shall
have the sole and complete responsibility and authority to, among other duties,
approve grants of options under the Stock Plan.

OPTION GRANTS

There were no stock options granted during the year ended December 31, 1999.

STOCK OPTION EXERCISES

There were no stock options exercised as of December 31, 1999.

EMPLOYEE BENEFIT PLANS

401(K) PLANS

The Company sponsors two savings plans which are intended to be qualified under
Sections 401(a) and 401(k) of the Internal Revenue Code. All regular U.S.
employees, except Tallahassee hourly employees, are eligible to participate in
the Stanadyne Automotive Corp. Savings Plus Plan (the "SAC Savings Plan").
Beginning on January 1, 1998, hourly employees at the Tallahassee Plant were
eligible to participate in the Precision Engine Products Corp. Retirement Fund
(the "PEPC 401(k) Plan"). The maximum matching contribution for any participant,
excluding the participants in the PEPC 401(k) Plan, for any year is 50% of such
participant's contributions up to a maximum amount of $300.00. The participants
in the PEPC 401(k) Plan receive a Company contribution of $300.00 per year plus
a maximum matching contribution of $100.00.

The Company formerly maintained for Tallahassee hourly employees a
noncontributory defined benefit pension plan entitled the "Precision Engine
Products Corp. Tallahassee Hourly Pension Plan." This plan was terminated as of
December 31, 1997. The Company now maintains only one noncontributory defined
benefit pension plan entitled the "Stanadyne Automotive Corp. Pension Plan" (the
"SAC Pension Plan").

THE SAC PENSION PLAN

The SAC Pension Plan provides benefits for all domestic non-collectively
bargained, salaried employees of the Company and hourly employees of the Company
employed at the Windsor, Washington and Jacksonville facilities. Salaried
employees who participate in the SAC Pension Plan are provided benefits
calculated under one of two different formulas. Salaried participants are
entitled to the greater of the two benefit amounts. Under Formula One, benefits
are based upon (i) a percentage of the monthly average compensation received by
a participant during the five consecutive calendar years of employment that
would produce the highest such average (the "Final


                                       23
<PAGE>   61
Average Compensation"), (ii) the years of service of the participant with the
Company and certain related or predecessor employers ("Years of Credited
Service"), and (iii) a percentage of the primary age 65 Social Security benefit.
Specifically, the accrued benefit payable under Formula One of the SAC Pension
Plan is equal to (w) + (x) - (y) - (z), where

(w) = 1.7% of Final Average Compensation times Years of Credited Service (not
      in excess of 30)

(x) = 1% of Final Average Compensation times Years of Credited Service in excess
      of 30

(y) = 1.66% of primary Social Security times Years of Credited Service (not
      in excess of 30)

(z) = Annuity for employees actively employed prior to July 2, 1988 (where
      applicable)

Formula Two under the SAC Pension Plan provides salaried participants with an
accrued monthly benefit equal to $19.00 times Years of Credited Service less an
Annuity for employees actively employed prior to July 2, 1988 (where
applicable).

Benefits provided under the SAC Pension Plan for hourly employees are based upon
(i) a fixed amount per month and (ii) the years of service of the participant
with the Company and certain related or predecessor employers ("Years of
Credited Service"). Specifically, the accrued monthly benefit ordinarily payable
under the SAC Pension Plan for hourly employees employed at the Washington and
Jacksonville locations is equal to: $12.00 multiplied by the participant's Years
of Credited Service. Hourly employees employed at the Windsor facility receive a
monthly benefit of $19.00 multiplied by Years of Credited Service.

For purposes of the SAC Pension Plan, compensation used in the determination of
Final Average Compensation includes total earnings received for personal
services to the Company. The total compensation that can be considered for any
purpose under the SAC Pension Plan is limited to $160,000 for 1999, 1998 and
1997, pursuant to requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"). The Code also places certain other limitations on the
annual benefits that may be paid under the Plan.

The Company has also adopted two nonqualified plans entitled the "Stanadyne
Automotive Corp. Benefit Equalization Plan" and the "Stanadyne Automotive Corp.
Supplemental Retirement Plan" (together, the "SERP"), which are designed to
supplement the benefits payable under the SAC Pension Plan for designated
employees. The annual benefit payable under the SERP is equal to the difference
between the benefit the designated employee would have received under the SAC
Pension Plan if certain Code limitations did not apply and the designated
employee's SAC Pension Plan benefit.

Benefits may be paid under the SAC Pension Plan and the SERP in the form of (i)
a straight-life annuity for the life of the participant; (ii) a 50% joint and
survivor annuity for the lives of the participant and spouse; (iii) a 75% or
100% joint and survivor annuity whereby the participant receives a reduced
monthly benefit for life and the spouse receives 75% or 100% of such reduced
monthly benefit for life; and (iv) for participants with an accrued benefit of
$5,000.00 or less, a lump sum.


                                       24
<PAGE>   62
                            Pension Plan Table (1)(2)

<TABLE>
<CAPTION>
                                                                       Years of Service
                                                                       ----------------
        Final Average Compensation               15             20            25          30           35
        --------------------------               --             --            --          --           --
<S>                                           <C>           <C>           <C>          <C>          <C>
        $125,000........................      $ 27,755      $ 37,007      $ 46,259     $ 55,510     $ 61,760
         150,000.......................         34,130        45,507        56,884       68,260       75,760
         175,000.......................         40,505        54,007        67,509       81,010       89,760
         200,000.......................         46,880        62,507        78,134       93,760      103,760
         225,000.......................         53,255        71,007        88,759      106,510      117,760
         250,000.......................         59,630        79,507        99,384      119,260      131,760
         300,000.......................         72,380        96,507       120,634      144,760      159,760
         400,000.......................         97,880       130,507       163,134      195,760      215,760
         450,000.......................        110,630       147,507       184,384      221,260      243,760
         500,000.......................        123,380       164,507       205,634      246,760      271,760
</TABLE>

Note:
(1)      Amounts shown represent the annual single-life benefit at age 65 from
         the SAC Pension Plan (as defined herein) plus the benefit from the SERP
         (as defined herein).

(2)      For this illustration, the annual social security benefit was assumed
         to be $16,476 for the calculation of the Social Security offset.

The Years of Credited Service under the SAC Pension Plan at December 31, 1999,
were 22.0, 34.4, 15.8, 29.8 and 18.0 for Messrs. Boyer, Caruso, Gurley, Janik
and Kelly, respectively. The estimated annual benefits payable under the Plan
and the SERP, assuming termination on December 31, 1999 and retirement at age
65, are illustrated as follows:

                                Estimated Accrued
                         Pension Benefit as of 12/31/99

<TABLE>
<CAPTION>
                                                   The Sac
                                                 Pension Plan          The SERP         Total
                                                 ------------          --------         -----
<S>                                              <C>                   <C>            <C>
                 Boyer.......................     $ 45,316             $ 26,718       $ 72,034
                 Caruso......................       54,225               49,824        104,049
                 Gurley......................       39,345               49,851         89,196
                 Janik.......................       40,560               20,005         60,565
                 Kelly.......................       37,017               23,065         60,082
</TABLE>


ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company is authorized by its Certificate of Incorporation to issue 10,000
shares of common stock, par value $.01 per share ("Company Common Stock").
Holdings owns all of the issued and outstanding 1,000 shares of Company Common
Stock. Holdings is authorized by its Certificate of Incorporation to issue
1,200,000 shares of common stock, par value $.01 per share ("Holdings Common
Stock"). AIP and management of the Company own substantially all of Holdings
Common Stock. Holdings has adopted the Stock Plan, which provides for the grant
to certain key employees and/or directors of the Company of stock options that
are non-qualified options for federal income tax purposes.

                                       25
<PAGE>   63
As of December 31, 1999, there were 20 holders of record of shares of Holdings
Common Stock. The following table sets forth certain information regarding
beneficial ownership of Holdings Common Stock as of December 31, 1999, assuming
the exercise of stock options exercisable within 60 days of such date, by (i)
each person who is known by Holdings to be the beneficial owner of more than 5%
of Holdings Common Stock, (ii) each of the Company's directors and the named
executive officers in the Summary Compensation Table and (iii) all directors and
executive officers as a group. To the knowledge of the Company, each stockholder
has sole voting and investment power as to the shares of Holdings Common Stock
shown unless otherwise noted. Except as indicated below, the address for each
such person is c/o Stanadyne Automotive Corp., 92 Deerfield Road, Windsor, CT
06095.

<TABLE>
<CAPTION>
                                                                                 Exercisable
                                                                  Total          Options (4)
                            Name                               Number (1)      Included in Total    Percentage (2)
                            ----                               ----------      -----------------    --------------
<S>                                                            <C>             <C>                  <C>
American Industrial Partners Capital Fund II, L.P. (3)..        951,301                   0             93.88%
W. Richard Bingham (3)..................................              0                   0              0.00%
Robert Cizik (3)........................................              0                   0              0.00%
Kenneth J. Diekroeger (3)...............................              0                   0              0.00%
Lawrence W. Ward, Jr. (3)...............................              0                   0              0.00%
William D. Gurley.......................................         20,418               6,318              2.01%
William W. Kelly........................................         11,534               3,240              1.14%
Leon P. Janik...........................................          7,755               2,430              0.77%
Michael H. Boyer........................................          7,271               2,295              0.72%
Arthur S. Caruso........................................              0                   0              0.00%
Theodore C. Rogers (5)..................................              0                   0              0.00%
All directors and executive officers as a group.........         49,554              15,201              4.89%
</TABLE>

(1)      Beneficial ownership is determined in accordance with Rule 13d-3 of the
         Securities and Exchange Commission. In computing the number of shares
         of Holdings Common Stock beneficially owned by a person and the
         percentage of beneficial ownership of that person, shares of Holdings
         Common Stock subject to options held by that person that are currently
         exercisable or exercisable within 60 days are deemed outstanding. Such
         shares, however, are not deemed outstanding for the purposes of
         computing the percentage ownership of each other person. The persons
         named in this table have sole voting and investment power with respect
         to all shares of Holdings Common Stock shown as beneficially owned by
         them, subject to community property laws where applicable and except as
         indicated in the other footnotes to this table.
(2)      Based upon 994,111 shares of Holdings Common Stock outstanding as of
         December 31, 1999.
(3)      The address of such entity or person is One Maritime Plaza, Suite 2525,
         San Francisco, California 94111.
(4)      Represents an aggregate of 15,201 shares of Holdings Common Stock held
         by directors and executive officers which are issuable upon exercise of
         options exercisable within 60 days of the date hereof.
(5)      The address of such person is 551 Fifth Avenue, Suite 3800, New York,
         New York 10176.

                                       26
<PAGE>   64
ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ACQUISITION ARRANGEMENTS

In connection with the Acquisition, Holdings, AIP and other stockholders of
Holdings entered into a stockholders agreement (the "Stockholders Agreement")
pursuant to which such persons were granted certain registration rights and
participation rights. Pursuant to the Stockholders Agreement, AIP has the right
to elect the directors of Holdings. The directors of the Company are the same as
the directors of Holdings.

At the close of the Acquisition on December 10, 1997, AIP was paid a fee of $4.0
million and was reimbursed for out-of-pocket expenses in connection with the
negotiation of the Acquisition and for providing certain investment banking
services to the Company, including the arrangement and negotiation of the
Company's financing, and for other financial advisory and management consulting
services.

MANAGEMENT SERVICES AGREEMENT

In accordance with a management services agreement, the Company is required to
pay AIP an annual fee of $1.1 million for providing general management,
financial and other corporate advisory services to the Company, payable
quarterly in advance on each January 1, April 1, July 1 and October 1 during the
term of the management services agreement. AIP also will be reimbursed for
out-of-pocket expenses. The management fees are subordinated in right of payment
to the Notes.




                                       27
<PAGE>   65

                                     PART IV

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

(a)      1.       Financial Statements:

                  See "Item 8. Financial Statements and Supplementary Data" of
this Annual Report on Form 10-K.

         2.       Financial Statement Schedules:

                  The Company is not required by the applicable accounting
regulations of the Securities and Exchange Commission to provide all financial
statement schedules. The Financial Statements and the Notes thereto contain what
information is required and what is not required has been omitted.

         3.       Exhibits:

<TABLE>
<CAPTION>
TABLE
NUMBER                                 DESCRIPTION

<S>      <C>
3.1      * Amended and Restated Certificate of Incorporation of Stanadyne
         Automotive Corp.

3.2      * Amended and Restated By-laws of Stanadyne Automotive Corp.

4.1      * Indenture dated as of December 11, 1997 between Stanadyne Automotive
         Corp., DSD International Corp., Precision Engine Products Corp. and
         United States Trust Company of New York

4.2      * Purchase Agreement dated as of December 4, 1997 among SAC Automotive,
         Inc. and Donaldson, Lufkin & Jenrette

4.3      * Registration Rights Agreement dated as of December 11, 1997 by and
         among Stanadyne Automotive Corp. and Donaldson, Lufkin & Jenrette


10.1     * Credit Agreement dated as of December 11, 1997 among SAC Automotive,
         Inc., Stanadyne Automotive Corp., the Lenders listed therein, as
         Lenders, DLJ Capital Funding, Inc., as Syndication Agent, and The First
         National Bank of Chicago, as Administrative Agent


10.1.1   *** First Amendment To Credit Agreement dated July 31, 1998 to amend
         the Credit Agreement dated as of December 11, 1997 among SAC
         Automotive, Inc., Stanadyne Automotive Corp., the Lenders listed
         therein, as Lenders, DLJ Capital Funding, Inc., as Syndication Agent,
         and The First National Bank of Chicago, as Administrative Agent

10.1.2   **** Second Amendment To Credit Agreement dated February 8, 1999 to
         amend the Credit Agreement dated as of December 11, 1997, as amended as
         of July 31, 1998, among SAC Automotive, Inc., Stanadyne Automotive
         Corp., the Lenders listed therein, as Lenders, DLJ Capital Funding,
         Inc., as Syndication Agent, and The First National Bank of Chicago, as
         Administrative Agent

10.1.3   ***** Consent Regarding Repurchase of Senior Subordinated Notes to the
         Credit Agreement dated September 24, 1999 to grant a consent to the
         Credit Agreement dated as of December 11, 1997, as amended as of July
         31, 1998 and February 8, 1999, among SAC Automotive, Inc., Stanadyne
         Automotive Corp., the Lenders listed therein, as Lenders, DLJ Capital
         Funding, Inc., as Syndication Agent, and The First National Bank of
         Chicago, as Administrative Agent

10.2     * Stock Purchase Agreement dated November 7, 1997 for the Purchase of
         Stanadyne Automotive Holding Corp. among SAC, Inc., a wholly-owned
         subsidiary of American Industrial Partners
</TABLE>




                                       28
<PAGE>   66
<TABLE>
<S>      <C>
         Capital Fund II, L.P., Stanadyne Automotive Holding Corp., and
         Stanadyne Automotive Holding Corp. Shareholders

10.3     * Form of Amended and Restated Employment Agreement by and between
         Stanadyne Automotive Corp. and William Gurley, Michael Boyer and
         William Kelly

10.4     * Form of Employment Agreement by and between Precision Engine Products
         Corp. and Arthur Caruso

10.5     * Stanadyne Automotive Corp. Pension Plan effective December 31, 1994

10.6     * Stanadyne Automotive Corp. Savings Plus Plan restated as of January
         1, 1993

10.7     * Precision Engine Products Corp. Retirement Fund effective as of
         January 1, 1998

10.8     * Stanadyne Automotive Corp. Benefit Equalization Plan effective as of
         January 1, 1992

10.9     * Stanadyne Automotive Corp. Supplemental Retirement Plan effective as
         of January 1, 1992

10.10    * Supply Agreement dated as of December 8, 1995 between Precision
         Engine Products Corp. and the Ina Bearing Company

10.11    * Customer Agreement dated as of November 1, 1996 between Stanadyne
         Automotive Corp. and Deere & Company

10.12    * Customer Agreement dated as of January 22, 1996 between Stanadyne
         Automotive Corp. and General Motors Powertrain Group

10.12.1  ** Amendment dated March 13, 1998 to Customer Agreement dated as of
         January 22, 1996 between Stanadyne Automotive Corp. and General Motors
         Powertrain Group

10.13    * Management Services Agreement dated as of December 11, 1997 between
         Stanadyne Automotive Corp. and American Industrial Partners.

10.14    Stanadyne Automotive Holding Corp. Management Stock Option Plan
         effective as of June 5, 1998

12.1     Statement of Computation of Ratios

21.1     Subsidiaries of Stanadyne Automotive Corp.

27.1     Financial Data Schedule

*        Incorporated by reference to Registration Statement Form S-4, File No.
         333-45823, filed on February 6, 1998 and amended on March 25, 1998,
         April 24, 1998 and May 11, 1998.

**       Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-Q filed May 14, 1998.

***      Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-Q filed November 12, 1998.

****     Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-K filed March 19, 1999.

*****    Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-Q filed November 12, 1999.

(b)      Reports on Form 8-K:
</TABLE>


         No reports on Form 8-K were filed during the last quarter of the period
covered by this report.






                                       29
<PAGE>   67
Signatures

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

<TABLE>
<S>      <C>                         <C>
                                           Stanadyne Automotive Corp.
                                           --------------------------
                                           (Registrant)

Date:    March 2, 2000               By:   /s/ William D. Gurley
         -------------                     ---------------------
                                           William D. Gurley
                                           President and Chief Executive Officer
</TABLE>


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following person on behalf of Stanadyne Automotive
Corp. and in the capacities and on the dates indicated.

<TABLE>
<S>      <C>                         <C>
Date:    March 2, 2000               By:   /s/ William D. Gurley
         -------------                     ---------------------
                                           William D. Gurley
                                           President, Chief Executive Officer
                                           and Director

Date:    March 2, 2000               By:   /s/ Michael H. Boyer
         -------------                     --------------------
                                           Michael H. Boyer
                                           Vice President, Chief Financial
                                           Officer, Secretary and Director

Date:    March 2, 2000               By:   /s/ W. Richard Bingham
         -------------                     ----------------------
                                           W. Richard Bingham
                                           Director

Date:    March 2, 2000               By:   /s/ Robert Cizik
         -------------                     ----------------
                                           Robert Cizik

                                           Chairman of the Board and Director

Date:    March 2, 2000               By:   /s/ Kenneth J. Diekroeger
         -------------                     -------------------------
                                           Kenneth J. Diekroeger
                                           Director

Date:    March 2, 2000               By:   /s/ Theodore C. Rogers
         -------------                     ----------------------
                                           Theodore C. Rogers
                                           Director

Date:    March 2, 2000               By:   /s/ Kurtis J. Kaull
         -------------                     -------------------
                                           Kurtis J. Kaull
                                           Director
</TABLE>




                                       30
<PAGE>   68
EXHIBIT INDEX


<TABLE>
<CAPTION>
TABLE
NUMBER                            DESCRIPTION
<S>      <C>
3.1      * Amended and Restated Certificate of Incorporation of Stanadyne
         Automotive Corp.

3.2      * Amended and Restated By-laws of Stanadyne Automotive Corp.

4.1      * Indenture dated as of December 11, 1997 between Stanadyne Automotive
         Corp., DSD International Corp., Precision Engine Products Corp. and
         United States Trust Company of New York

4.2      * Purchase Agreement dated as of December 4, 1997 among SAC Automotive,
         Inc. and Donaldson, Lufkin & Jenrette

4.3      * Registration Rights Agreement dated as of December 11, 1997 by and
         among Stanadyne Automotive Corp. and Donaldson, Lufkin & Jenrette

10.1     * Credit Agreement dated as of December 11, 1997 among SAC Automotive,
         Inc., Stanadyne Automotive Corp., the Lenders listed therein, as
         Lenders, DLJ Capital Funding, Inc., as Syndication Agent, and The First
         National Bank of Chicago, as Administrative Agent

10.1.1   *** First Amendment To Credit Agreement dated July 31, 1998 to amend
         the Credit Agreement dated as of December 11, 1997 among SAC
         Automotive, Inc., Stanadyne Automotive Corp., the Lenders listed
         therein, as Lenders, DLJ Capital Funding, Inc., as Syndication Agent,
         and The First National Bank of Chicago, as Administrative Agent

10.1.2   **** Second Amendment To Credit Agreement dated February 8, 1999 to
         amend the Credit Agreement dated as of December 11, 1997, as amended as
         of July 31, 1998, among SAC Automotive, Inc., Stanadyne Automotive
         Corp., the Lenders listed therein, as Lenders, DLJ Capital Funding,
         Inc., as Syndication Agent, and The First National Bank of Chicago, as
         Administrative Agent

10.1.3   ***** Consent Regarding Repurchase of Senior Subordinated Notes to the
         Credit Agreement dated September 24, 1999 to grant a consent to the
         Credit Agreement dated as of December 11, 1997, as amended as of July
         31, 1998 and February 8, 1999, among SAC Automotive, Inc., Stanadyne
         Automotive Corp., the Lenders listed therein, as Lenders, DLJ Capital
         Funding, Inc., as Syndication Agent, and The First National Bank of
         Chicago, as Administrative Agent

10.2     * Stock Purchase Agreement dated November 7, 1997 for the Purchase of
         Stanadyne Automotive Holding Corp. among SAC, Inc., a wholly-owned
         subsidiary of American Industrial Partners Capital Fund II, L.P.,
         Stanadyne Automotive Holding Corp., and Stanadyne Automotive Holding
         Corp. Shareholders


10.3     * Form of Amended and Restated Employment Agreement by and between
         Stanadyne Automotive Corp. and William Gurley, Michael Boyer and
         William Kelly


10.4     * Form of Employment Agreement by and between Precision Engine Products
         Corp. and Arthur Caruso

10.5     * Stanadyne Automotive Corp. Pension Plan effective December 31, 1994

10.6     * Stanadyne Automotive Corp. Savings Plus Plan restated as of January
         1, 1993

10.7     * Precision Engine Products Corp. Retirement Fund effective as of
         January 1, 1998

10.8     * Stanadyne Automotive Corp. Benefit Equalization Plan effective as of
         January 1, 1992

10.9     * Stanadyne Automotive Corp. Supplemental Retirement Plan effective as
         of January 1, 1992

10.10    * Supply Agreement dated as of December 8, 1995 between Precision
         Engine Products Corp. and the Ina Bearing Company

10.11    * Customer Agreement dated as of November 1, 1996 between Stanadyne
         Automotive Corp. and Deere & Company

10.12    * Customer Agreement dated as of January 22, 1996 between Stanadyne
         Automotive Corp. and General Motors Powertrain Group


10.12.1  ** Amendment dated March 13, 1998 to Customer Agreement dated as of
         January 22, 1996 between Stanadyne Automotive Corp. and General Motors
         Powertrain Group
</TABLE>

<PAGE>   69

<TABLE>
<S>      <C>
10.13    * Management Services Agreement dated as of December 11, 1997 between
         Stanadyne Automotive Corp. and American Industrial Partners.

10.14    Stanadyne Automotive Holding Corp. Management Stock Option Plan
         effective as of June 5, 1998

12.1     Statement of Computation of Ratios

21.1     Subsidiaries of Stanadyne Automotive Corp.

27.1     Financial Data Schedule

*        Incorporated by reference to Registration Statement Form S-4, File No.
         333-45823, filed on February 6, 1998 and amended on March 25, 1998,
         April 24, 1998 and May 11, 1998.

**       Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-Q filed May 14, 1998.

***      Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-Q filed November 12, 1998.

****     Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-K filed March 19, 1999.

*****    Incorporated by reference to corresponding exhibit filed as an exhibit
         to Form 10-Q filed November 12, 1999.
</TABLE>