<PAGE>

                                  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, 2001

                                       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 CORPORATION
             (Exact name of registrant as specified in its charter)

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

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

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

                            STANADYNE AUTOMOTIVE CORP
                            -------------------------
                           (Former name of registrant)

          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, 2001, 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, 2002 was 1,000.

                   DOCUMENTS INCORPORATED BY REFERENCE - None
<PAGE>
                              STANADYNE CORPORATION

                                    FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            PAGE
<S>                                                                                         <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 ................................................      12
        ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk ...........      18
        ITEM  8.  Financial Statements and Supplementary Data ..........................      19
        ITEM  9.  Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure .............................................      20

PART III:
        ITEM 10.  Directors and Executive Officers of the Registrant ...................      21
        ITEM 11.  Executive Compensation ...............................................      24
        ITEM 12.  Security Ownership of Certain Beneficial Owners and Management .......      29
        ITEM 13.  Certain Relationships and Related Transactions .......................      31

PART IV:
        ITEM 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K .....      32
        Signatures .....................................................................      35
</TABLE>


                                       2
<PAGE>
                                     PART I

ITEM 1. BUSINESS

GENERAL

Stanadyne Corporation ("Stanadyne" or the "Company"), formerly known as
Stanadyne Automotive Corp., 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 as "hydraulic valve lifters"). With over 100
years of machining experience and over 50 years as a supplier of diesel fuel
injection equipment and hydraulic lash devices, Stanadyne's core competencies in
product design, precision machining, and the assembly and testing of complex
components have earned the Company a reputation for innovative, high quality
products. The Company possesses an extremely broad range of manufacturing
technology and know-how and is capable of high-volume production runs, machining
high-quality components within tolerances of 20 millionths of an inch on a cost
effective basis.

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 85% of the
Company's 2001 net sales, and Precision Engine Products Corp. ("Precision
Engine"), a wholly-owned subsidiary, which accounted for 15% of the Company's
2001 net sales. Additional segment information can be found in Notes 17 and 18
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 $216.2 million, $248.4 million and $231.0 million for 2001, 2000 and
1999, respectively. Operating income for the Diesel Group was $15.0 million,
$23.9 million and $17.7 million for 2001, 2000 and 1999, respectively. Total
assets of the Diesel Group were $241.1 million, $257.4 million and $270.5
million at December 31, 2001, 2000 and 1999, 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. The
primary focus of the Diesel Group is on the off highway agricultural and


                                       3
<PAGE>
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, oil pumps and other precision manufactured
components and distributes diesel fuel conditioners, stabilizers and diesel
engine diagnostic equipment.

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"), Perkins Engines Company Limited, and Ford Motor Company
("Ford), accounted for approximately $136.5 million, or approximately 63.1% of
the Diesel Group's net sales. The Diesel Group had two customers that accounted
for more than 10% of 2001 net sales: Deere accounted for 26.2% and GM accounted
for 23.2% of the Diesel Group's 2001 net sales.

The Diesel Group supports the servicing of the engine and its own products
through sales of aftermarket units and parts to the service organizations of its
OEM customers and through its own global network of authorized distributors and
dealers.

INDIA BUSINESS STATUS

On October 22, 2001, the Company formed a joint venture with Amalgamations
Private Limited to form a new company in the state of Tamil Nadu, India. The
joint venture is named Stanadyne Amalgamations Private Limited ("SAPL") and will
manufacture diesel fuel injection equipment for the domestic and export markets
starting in 2003. The Diesel Group holds a 51% controlling share of SAPL.

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, 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 $38.2 million, $44.0 million and $50.5 million for 2001, 2000 and 1999,
respectively. Operating (loss) income for Precision Engine was $(5.9) million,
$0.0 million and $4.2 million for 2001, 2000 and 1999, respectively.


                                       4
<PAGE>
Total assets of Precision Engine were $48.5 million, $46.0 million and $53.6
million at December 31, 2001, 2000 and 1999, 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 63.1% of Precision Engine's 2001 net sales.

CUSTOMERS

Precision Engine's primary customers are OEMs. DaimlerChrysler Corp. ("DCX"),
Ford and Tritec Motors LTDA. ("Tritec") accounted for 49.4%, 14.3% and 14.0%,
respectively, of Precision Engine's 2001 net sales. Precision Engine also sells
to several companies for distribution into the aftermarket.

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, a
Brazilian joint venture company formed by DCX 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. This limited
liability company manufactures, assembles and tests roller rocker arm assemblies
for supply to Tritec. Investment in PEPL began in the first quarter of 1999.
Limited production at PEPL began in the fourth quarter of 2000, with a ramp up
to mature production completed during 2001.

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.

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).


                                       5
<PAGE>
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.

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, 2001, the Company employed 2,043 persons of whom approximately
30% were salaried and 70% 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
2001, 2000 and 1999 were $11.6 million, $10.1 million and $9.1 million,
respectively, of which $1.4 million, $0.9 million and $0.6 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 2001, 2000 and 1999, the Company spent $18.0 million, $9.5
million and $11.4 million, respectively, on capital investments.


                                       6
<PAGE>
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 in the United States and Italy 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 products
manufactured in Brazil are sold only to an OEM customer in Brazil.

The sales to OEM and aftermarket customers during 2001, 2000 and 1999 were as
follows:

<TABLE>
<CAPTION>
                                                               2001        2000        1999
                                                               ----        ----        ----
                                                                   (dollars in millions)
<S>                                                           <C>         <C>         <C>
            Original Equipment:
                 Diesel Group                                 $103.1      $147.5      $153.7
                 Precision Engine                               30.3        38.9        45.0
            Aftermarket:
                 Diesel Group                                  113.2       100.9        77.4
                 Precision Engine                                7.9         5.2         5.5
                                                              ------      ------      ------
                       Total Net Sales                        $254.5      $292.5      $281.6
                                                              ======      ======      ======
</TABLE>

Information regarding net sales to geographic areas, operating income (loss)
from manufacturing facilities in geographic areas and assets by geographic areas
for the years ended December 31, 2001, 2000 and 1999 appear below and in Note 18
of Notes to Consolidated Financial Statements contained in Item 8 of this
Report.

<TABLE>
<CAPTION>
                                                              2001        2000        1999
                                                              ----        ----        ----
                                                                  (dollars in millions)
<S>                                                          <C>         <C>         <C>
            Net Sales:
                 United States                               $151.1      $173.8      $168.5
                 England                                       25.6        34.4        43.5
                 All Other Geographic Areas                    77.8        84.3        69.6
                                                             ------      ------      ------
                       Total Net Sales                       $254.5      $292.5      $281.6
                                                             ======      ======      ======

            Operating Income (Loss):
                 United States                               $ 11.0      $ 23.2      $ 20.8
                 Italy                                          0.0         1.8         1.5
                 Brazil                                        (1.9)       (1.0)        (.4)
                                                             ------      ------      ------
                       Total Operating Income                $  9.1      $ 24.0      $ 21.9
                                                             ======      ======      ======

            Identifiable Assets:
                 United States                               $235.8      $249.8      $264.9
                 Italy                                         33.5        33.0        40.1
                 Brazil                                         3.8         1.3         1.1
                                                             ------      ------      ------
                       Total Identifiable Assets             $273.1      $284.1      $306.1
                                                             ======      ======      ======
</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>
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
operates under various environmental permits and approvals, the violation of
which may subject the Company to fines and penalties. There are no known
violations of environmental permits or approvals that may have a material
adverse effect to the Company's financial position or results of operations. The
Company's manufacturing operations involve the use of hazardous substances and,
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. While many of these
remediations are underway and 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 16 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) loss of
material customer; (6) adverse state or federal legislation or regulation or
adverse determinations in pending litigation; and (7) changes in general
economic conditions and/or in the automobile, light duty trucks, agricultural
and construction vehicles and equipment, industrial products and marine
equipment markets in which the Company competes. Many of such factors are beyond
the control of the Company and its management. The forward-looking statements
contained in this report speak only as of the date on which such statements are
made. The Company assumes no duty to update them reflect new, changing or
unanticipated events or circumstances.


                                       8
<PAGE>
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     Precision Engine Headquarters, Manufacturing
          Tallahassee, FL            125,000           Owned     Manufacturing, Engineering
          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 2001.


                                       9
<PAGE>
                                     PART II

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

As of March 1, 2002, 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 2001,
2000, 1999 and 1998 and the 21 day period ended December 31, 1997 and of the
Predecessor for the 344 day period ended December 10, 1997. 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, 2001, 2000, 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
                                          -------------------------------------------------------------------------   --------------
                                           Year Ended     Year Ended     Year Ended      Year Ended   21 Days Ended   344 Days Ended
                                          December 31,   December 31,   December 31,    December 31,   December 31,    December 10,
                                              2001           2000           1999            1998           1997            1997
                                          ------------   ------------   ------------    ------------  -------------   --------------
                                                                           (dollars in thousands)
<S>                                       <C>            <C>            <C>             <C>           <C>             <C>

Statement of Operations Data:
  Net sales                                $ 254,450      $ 292,452      $ 281,580       $ 307,053      $  14,154       $ 259,144
  Cost of goods sold        (a)              208,139        229,591        224,204         251,730         11,418         219,642
                                           ---------      ---------      ---------       ---------      ---------       ---------
  Gross profit                                46,311         62,861         57,376          55,323          2,736          39,502
  Selling, general and
    administrative expenses (a)               37,207         38,904         35,516          40,291          1,845          28,098
                                           ---------      ---------      ---------       ---------      ---------       ---------
  Operating income                             9,104         23,957         21,860          15,032            891          11,404
  Interest expense, net                      (10,141)       (11,669)       (13,576)        (15,138)          (880)         (6,673)
                                           ---------      ---------      ---------       ---------      ---------       ---------
  (Loss) income before income
    taxes and extraordinary
    item                                      (1,037)        12,288          8,284            (106)            11           4,731
  Income taxes                                   370          5,457          3,128           1,581             23           1,789
                                           ---------      ---------      ---------       ---------      ---------       ---------
  (Loss) income before
    extraordinary item                        (1,407)         6,831          5,156          (1,687)           (12)          2,942
  Extraordinary item        (b)                   --            951            750              --             --              --
                                           ---------      ---------      ---------       ---------      ---------       ---------
  Net (loss) income                           (1,407)         7,782          5,906          (1,687)           (12)          2,942
  Preferred dividend
    requirement                                   --             --             --              --             --            (450)
                                           ---------      ---------      ---------       ---------      ---------       ---------
  Net (loss) income
    applicable to common
    shareholders                           $  (1,407)     $   7,782      $   5,906       $  (1,687)     $     (12)      $   2,492
                                           =========      =========      =========       =========      =========       =========

Balance Sheet Data (at year end):
  Fixed assets, net                        $ 113,361      $ 110,965      $ 119,611       $ 125,966      $ 124,443       $      --
  Total assets                               273,064        284,092        306,105         321,916        321,310              --
  Long-term debt (including
    current portion)                         112,362        122,944        142,280         160,486        161,152              --
  Stockholders' equity                        65,724         66,248         61,681          59,191         59,845              --

Ratio of earnings to fixed
  charges
    (See Exhibit 12.1)                           0.9            1.9            1.5             1.0            1.0             1.6
</TABLE>


                                       10
<PAGE>
(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 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 2000 and 1999 includes an extraordinary gain of $1.0
      million and $0.8 million, respectively, net of income taxes, for the early
      extinguishment of debt.


                                       11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

BASIS OF PRESENTATION

The following table sets forth certain performance details for the periods
shown. The amounts are presented in thousands of dollars and as a percentage of
net sales.

<TABLE>
<CAPTION>
                                                      Years Ended December 31,
                                           2001                 2000                1999
                                    -----------------     ----------------    ----------------
                                                       (dollars in thousands)
                                       $          %          $         %         $         %
                                    -------     -----     -------    -----    -------    -----
<S>                                 <C>         <C>       <C>        <C>      <C>        <C>
Net sales .....................     254,450     100.0     292,452    100.0    281,580    100.0
Cost of goods sold ............     208,139      81.8     229,591     78.5    224,204     79.6
Gross profit ..................      46,311      18.2      62,861     21.5     57,376     20.4
SG&A ..........................      30,757      12.1      32,057     11.0     28,515     10.1
Amortization of intangibles ...       5,350       2.1       5,747      2.0      5,901      2.1
Management fees ...............       1,100       0.4       1,100      0.4      1,100      0.4
Operating income ..............       9,104       3.6      23,957      8.2     21,860      7.8
Net (loss) income .............      (1,407)     (0.6)      7,782      2.7      5,906      2.1
</TABLE>

COMPARISON OF RESULTS OF OPERATIONS

OVERVIEW

In 2001, weak global economy and the resulting negative impact on demand for the
Company's products provided the backdrop for a 13% reduction in sales from the
prior year and a net loss of $1.4 million. When compared to 2000, revenues by
segment show Diesel Group and Precision Engine sales down by 13.0% and 13.2%,
respectively, with all major product lines and businesses reporting lower
results. Net losses were driven by a $6.0 million net loss in Precision Engine
due primarily to lower customer demand for DaimlerChrysler ("DCX") vehicles
equipped with the Company's products and $0.8 million in unrealized foreign
exchange losses on operations in Brazil. The Company proactively made
adjustments to the Company's cost structure throughout 2001, making workforce
adjustments as needed and pursuing other cost reduction projects.

Despite the relatively poor business climate, the Company reported progress with
several activities during 2001 including: the preparation for launch in early
2002 of production of non-proprietary products in the new Precision Components
and Assembly ("PCA") product line; the near-completion of implementation
activities for the early 2002 launch of the new Enterprise Resource Planning
("ERP") system; the completion of a long-term supply agreement with Deere; and
the ramp-up to full production in the Brazilian subsidiary, PEPL.


                                       12
<PAGE>
2001 COMPARED TO 2000

Net Sales. Net sales decreased in 2001 from 2000 by $38.0 million or 13.0%.
Lower sales in Diesel Group, down $32.1 million, or 13.0%, included an
approximate $12 million year-to-year reduction in business associated with two
OEM programs that ended during 2000: the GM 6.5l engine equipped with a DS fuel
pump; and the Ford 2.5l Transit engine equipped with RSN injectors. The balance
of the sales decline was due to lower demand from major agricultural and
industrial customers. Precision Engine's sales in 2001 decreased by $5.8 million
or 13.2% versus 2000. This dramatic downturn was due almost entirely to $10.2
million less sales in the US to DCX associated with reduced vehicle sales,
partially offset by new sales in Brazil to Tritec of $5.4 million.

Gross Profit. Due primarily to the substantially lower sales volumes, gross
profit decreased in 2001 from 2000 by $16.6 million or 26.3%. As a percentage of
net sales, gross profit in total decreased to 18.2% from 21.5%. Results by
segment show gross profit for the Diesel Group declining to 21.4% of net sales
in 2001 from 23.0% in 2000, while Precision Engine reported a negative gross
profit of 0.1% versus a positive result of 12.9% a year earlier. In addition to
the impact of lower sales volumes in 2001, the Diesel Group gross profit was
impacted by $1.0 million of start up costs associated with the new PCA product
line. Gross profits for Precision Engine suffered in 2001 due to the combined
impact of lower sales volumes, downward price pressure from DCX, and a shift in
sales from higher to lower margin products.

Selling, General and Administrative Expense. SG&A expense decreased in 2001 from
2000 by $1.3 million or 4.1%. As a percentage of net sales, SG&A increased to
12.1% from 11.0%. The overall reduction included $1.0 million lower bonus and
$0.5 million lower freight on sales expenses in 2001, offset by additional
amounts of $1.1 million for ERP implementation and $0.8 million of unrealized
foreign exchange losses on operations in Brazil. One time expenses incurred in
2000 included $0.6 million in PEPL startup costs and $0.7 million associated
with an unsuccessful union organizing effort at the Windsor, Connecticut
facility.

Amortization of Intangibles. Amortization of intangible assets totaled $5.4
million in 2001 and $5.7 million in 2000. Amortization of goodwill was $1.9
million in both 2001 and 2000.

Operating Income. Operating income decreased in 2001 from 2000 by $14.9 million
or 62.0% and as a percentage of sales decreased to 3.6% from 8.2%. The decrease
was due primarily to lower sales and the resulting impact on gross profits in
both segments, only partially offset by lower SG&A expenses.

Net (Loss) Income. A net loss of $1.4 million in 2001 represented a
deterioration of $9.2 million from the prior year net income of $7.8 million.
The decrease in net income was driven by the $14.9 million reduction in
operating income. A reduction in debt and lower borrowing rates in 2001 resulted
in $1.5 million less net interest expense. Also, the lower earnings in 2001
translated into $5.1 million less income taxes. The Company's effective tax rate
was (35.7)% and 44.4% in 2001 and 2000, respectively. The negative tax rate in
2001 was due to the effect of foreign and state taxes on net losses. Additional
information can be found in Note 11 of the Notes to Consolidated Financial
Statements contained in Item 8 of this Report.


                                       13
<PAGE>
2000 COMPARED TO 1999

Net Sales. Net sales increased in 2000 from 1999 by $10.9 million or 3.9%.
Higher sales in Diesel Group, up $17.4 million, or 7.5%, related to increased
demand for fuel pumps and filter products. Sales of fuel pump products increased
$15.0 million, with $11.8 million of the increase traceable to GM where service
demand remained strong following the end of OEM shipments in the third quarter
for the 6.5l engine. Sales of filter products in 2000 were $10.0 million higher
than 1999 due primarily to new applications introduced at Ford and New Holland
as well as increased aftermarket demand for filter elements. Precision Engine's
sales in 2000 decreased by $6.5 million or 12.8% versus 1999, with fourth
quarter sales down $4.2 million or 34.5%. This dramatic downturn was due almost
entirely to lower demand from DCX based on reduced car sales.

Gross Profit. Gross profit improved in 2000 from 1999 by $5.5 million or 9.6%.
As a percentage of net sales, gross profit improved to 21.5% from 20.4%.
Reflective of strong customer demand for fuel pumps and filter products, all of
this increase came from the Diesel Group, where gross profit as a percentage of
net sales was 23.0% in 2000, up from 20.8% in 1999. In addition to the higher
earnings on increased sales volumes in the Diesel Group, gross profit benefited
from cost reduction programs completed during 1999 and 2000. Lower sales volumes
drove gross profits lower in Precision Engine during the year, with the result
for 2000 at 12.9% of net sales down from 18.6% in 1999.

Selling, General and Administrative Expense. SG&A expense increased in 2000 from
1999 by $3.6 million or 12.4%. As a percentage of net sales, SG&A increased to
11.0% from 10.1%. Approximately $1.9 million of this change was due to the
savings recorded in 1999 associated with the Diesel Group's successful
conclusion of the closure of its Bari, Italy location. Other significant
contributors to the overall increase included $0.6 million increase in PEPL
startup costs in Precision Engine and $0.7 million associated with an
unsuccessful union organizing effort by the UAW at the Windsor, Connecticut
facility.

Amortization of Intangibles. Amortization of intangible assets totaled $5.7
million in 2000 and $5.9 million in 1999. Amortization of goodwill was $1.9
million in both 2000 and 1999.

Operating Income. Operating income increased in 2000 from 1999 by $2.1 million
or 9.6%. As a percentage of sales, operating income increased to 8.2% from 7.8%.
The increase was due to improved gross profits in the Diesel Group as noted
above, partially offset by lower gross profits in Precision Engine and higher
SG&A expenses in both segments.

Net Income. Net income increased to $7.8 million in 2000 from $5.9 million in
1999, an increase of $1.9 million or 31.8%. The increase in net income was due
to a combination of a $2.1 million improvement in operating income, a $1.9
million reduction in net interest expense and an extraordinary gain of $0.2
million, net of taxes, associated with the early retirement of Senior
Subordinated Notes ("Notes"). Net income was reduced by $1.7 million in
additional income taxes based on higher earnings and $0.6 million in federal
taxes associated with an examination of fiscal years 1997 and 1998.


                                       14
<PAGE>
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, 2001, the
Company had $112.3 million of indebtedness. The Company's principal sources of
liquidity are cash flow from operations supplemented by borrowings under its
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, capital expenditures or
other general corporate purposes.

Net cash flow provided by operating activities was $14.1 million, $35.1 million
and $25.9 million in 2001, 2000 and 1999, respectively. Cash flows from
operations in 2001 were $21.0 million less than 2000 due to: a $9.2 million
year-to-year swing from net income to net losses; a $4.0 million increase in
2001 in funds required for working capital, noncurrent asset accounts and
noncurrent liability accounts as compared to a $5.6 million decrease in the
prior year; and a decrease in deferred taxes of $2.4 million. Accounts
receivable balances increased by $4.8 million during 2001, as compared to a $7.7
million reduction in the prior year. These changes reflect the downturn in
business levels in late 2000 and then some strengthening in late 2001. Operating
cash flows in 2000 were enhanced by $4.2 million due to inventory reduction and
reduced by $0.9 million of inventory growth in 2001 for the same reasons.

Capital expenditures were $18.0 million, $9.5 million and $11.4 million in 2001,
2000 and 1999, respectively. These amounts 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 $5.0 to $6.0 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, to
effect cost reductions through process improvements, and to increase capacity to
support increased production volumes on existing engine platforms. The Company's
capital expenditures of $18.0 million in 2001 were higher than recent years
because of $4.7 million expended for computer hardware and software to support
the Company's ERP Program and $2.8 million expended for a product launch in the
new Diesel Group PCA Program.

Cash flow from financing activities for 2001 resulted in a net reduction to cash
of $10.6 million. Facing risk of non-compliance with certain financial covenants
contained in the Credit Agreement, the Company concluded the Third Amendment to
the Credit Agreement during the third quarter of 2001. This Amendment revised
certain quarterly financial performance covenants and borrowing rates.
Principal payments of long-term debt totaled $16.0 million during 2001,
including a $10.0 million pre-payment associated with the Third Amendment to the
Credit Agreement. As of December 31, 2001, there was $5.4 million in borrowings
under the revolving credit facility and $0.5 million net borrowings of
Stanadyne, SpA's overdraft facility. Scheduled payments of capital lease
obligations totaled $0.5 million in 2001.


                                       15
<PAGE>
Management believes that cash flows from operations and availability of
additional borrowings under the revolving credit facility will provide adequate
funds for the Company's foreseeable working capital needs, planned capital
expenditures and debt service obligations including long-term debt payments
totaling $5.6 million in 2002. At December 31, 2001, the Company had $30 million
in the revolving credit line available through December 11, 2003, of which $5.4
million was used for borrowings and $4.4 million was used for standby letters of
credit, leaving $20.2 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.

At December 31, 2001 and 2000, 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 in 2001 and 2000. 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.

CRITICAL ACCOUNTING POLICIES

We prepare the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. As such, we are
required to make certain estimates, judgments and assumptions that we believe
are reasonable based upon the information available. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the periods presented. The significant accounting policies which we
believe are the most critical to aid in fully understanding and evaluating our
reported financial results include: product warranty reserves, inventory
reserves for excess or obsolescence, and pension and postretirement benefit
liabilities and are fully described in the notes to our consolidated financial
statements.

NEW ACCOUNTING STANDARDS

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 are to be recognized immediately
or deferred depending on the use of the derivative and if the derivative is a
qualifying hedge. The Company adopted SFAS No. 133 as amended by SFAS No. 138
"Accounting for Certain Derivatives and Certain Hedging Activities", on January
1, 2001, as required. The adoption of these standards had no significant impact
on the Company's consolidated financial statements and related disclosures.

                                       16
<PAGE>
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets".
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001 and that the use of the
pooling-of-interest method is no longer allowed. The Company does not anticipate
any material impact from the adoption of this standard. SFAS No. 142 requires
that upon adoption, amortization of goodwill cease and instead, the carrying
value of goodwill be evaluated for impairment on an annual basis by applying a
fair value based test. Identifiable intangible assets will continue to be
amortized over their useful lives and be reviewed for impairment in accordance
with SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", as amended by SFAS No. 144. The Company
will adopt this new standard beginning on January 1, 2002. The Company
anticipates that the adoption of this new standard will result in the
discontinuation of goodwill amortization of approximately $1.9 million in 2002.

In August 2001, the Financial Accounting Standards Board issued SFAS No 144
"Accounting for the Impairment or Disposal of Long-Lived Assets". The Company
will adopt this new standard on January 1, 2002. The Company does not expect the
adoption of SFAS No. 144 to have a material impact on its consolidated financial
position and results of operations.


                                       17
<PAGE>
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 line
and Term Loans approximate fair value. The revolving credit line is priced daily
and the Term Loans are primarily LIBOR borrowings and are re-priced
approximately every month based on prevailing market rates. A 10% change in the
interest rate on the revolving credit line and Term Loans would have increased
or decreased the 2001 interest expense by $0.3 million. The Notes bear interest
at a fixed rate of 10 1/4% and, therefore, are not sensitive to interest rate
fluctuation. The fair value of the Notes based on quoted market prices at
December 31, 2001 was approximately $60.9 million.

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. Foreign currency exchange losses totaled $0.8 million and $0.3 million
for 2001 and 2000, respectively. A majority of the increase in 2001 is related
to the Company's operations in Brazil. The Company does not hedge against
foreign currency risk.


                                       18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                          <C>
                     STANADYNE CORPORATION AND SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT ...........................................................      F-1
   Consolidated Balance Sheets as of December  31, 2001 and 2000 .......................      F-2
   Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000
      and 1999 .........................................................................      F-3
   Consolidated Statements of Changes in Stockholders' Equity and Comprehensive
      Income (Loss) for the Years Ended December 31, 2001, 2000 and 1999 ...............      F-4
   Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000
      and 1999 .........................................................................      F-5
   Notes to the Consolidated Financial Statements ......................................      F-6
</TABLE>


                                       19
<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors
Stanadyne Corporation

We have audited the accompanying consolidated balance sheets of Stanadyne
Corporation and subsidiaries (the "Company") as of December 31, 2001 and 2000,
and the related consolidated statements of operations, changes in stockholders'
equity and comprehensive income (loss) and cash flows for each of the three
years in the period ended December 31, 2001. These consolidated financial
statements are the responsibility of the Company'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 auditing standards generally accepted
in the United States of America. 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 Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.


Deloitte & Touche LLP

Hartford, Connecticut
February 11, 2002


                                      F-1
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (DOLLARS IN THOUSANDS, EXCEPT SHARES)

<TABLE>
<CAPTION>
                                       ASSETS                                      December 31,
                                                                                2001            2000
                                                                             ---------       ---------
<S>                                                                          <C>             <C>
Current Assets:
     Cash and cash equivalents                                               $     120       $  13,647
     Accounts receivable, net of allowance for uncollectible accounts
         (Notes 15 and 19)                                                      36,872          32,030
     Inventories, net (Notes 2 and 19)                                          32,660          31,793
     Prepaid expenses and other assets                                             869           1,635
     Deferred income taxes (Note 11)                                             6,955           6,998
                                                                             ---------       ---------
                  Total current assets                                          77,476          86,103
Property, plant and equipment, net (Note 3)                                    113,361         110,965
Intangible and other assets, net (Note 4)                                       78,011          82,963
Due from Stanadyne Automotive Holdings Corp. (Note 14)                           4,216           4,061
                                                                             ---------       ---------
                  Total assets                                               $ 273,064       $ 284,092
                                                                             =========       =========

                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                                        $  21,639       $  17,291
     Accrued liabilities (Note 6)                                               24,599          27,156
     Current maturities of long-term debt (Note 8)                               6,143           6,765
     Current installments of capital lease obligations (Note 5)                     42             471
                                                                             ---------       ---------
                  Total current liabilities                                     52,423          51,683
Long-term debt, excluding current maturities (Note 8)                          106,177         115,667
Deferred income taxes (Note 11)                                                  4,017           5,304
Capital lease obligations, excluding current installments (Note 5)                  --              41
Other noncurrent liabilities (Note 7)                                           44,723          45,149
                                                                             ---------       ---------
                  Total liabilities                                            207,340         217,844
                                                                             ---------       ---------

Commitments and Contingencies (Notes 5 and 16)

Stockholders' Equity:
     Common stock, par value $.01, authorized 10,000 shares, issued and
         outstanding 1,000 shares                                                   --              --
     Additional paid-in capital                                                 59,858          59,858
     Other accumulated comprehensive loss                                       (4,716)         (5,599)
     Retained earnings                                                          10,582          11,989
                                                                             ---------       ---------
                  Total stockholders' equity                                    65,724          66,248
                                                                             ---------       ---------
                  Total liabilities and stockholders' equity                 $ 273,064       $ 284,092
                                                                             =========       =========
</TABLE>

                See notes to consolidated financial statements.


                                      F-2
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        Years Ended December 31,
                                                                ---------------------------------------
                                                                   2001           2000           1999
                                                                ---------      ---------      ---------
<S>                                                             <C>            <C>            <C>
Net sales (Notes 15, 17, 18)                                    $ 254,450      $ 292,452      $ 281,580
Costs of goods sold                                               208,139        229,591        224,204
                                                                ---------      ---------      ---------
     Gross profit                                                  46,311         62,861         57,376
Selling, general and administrative expenses (Note 14)             37,207         38,904         37,446
Plant closure costs (Note 12)                                          --             --         (1,930)
                                                                ---------      ---------      ---------
     Operating income                                               9,104         23,957         21,860
Other income (expense):
     Interest income                                                  349            347            522
     Interest expense                                             (10,490)       (12,016)       (14,098)
                                                                ---------      ---------      ---------
(Loss) income before income taxes and extraordinary
     item                                                          (1,037)        12,288          8,284
Income taxes (Note 11)                                                370          5,457          3,128
                                                                ---------      ---------      ---------
(Loss) income before extraordinary item                            (1,407)         6,831          5,156
Extraordinary gain related to early retirement of debt, net
     of income taxes of $634 in 2000 and $500 in 1999
     (Note 8)                                                          --            951            750
                                                                ---------      ---------      ---------
Net (loss) income                                               $  (1,407)     $   7,782      $   5,906
                                                                =========      =========      =========
</TABLE>

                See notes to consolidated financial statements.


                                      F-3
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                         AND COMPREHENSIVE INCOME (LOSS)
                      (DOLLARS IN THOUSANDS EXCEPT SHARES)

<TABLE>
<CAPTION>
                                                                                    Accumulated
                                                                                       Other
                                                    Common Stock      Additional      Compre-
                                                  ----------------      Paid-in       hensive
                                                  Shares    Amount      Capital    Income (Loss)
                                                  ------    ------    ----------   -------------
<S>                                               <C>       <C>       <C>          <C>
January 1, 1999                                   1,000     $   --     $ 59,858       $ 1,032

Comprehensive income:
  Net income                                         --         --           --            --

  Other comprehensive loss, net of tax -
      Foreign currency translation adjustments       --         --           --        (3,416)

  Other comprehensive loss

Comprehensive income

                                                  -----     ------     --------       -------

December 31, 1999                                 1,000         --       59,858        (2,384)

Comprehensive income:
  Net income                                         --         --           --            --

  Other comprehensive loss, net of tax -
      Foreign currency translation adjustments       --         --           --        (3,215)

  Other comprehensive loss

Comprehensive income

                                                  -----     ------     --------       -------

December 31, 2000                                 1,000         --       59,858        (5,599)

Comprehensive loss:
  Net loss                                           --         --           --            --

  Other comprehensive income, net of tax -
      Foreign currency translation adjustments       --         --           --           883

  Other comprehensive income

Comprehensive loss

                                                  -----     ------     --------       -------

December 31, 2001                                 1,000     $   --     $ 59,858       $(4,716)
                                                  =====     ======     ========       =======
</TABLE>

<TABLE>
<CAPTION>

                                                    Retained
                                                    Earnings        Compre-
                                                  (Accumulated      hensive
                                                    Deficit)     Income (Loss)     Total
                                                  ------------   -------------     -----
<S>                                               <C>            <C>             <C>
January 1, 1999                                     $ (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)
                                                                    -------
  Other comprehensive loss                                           (3,416)
                                                                    -------
Comprehensive income                                                $ 2,490
                                                                    -------
                                                    --------                     --------

December 31, 1999                                      4,207                       61,681

Comprehensive income:
  Net income                                           7,782        $ 7,782         7,782
                                                                    -------
  Other comprehensive loss, net of tax -
      Foreign currency translation adjustments            --         (3,215)       (3,215)
                                                                    -------
  Other comprehensive loss                                           (3,215)
                                                                    -------
Comprehensive income                                                $ 4,567
                                                                    -------
                                                    --------                     --------

December 31, 2000                                     11,989                       66,248

Comprehensive loss:
  Net loss                                            (1,407)       $(1,407)       (1,407)
                                                                    -------
  Other comprehensive income, net of tax -
      Foreign currency translation adjustments            --            883           883
                                                                    -------
  Other comprehensive income                                            883
                                                                    -------
Comprehensive loss                                                  $  (524)
                                                                    -------
                                                    --------                     --------

December 31, 2001                                   $ 10,582                     $ 65,724
                                                    ========                     ========
</TABLE>

                See notes to consolidated financial statements.


                                      F-4
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                Years Ended December 31,
                                                                         ------------------------------------
                                                                           2001          2000          1999
                                                                         --------      --------      --------
<S>                                                                      <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (loss) income                                                   $ (1,407)     $  7,782      $  5,906
     Adjustments to reconcile net (loss) income to net cash provided
         by operating activities:
         Depreciation and amortization                                     21,035        21,277        20,804
         Extraordinary gain, net of applicable income taxes                    --          (951)         (750)
         Deferred income taxes                                             (1,451)          944           394
         (Gain) loss on disposal of property, plant and equipment             (43)          384            77
         Changes in assets and liabilities:
              Accounts receivable                                          (4,758)        7,726           450
              Inventories                                                    (936)        4,186          (874)
              Prepaid expenses and other assets                               684          (150)        1,268
              Due to Stanadyne Automotive Holding Corp.                      (155)           --            --
              Accounts payable                                              4,325        (4,744)        2,542
              Accrued liabilities                                          (2,609)         (896)       (2,713)
              Other noncurrent liabilities                                   (539)         (496)       (1,190)
                                                                         --------      --------      --------
                  Net cash provided by operating activities                14,146        35,062        25,914
                                                                         --------      --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures                                                 (17,971)       (9,465)      (11,449)
     Proceeds from disposal of property, plant and equipment                  230           251           689
                                                                         --------      --------      --------
                  Net cash used in investing activities                   (17,741)       (9,214)      (10,760)
                                                                         --------      --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds (payments) on revolving credit notes and overdraft
         facilities                                                         5,855        (2,072)         (754)
     Payments on long-term debt                                           (15,945)      (13,628)      (14,246)
     Payments on capital lease obligations                                   (484)         (770)       (1,252)
                                                                         --------      --------      --------
                  Net cash used in financing activities                   (10,574)      (16,470)      (16,252)
                                                                         --------      --------      --------

Net (decrease) increase in cash and cash equivalents                      (14,169)        9,378        (1,098)
Effect of exchange rate changes on cash and cash equivalents                  642           212            23
Cash and cash equivalents at beginning of year                             13,647         4,057         5,132
                                                                         --------      --------      --------
Cash and cash equivalents at end of year                                 $    120      $ 13,647      $  4,057
                                                                         ========      ========      ========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONS:

      During 1999 the Company entered into capital leases for new equipment
resulting in capital lease obligations of $30.

                See notes to consolidated financial statements.


                                      F-5
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Description of Business. Stanadyne Corporation (the "Company"), formerly
known as Stanadyne Automotive Corp., 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 engine 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, SpA ("SpA"), Precision Engine Products LTDA
("PEPL") 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.

      On October 22, 2001, the Company formed a joint venture with Amalgamations
Private Limited to form a new company in the state of Tamil Nadu, India. The
joint venture is named Stanadyne Amalgamations Private Limited ("SAPL") and will
manufacture diesel fuel injection equipment for the domestic and export markets
starting in 2003. In 2002, the Diesel Group will consolidate SAPL, of which it
holds a 51% controlling share.

      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,
2001 and 2000, inventories valued at LIFO represented 87% and 88% 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
            Computer hardware and software                               3 to  7 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.


                                      F-6
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

      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.

      In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets". The Company will adopt this new standard on
January 1, 2002. The Company does not expect the adoption of SFAS No. 144 to
have a material impact on its consolidated financial position and results of
operations.

      Fair Value of Financial Instruments. 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 8 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. 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 period of the plan
participants as this period approximates the benefit period. This amortization
method of postretirement benefit obligations distributes gains and losses over
the benefit period of the participants thereby minimizing any volatility caused
by actuarial gains and losses.

      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 $849, $336 and
$145 are included in the consolidated statements of operations for 2001, 2000
and 1999, 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>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

      Research and Development. Research and development ("R&D") costs incurred
for 2001, 2000 and 1999 were $11,571, $10,135 and $9,075, respectively, of which
$1,427, $911 and $596, respectively, were reimbursed by customers. The net
expenses of $10,144, $9,224 and $8,479 in 2001, 2000 and 1999, respectively, are
included in the consolidated statements of operations.

      Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
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 8).

      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 are to be recognized immediately
or deferred depending on the use of the derivative and if the derivative is a
qualifying hedge. The Company has adopted SFAS No. 133, as amended by SFAS No.
138 "Accounting for Certain Derivative Instruments and Certain Hedging
Activities", on January 1, 2001, as required. The adoption of these standards
had no significant impact on the Company's consolidated financial statements and
related disclosures.

      Business Combinations and Goodwill and Other Intangible Assets. In June
2001, the Financial Accounting Standards Board issued SFAS No. 141 "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". SFAS No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 and that the use of the
pooling-of-interest method is no longer allowed. The Company does not anticipate
any material impact from the adoption of this standard. SFAS No. 142 requires
that upon adoption, amortization of goodwill cease and instead, the carrying
value of goodwill be evaluated for impairment on an annual basis by applying a
fair value based test. The Company is required to complete the initial step of a
transitional impairment test within six months of adoption. Identifiable
intangible assets will continue to be amortized over their useful lives and be
reviewed for impairment in accordance with SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", as
amended by SFAS No 144. The Company will adopt this new standard beginning on
January 1, 2002. The Company anticipates that the adoption of this new standard
will result in the discontinuation of goodwill amortization of approximately
$1,900 in 2002.

      Reclassifications. Certain amounts have been reclassified in the 2000 and
1999 consolidated financial statements to conform to the 2001 presentation.


                                      F-8
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(2)   INVENTORIES

      Inventories at December 31 consisted of:

<TABLE>
<CAPTION>
                                                                  2001                2000
                                                                  ----                ----
<S>                                                              <C>                 <C>
            Raw materials                                        $ 1,718             $ 1,816
            Work in process                                       24,469              21,198
            Finished goods                                         6,473               8,779
                                                                 -------             -------
                                                                 $32,660             $31,793
                                                                 =======             =======
</TABLE>

      The LIFO reserve at December 31, 2001 and 2000 was $1,953 and $1,759,
respectively.

      In 2001, inventory quantities were reduced. This reduction resulted in a
liquidation of LIFO inventory quantities carried at lower costs prevailing in
prior years as compared with cost of 2001 purchases. The effect of this
liquidation increased net income by $34.

(3)   PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                    2001              2000
                                                                    ----              ----
<S>                                                               <C>               <C>
            Land                                                  $ 11,297          $ 11,246
            Building and improvements                               22,702            22,594
            Machinery and equipment                                123,992           114,268
            Capitalized leases                                         351             2,130
            Construction in progress                                12,641             3,838
                                                                  --------          --------
                                                                   170,983           154,076
            Less accumulated depreciation                           57,622            43,111
                                                                  --------          --------
                                                                  $113,361          $110,965
                                                                  ========          ========
</TABLE>

      Depreciation expense including amortization of assets acquired under
capital leases was $15,685, $15,530 and $14,904 for 2001, 2000 and 1999,
respectively. The net book value of assets acquired under remaining capital
leases was $235 and $1,603 at December 31, 2001 and 2000, respectively.


                                      F-9
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(4)   INTANGIBLE AND OTHER ASSETS

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

<TABLE>
<CAPTION>
                                                                    2001              2000
                                                                    ----              ----
<S>                                                               <C>               <C>
            Goodwill                                              $ 74,295          $ 73,935
            Patents                                                  9,809             9,809
            Debt issuance costs                                      8,149             8,149
            Software                                                 3,544             3,544
            Customer contracts                                       2,690             2,690
            Other                                                    1,844             2,009
                                                                  --------          --------
                                                                   100,331           100,136
            Less accumulated amortization                           22,320            17,173
                                                                  --------          --------
                                                                  $ 78,011          $ 82,963
                                                                  ========          ========
</TABLE>

      Amortization expense was $5,350, $5,747 and $5,900 for 2001, 2000 and
1999, respectively.

(5)   LEASES

      The Company is obligated under certain noncancelable operating leases.
Rent expense for 2001, 2000 and 1999 was $1,927, $1,959 and $1,698,
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, 2001 were as follows:

<TABLE>
<CAPTION>
                                                                   CAPITAL    OPERATING
                                                                    LEASES      LEASES
                                                                   -------    ---------
<S>                                                                <C>        <C>
      Year ending December 31:
           2002                                                    $    43      $1,146
           2003                                                         --         956
           2004                                                         --         568
           2005                                                         --         162
           2006                                                         --           2
                                                                   -------      -------
      Total minimum lease payments                                      43      $2,834
                                                                                ======
      Less amount representing interest at a weighted average
           rate of 5.7%                                                  1
                                                                   -------
      Present value of net minimum capital lease obligations            42
      Less current installments of capital lease obligations            42
                                                                   -------
               Capital lease obligations, excluding current
                   installments                                    $    --
                                                                   =======
</TABLE>


                                      F-10
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(6)   ACCRUED LIABILITIES

      Accrued liabilities at December 31 consisted of:

<TABLE>
<CAPTION>
                                                                     2001              2000
                                                                     ----              ----
<S>                                                                <C>               <C>
            Vacation                                               $ 4,738           $ 4,748
            Pensions                                                 4,157             2,333
            Salaries, wages and bonus                                3,923             6,077
            Retiree health benefits                                  3,464             3,979
            Accrued taxes                                            2,328             1,851
            Workers' compensation                                    1,930             2,154
            Accrued warranty                                         1,769             3,112
            Accrued interest payable                                   467               390
            Other                                                    1,823             2,512
                                                                   -------           -------
                                                                   $24,599           $27,156
                                                                   =======           =======
</TABLE>

(7)   OTHER NONCURRENT LIABILITIES

      Other noncurrent liabilities at December 31 consisted of:

<TABLE>
<CAPTION>
                                                                       2001            2000
                                                                       ----            ----
<S>                                                                  <C>             <C>
            Retiree health benefits                                  $23,439         $23,927
            Pensions                                                  11,487          11,961
            Italian leaving indemnity (Note 9)                         4,201           4,014
            Workers' compensation                                      2,558           2,266
            Accrued warranty                                           1,231           1,231
            Environmental                                                895           1,020
            Other noncurrent liabilities                                 912             730
                                                                     -------         -------
                                                                     $44,723         $45,149
                                                                     =======         =======
</TABLE>

(8)   LONG-TERM DEBT

      Long-term debt at December 31 consisted of:

<TABLE>
<CAPTION>
                                                                         2001         2000
                                                                         ----         ----
<S>                                                                    <C>          <C>
            Revolving credit lines                                     $  5,400     $     --
            Term A loans                                                 13,025       23,407
            Term B loans                                                 17,409       22,972
            Senior Subordinated Notes                                    75,950       75,950
            Stanadyne, SpA debt, payable to Italian banks
                 through 2002, bearing interest at rates ranging
                 from 3.8% to 11.88%                                        536          103
                                                                       --------     --------
                                                                        112,320      122,432
            Less current maturities of long-term debt                     6,143        6,765
                                                                       --------     --------
                 Long-term debt, excluding current maturities          $106,177     $115,667
                                                                       ========     ========
</TABLE>


                                      F-11
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(8)   LONG-TERM DEBT - (CONTINUED)

      At December 31, 2001 and 2000, the Company had $30,000 in revolving credit
lines (the "Revolving Credit Lines") of which $5,400 was borrowed at December
31, 2001. In addition, at December 31, 2001 and 2000, $4,407 and $3,410,
respectively, was used for standby letters of credit leaving $20,193 and
$26,590, respectively, available for borrowings. Any amounts outstanding are
payable on December 11, 2003. The interest rate on the borrowings of the
Revolving Credit Line, was 6.5% at December 31, 2001. 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 .5% based
on certain financial ratios.

      At December 31, 2001 and 2000, the Company had $30,434 and $46,379,
respectively, in term loans (the "Term Loans") outstanding at various interest
rates ranging from 4.63% and 6.75%. The remaining $13,025 Term A loans
outstanding at December 31, 2001 are payable in quarterly installments of $1,357
from March 31, 2002 through December 31, 2002; $1,899 from March 31, 2003
through September 30, 2003; and $1,900 on December 11, 2003. The remaining
$17,409 Term B loans outstanding at December 31, 2001 are payable in quarterly
installments of $45 from March 31, 2002 through September 30, 2004 with a final
balloon payment of $16,914 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 an obligation of  Stanadyne Corporation (the "Parent")
and is guaranteed by Precision Engine (the "Subsidiary Guarantor"). The Credit
Agreement is secured by substantially all of the assets of the Parent and
Subsidiary Guarantor and by a pledge of substantially all the issued and
outstanding capital stock of the Parent and the Subsidiary Guarantor and 65% of
the capital stock of SpA. 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 $75,950 of Senior Subordinated Notes (the "Notes") at an
interest rate of 10.25% outstanding at December 31, 2001 and 2000. 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 transaction was recorded as
an extraordinary item in 2000. 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 Guarantor. In addition, the Notes are subject to covenants including
limitations on indebtedness, liens, and dividends or other distributions to
stockholders.

      At December 31, 2001 and 2000, the weighted average interest rate on the
Company's short-term borrowings was 5.1% and 5.2%, respectively.

      The fair values of the Company's Term Loans and short-term borrowings
approximate their recorded values at December 31, 2001 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, 2001 was
approximately $60,851.


                                      F-12
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(8)   LONG-TERM DEBT - (CONCLUDED)

      The aggregate maturities of long-term debt outstanding at December 31,
2001 were:

<TABLE>
<S>                                            <C>
            2002                               $   6,143
            2003                                  13,177
            2004                                  17,050
            2005                                      --
            2006                                      --
            Thereafter                            75,950
                                               ---------
                                               $ 112,320
                                               =========
</TABLE>

      For 2001, 2000 and 1999, interest paid was $10,401, $12,170 and $14,098,
respectively.

(9)   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 sheets as of December 31:

<TABLE>
<CAPTION>
                                                              2001                                           2000
                                             --------------------------------------         --------------------------------------
                                             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                                       $ 51,137                $ 2,736                $ 44,372                $ 2,265
   Service cost                                    2,603                     75                   2,401                     71
   Interest cost                                   3,988                    233                   3,630                    196
   Amendments                                        228                   (228)                  1,401                     --
   Actuarial loss (gain)                           3,331                   (111)                    651                    308
   Benefits paid                                  (1,566)                  (135)                 (1,318)                  (104)
                                                --------                -------                --------                -------
   Benefit obligations at end of year           $ 59,721                $ 2,570                $ 51,137                $ 2,736
                                                ========                =======                ========                =======
</TABLE>


                                      F-13
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(9)   PENSIONS - (CONTINUED)

<TABLE>
<CAPTION>
                                                              2001                                           2000
                                             --------------------------------------         --------------------------------------
                                             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                          $ 44,230                $    --                $ 43,898                $    --
   Actual (loss) return on plan
     assets                                         (460)                    --                   1,062                     --
   Employer contribution                           1,622                    135                     588                    104
   Benefits paid                                  (1,566)                  (135)                 (1,318)                  (104)
                                                --------                -------                --------                -------
   Fair value of plan asset at end
     of year                                    $ 43,826                $    --                $ 44,230                $    --
                                                ========                =======                ========                =======
</TABLE>

<TABLE>
<CAPTION>
                                                              2001                                           2000
                                             --------------------------------------         --------------------------------------
                                             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                                $(15,895)               $(2,570)               $ (6,907)               $(2,736)
   Unrecognized prior service cost
     (benefit)                                     1,989                   (229)                  1,933                     --
   Unrecognized net actuarial loss
     (gain)                                        1,163                    (50)                 (6,614)                    79
                                                --------                -------                --------                -------
   Accrued pension cost                         $(12,743)               $(2,849)               $(11,588)               $(2,657)
                                                ========                =======                ========                =======
</TABLE>

      The components of the net periodic pension costs were as follows:

<TABLE>
<CAPTION>
                                                   Years Ended December 31,
                                              ---------------------------------
                                                2001         2000         1999
                                              -------      -------      -------
<S>                                           <C>          <C>          <C>
      Service cost                            $ 2,678      $ 2,472      $ 2,516
      Interest cost                             4,221        3,826        3,376
      Expected return on plan assets           (3,964)      (4,042)      (3,520)
      Amortization of prior service costs         173          114           28
      Curtailment gain                             --           --         (336)
      Recognized net actuarial gain                (3)        (364)        (123)
                                              -------      -------      -------
         Net periodic pension cost            $ 3,105      $ 2,006      $ 1,941
                                              =======      =======      =======
</TABLE>


                                      F-14
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(9)   PENSIONS - (CONCLUDED)

      Actuarial assumptions used in accounting for the pension plans were:

<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                                    ---------------------------------
                                                     2001          2000          1999
                                                    -----          ----          ----
<S>                                                 <C>            <C>           <C>
Assumed average salary compensation increase          5.0%          5.0%          5.0%
Discount rate                                       7.375%         7.75%         7.75%
Expected long-term rate of return on assets           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, 2000 and 1999 the unit benefit for hourly participants and the
minimum benefit for salaried participants were increased by two dollars and one
dollar, respectively, 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, 2001 and 2000 were $4,201
and $4,014, respectively. Leaving indemnity expense was $334, $538 and $634 for
2001, 2000 and 1999, respectively.

(10)  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 Elmhurst 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-15
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

      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 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 sheets as of December 31:

<TABLE>
<CAPTION>
                                                           2001          2000
                                                           ----          ----
<S>                                                      <C>           <C>
Change in benefit obligations:
  Benefit obligation at beginning of year                $ 31,332      $ 32,129
  Service cost                                                290           273
  Interest cost                                             2,153         2,352
  Actuarial gain                                           (1,320)         (210)
  Plan participants' contributions                            615           467
  Benefits paid                                            (3,919)       (3,679)
                                                         --------      --------
  Benefit obligation at end of year                      $ 29,151      $ 31,332
                                                         ========      ========

Change in plan assets:
  Fair value of plan assets at beginning of year         $     --      $     --
  Actual return on plan assets                                 --            --
  Employer contribution                                     3,304         3,212
  Plan participants' contribution                             615           467
  Benefit paid                                             (3,919)       (3,679)
                                                         --------      --------
  Fair value of plan assets at end of year               $     --      $     --
                                                         ========      ========

Funded status:
  Funded status                                          $(29,151)     $(31,332)
  Unrecognized net actuarial loss                           2,323         3,643
                                                         --------      --------
  Accrued postretirement cost                            $(26,828)     $(27,689)
                                                         ========      ========
</TABLE>


                                      F-16
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

      Net periodic postretirement benefit costs included the following
components:

<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                                --------------------------------
                                                 2001         2000         1999
                                                ------       ------       ------
<S>                                             <C>          <C>          <C>
Service cost                                    $  290       $  273       $  320
Interest cost                                    2,153        2,352        2,311
Recognition of net actuarial loss                   --          108          352
                                                ------       ------       ------
     Net periodic postretirement
       benefits cost                            $2,443       $2,733       $2,983
                                                ======       ======       ======
</TABLE>

        For measurement purposes, the following medical and dental cost trend
rates were assumed in determining the accumulated benefit obligation:

      Medical Cost Trend Rates

      -   Medical prior to age 65              7.5% and 7.0% in 2002 and 2003,
          (Indemnity Plan)                     respectively, ultimately, 4.5%
                                               in 2004 and thereafter.

      -   Medical prior to age 65 (HMOs);      7.5% and 7.0% in 2002 and 2003,
          medical age 65 and older             respectively, ultimately, 4.5% in
                                               2004 and thereafter.

      Dental Cost Trend Rate

      -   Dental costs                         4.5% in 2002 and thereafter.


                                      F-17
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(10)  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>
                                                 2001        2000        1999
                                                 ----        ----        ----
<S>                                             <C>         <C>         <C>
      One percentage point increase:
        - Service cost plus interest            $  30       $  20       $  34
        - Postretirement benefit obligation       354         218         390

      One percentage point decrease:
        - Service cost plus interest cost         (18)        (23)        (38)
        - Postretirement benefit obligation      (405)       (255)       (457)

      Discount rate                             7.375%       7.75%       7.75%
</TABLE>

(11)  INCOME TAXES

      Income taxes provision (benefit) consisted of:

<TABLE>
<CAPTION>
                                        Current            Deferred            Total
                                        -------            --------            -----
<S>                                     <C>                <C>                <C>
      2001
           Federal                      $   638            $  (781)           $  (143)
           State                            690               (316)               374
           Foreign                          493               (354)               139
                                        -------            -------            -------
                                        $ 1,821            $(1,451)           $   370
                                        =======            =======            =======

      2000
           Federal                      $ 4,012            $   581            $ 4,593
           State                            666                (58)               608
           Foreign                          469                421                890
                                        -------            -------            -------
                                        $ 5,147            $   944            $ 6,091
                                        =======            =======            =======

      1999
           Federal                      $ 1,897            $   213            $ 2,110
           State                            916               (383)               533
           Foreign                          421                564                985
                                        -------            -------            -------
                                        $ 3,234            $   394            $ 3,628
                                        =======            =======            =======
</TABLE>


                                      F-18
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(11)  INCOME TAXES - (CONTINUED)

      The income taxes for 2000 and 1999 in the table above includes $634 and
$500, respectively, which offsets the extraordinary gain related to the early
retirement of debt.

      Total income taxes differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% for 2001, 35% for 2000 and 34% for 1999 to income
before income taxes as follows:

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                                ---------------------------------
                                                  2001         2000         1999
                                                -------      -------      -------
<S>                                             <C>          <C>          <C>
Computed "expected" (benefit) expense           $  (363)     $ 4,855      $ 3,242
Increase (reduction) in income tax
   resulting from:
     State taxes, net of federal tax effect         249          425          352
     Foreign taxes                                  493          467          431
     Goodwill                                       655          668          662
     Federal R & D credit                          (165)         (76)          --
     Tax benefit of Foreign Sales Corp.            (801)      (1,010)      (1,390)
     Rate difference on income of
        foreign operations                           29           27          145
     Impact of tax examinations                      --          565           --
     Other, net                                     273          170          186
                                                -------      -------      -------
                                                $   370      $ 6,091      $ 3,628
                                                =======      =======      =======
</TABLE>

      U.S. federal, state and foreign net income taxes paid amounted to $2,251,
$5,395 and $2,623 for 2001, 2000 and 1999, respectively.

      (Loss) income before taxes from domestic operations amounted to $(1,288),
$8,451 and $2,191 for 2001, 2000 and 1999, respectively. Income before taxes
from foreign operations amounted to $251, $5,422 and $7,343 for 2001, 2000 and
1999, 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 $1,479 at December 31, 2001, which, if not used to offset future
state taxable income, will begin to expire in 2009. The Company also has unused
foreign net operating losses of $7,101 at December 31, 2001 which will begin to
expire in 2002.

      The Company has been subject to the U.S. Alternative Minimum Tax ("AMT")
and, therefore, has a cumulative AMT credit carryforward of $2,131 as of
December 31, 2001. This carryforward has an unlimited life and may be used to
offset federal income taxes in excess of AMT in future periods.


                                      F-19
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(11)  INCOME TAXES - (CONCLUDED)

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

<TABLE>
<CAPTION>
                                                          2001          2000
                                                          ----          ----
<S>                                                     <C>           <C>
Current:
   Deferred tax assets:
       Postretirement benefits                          $  3,183      $  1,837
       Compensated absences                                1,714         1,714
       Workers' compensation                                 791           883
       Alternative minimum tax credit carryforwards          500         1,060
       Net operating losses                                  282           295
       Health benefits                                       190           248
       Other                                               1,022         1,830
                                                        --------      --------
           Deferred tax assets                             7,682         7,867
   Deferred tax liabilities:
       Inventories                                          (727)         (869)
                                                        --------      --------
           Net current deferred tax asset               $  6,955      $  6,998
                                                        ========      ========

Noncurrent:
   Deferred tax assets:
       Postretirement benefits                          $ 13,067      $ 15,095
       Net operating loss carryforwards                    2,276         1,400
       Alternative minimum tax credit carryforwards        1,631         1,553
       Workers' compensation                               1,049           929
       Other                                               1,063         1,700
                                                        --------      --------
           Deferred tax assets                            19,086        20,677
   Deferred tax liabilities:
       Property, plant and equipment                     (23,103)      (25,981)
                                                        --------      --------
           Net noncurrent deferred tax liability        $ (4,017)     $ (5,304)
                                                        ========      ========
</TABLE>

      At December 31, 2001, the Company did not establish a valuation allowance
to offset any deferred tax assets. Based on projections for future taxable
income 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.


                                      F-20
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(12)  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.

(13)  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 $369,
$396 and $396 during 2001, 2000 and 1999, respectively.

(14)  RELATED PARTY TRANSACTIONS

      During 2001, 2000 and 1999 the Company incurred management fees of $1,100
from AIP for management services provided. These charges are included in
selling, general and administrative expenses.

      The Company has an amount due from Stanadyne Automotive Holding Corp. of
$4,216 and $4,061 as of December 31, 2001 and 2000, respectively.


                                      F-21
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(15)  SIGNIFICANT CUSTOMERS

      Sales to customers and their affiliates, which represented approximately
10% or more of consolidated total sales, were as follows:

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                 ----------------------------------------------------------
                          Segment                  2001        %        2000        %        1999        %
                          -------                -------     ----     -------     ----     -------     ----
<S>            <C>                               <C>         <C>      <C>         <C>      <C>         <C>
Customer A             Diesel Group              $50,220     19.7     $56,872     19.4     $45,359     16.1
Customer B     Precision Engine/Diesel Group      18,891      7.4      29,105     10.0      34,143     12.1
Customer C             Diesel Group               56,741     22.3      65,062     22.2      57,203     20.3
</TABLE>

      Accounts receivable balances with these customers and their affiliates
were $16,226 and $15,878 at December 31, 2001 and 2000, respectively.

(16)  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 consolidated
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 Company ("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, $1,052 and $1,182, with
respect to these matters at December 31, 2001 and 2000, 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 consolidated financial position or
results of operations.


                                      F-22
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(17)  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 85%, 85% and 82% of the Company's revenues
for 2001, 2000 and 1999, respectively. Precision Engine manufactures
roller-rocker arms, hydraulic valve lifters and lash adjusters for gasoline
engines. Revenues for Precision Engine accounted for 15%, 15% and 18% of total
revenues for 2001, 2000 and 1999, 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:

<TABLE>
<CAPTION>
                                     As of and For the Year Ended December 31, 2001

                                    Diesel     Precision
                                    Group       Engine     Eliminations      Totals
                                    -----       ------     ------------      ------
<S>                               <C>          <C>         <C>             <C>
Net sales                         $ 216,227    $ 38,223      $     --      $ 254,450
Gross profit (loss)                  46,334         (23)           --         46,311
Depreciation and amortization
   expense                           17,392       3,643            --         21,035
Operating income (loss)              14,989      (5,885)           --          9,104
Net income (loss)                     4,599      (6,006)           --         (1,407)
Total assets                        241,084      48,492       (16,512)       273,064
Total capital expenditures           15,821       2,150            --         17,971
</TABLE>

<TABLE>
<CAPTION>
                                     As of and For the Year Ended December 31, 2000

                                    Diesel     Precision
                                    Group       Engine     Eliminations      Totals
                                    -----       ------     ------------      ------
<S>                               <C>          <C>         <C>             <C>
Net sales                         $ 248,404    $ 44,048      $     --      $ 292,452
Gross profit                         57,160       5,701            --         62,861
Depreciation and amortization
   expense                           17,682       3,595            --         21,277
Operating income                     23,946          11            --         23,957
Net income (loss)                     9,047      (1,265)           --          7,782
Total assets                        257,387      45,999       (19,294)       284,092
Total capital expenditures            8,808         657            --          9,465
</TABLE>


                                      F-23
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(17)  SEGMENTS - (CONCLUDED)

<TABLE>
<CAPTION>
                                     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                    17,700       4,160             --        21,860
Net income                           5,050         856             --         5,906
Total assets                       270,530      53,604        (18,029)      306,105
Total capital expenditures           9,439       2,010             --        11,449
</TABLE>

(18)  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:

<TABLE>
<CAPTION>
                                        Years Ended December 31,
                                  ----------------------------------
                                    2001         2000         1999
                                  --------     --------     --------
<S>                               <C>          <C>          <C>
Net sales:
     Domestic - United States     $151,070     $173,802     $168,463
                                  --------     --------     --------
     Foreign net sales:
         England                    25,605       34,417       43,547
         All other                  77,775       84,233       69,570
                                  --------     --------     --------
     Total foreign sales           103,380      118,650      113,117
                                  --------     --------     --------
Net sales                         $254,450     $292,452     $281,580
                                  ========     ========     ========
</TABLE>


                                      F-24
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(18)  FOREIGN AND GEOGRAPHIC INFORMATION - (CONCLUDED)

<TABLE>
<CAPTION>
                                                                  December 31,
                                                          ---------------------------
                                                             2001              2000
                                                          ---------         ---------
<S>                                                       <C>               <C>
      Long-lived assets:
           United States                                  $ 165,006         $ 168,299
           Italy                                             25,064            24,815
           Brazil                                             1,302               814
                                                          ---------         ---------
               Long-lived assets                          $ 191,372         $ 193,928
                                                          =========         =========

      Deferred tax assets (liabilities):
           United States                                  $   2,800         $   1,703
           Italy                                               (931)             (526)
           Brazil                                             1,069               517
                                                          ---------         ---------
               Deferred tax assets                        $   2,938         $   1,694
                                                          =========         =========
</TABLE>

(19)  VALUATION AND QUALIFYING ACCOUNTS

      The components of significant valuation and qualifying accounts were as
follows:

<TABLE>
<CAPTION>
                                                         Allowance for
                                                         Uncollectible
                                                            Accounts          Inventory
                                                           Receivable         Reserves
                                                         -------------        ---------
<S>                                                      <C>                  <C>
      Balance January 1, 1999                                $ 500            $ 4,620

           Charged to costs and expenses                       208                378
           Write-offs                                          (54)            (1,781)
           Effect of exchange rate changes                     (44)              (125)
                                                             -----            -------
      Balance December 31, 1999                                610              3,092

           Charged to costs and expenses                       142                473
           Write-offs                                         (200)              (807)
           Effect of exchange rate changes                     (52)               (64)
                                                             -----            -------
      Balance December 31, 2000                                500              2,694

           Charged to costs and expenses                       139                179
           Write-offs                                         (162)              (389)
           Effect of exchange rate changes                      47                 22
                                                             -----            -------
      Balance December 31, 2001                              $ 524            $ 2,506
                                                             =====            =======
</TABLE>


                                      F-25
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

(20)  SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS

      The Notes issued by the Company are guaranteed jointly, fully, severally
and unconditionally by the Subsidiary Guarantor on a subordinated basis and are
not guaranteed by SpA, SAPL, PEPL and FSC (the "Non-Guarantors").

      Supplemental combining condensed balance sheets as of December 31, 2001
and 2000 and the supplemental combined condensed statements of operations and
cash flows for 2001, 2000 and 1999 for the Parent, Subsidiary Guarantor and
Non-Guarantor Subsidiaries are presented below. Separate complete financial
statements of the Guarantor are not presented because management has determined
that they are not material to investors.

<TABLE>
<CAPTION>
                                                                     December 31, 2001
                                        ----------------------------------------------------------------------------
                                         Stanadyne                       Non-                             Stanadyne
                                        Corporation    Subsidiary      Guarantor                       Corporation &
                                           Parent       Guarantor    Subsidiaries    Eliminations       Subsidiaries
                                           ------       ---------    ------------    ------------       ------------
<S>                                     <C>            <C>           <C>             <C>               <C>
ASSETS
Cash and cash equivalents                $     483      $      5       $    772      $  (1,140)          $     120
Accounts receivable, net                    27,076         5,234          4,577            (15)             36,872
Inventories, net                            18,960         8,947          4,296            457  (c)         32,660
Other current assets                         5,791           649          1,347             37               7,824
                                         ---------      --------       --------      ---------           ---------
         Total current assets               52,310        14,835         10,992           (661)             77,476
Property, plant and equipment, net          82,114        18,445         12,802             --             113,361
Intangible and other assets, net            53,334        12,181         13,564         (1,068) (b)         78,011
Investment in subsidiaries                  42,399        (2,567)            --        (39,832) (a)             --
Due from Stanadyne Automotive
   Holding Corp.                             4,216            --             --             --               4,216
                                         ---------      --------       --------      ---------           ---------
         Total assets                    $ 234,373      $ 42,894       $ 37,358      $ (41,561)          $ 273,064
                                         =========      ========       ========      =========           =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
   liabilities                           $  34,832      $  6,966       $  4,442      $      (2)          $  46,238
Current maturities of long-term debt
   and capital lease obligations             5,607            --            578             --               6,185
                                         ---------      --------       --------      ---------           ---------
         Total current liabilities          40,439         6,966          5,020             (2)             52,423
Long-term debt and capital lease
   obligations                             106,177            --             --             --             106,177
Other noncurrent liabilities                32,535        11,010          6,263         (1,068) (b)         48,740
Intercompany accounts                      (15,321)        8,904          6,952           (535)                 --
Stockholders' equity                        70,543        16,014         19,123        (39,956) (a)         65,724
                                         ---------      --------       --------      ---------           ---------
         Total liabilities and
           stockholders' equity          $ 234,373      $ 42,894       $ 37,358      $ (41,561)          $ 273,064
                                         =========      ========       ========      =========           =========
</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-26
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
                                                                          December 31, 2000
                                             --------------------------------------------------------------------------
                                               Stanadyne                       Non-                         Stanadyne
                                             Corporation     Subsidiary      Guarantor                    Corporation &
                                                Parent        Guarantor    Subsidiaries   Eliminations     Subsidiaries
                                                ------        ---------    ------------   ------------     ------------
<S>                                          <C>             <C>           <C>            <C>             <C>
ASSETS
Cash and cash equivalents                     $  13,383       $     14       $     85      $     165         $  13,647
Accounts receivable, net                         25,094          3,537          3,399             --            32,030
Inventories, net                                 20,081          7,869          3,948           (105)(c)        31,793
Other current assets                              5,815          1,584          1,234             --             8,633
                                              ---------       --------       --------      ---------         ---------
         Total current assets                    64,373         13,004          8,666             60            86,103
Property, plant and equipment, net               79,212         19,141         12,612             --           110,965
Intangible and other assets, net                 57,499         12,964         13,017           (517)(b)        82,963
Investment in subsidiaries                       42,742         (1,111)            --        (41,631)(a)            --
Due from Stanadyne Automotive
   Holding Corp.                                  4,061             --             --             --             4,061
                                              ---------       --------       --------      ---------         ---------
         Total assets                         $ 247,887       $ 43,998       $ 34,295      $ (42,088)        $ 284,092
                                              =========       ========       ========      =========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued
   liabilities                                $  34,686       $  5,231       $  4,530      $      --         $  44,447
Current maturities of long-term debt
   and capital lease obligations                  6,662             --            574             --             7,236
                                              ---------       --------       --------      ---------         ---------
         Total current liabilities               41,348          5,231          5,104             --            51,683
Long-term debt and capital lease
   obligations                                  115,667             --             41             --           115,708
Other noncurrent liabilities                     33,779         11,508          5,683           (517)(b)        50,453
Intercompany accounts                           (14,926)         7,909          6,616            401                --
Stockholders' equity                             72,019         19,350         16,851        (41,972)(a)        66,248
                                              ---------       --------       --------      ---------         ---------
         Total liabilities and
           stockholders' equity               $ 247,887       $ 43,998       $ 34,295      $ (42,088)        $ 284,092
                                              =========       ========       ========      =========         =========
</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-27
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
                                                                   Year Ended December 31, 2001
                                         -----------------------------------------------------------------------------
                                          Stanadyne                         Non-                           Stanadyne
                                         Corporation     Subsidiary       Guarantor                      Corporation &
                                            Parent       Guarantor      Subsidiaries     Eliminations     Subsidiaries
                                         -----------     ----------     ------------     ------------    -------------
<S>                                      <C>             <C>            <C>              <C>             <C>
Net sales                                  $200,181       $ 37,666        $ 21,875        $(5,272) (a)      $ 254,450
Cost of goods sold                          155,302         37,099          21,253         (5,515) (a)        208,139
                                           --------       --------        --------        -------           ---------
         Gross profit                        44,879            567             622            243              46,311
Selling, general, administrative and
   other operating expenses                  30,036          4,598           2,585            (12)             37,207
Intercompany FSC commissions                  3,387            127          (3,514)            --                  --
                                           --------       --------        --------        -------           ---------
         Operating income (loss)             11,456         (4,158)          1,551            255               9,104
Interest, net                                 8,001            584           1,415            141              10,141
                                           --------       --------        --------        -------           ---------
         Income (loss) before income
           taxes (benefit)                    3,455         (4,742)            136            114              (1,037)
Income taxes (benefit)                            5           (152)            517             --                 370
                                           --------       --------        --------        -------           ---------
         Net income (loss)                 $  3,450       $ (4,590)       $   (381)       $   114           $  (1,407)
                                           ========       ========        ========        =======           =========
</TABLE>

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


                                      F-28
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
                                                                   Year Ended December 31, 2000
                                         -----------------------------------------------------------------------------
                                          Stanadyne                         Non-                           Stanadyne
                                         Corporation     Subsidiary       Guarantor                      Corporation &
                                            Parent       Guarantor      Subsidiaries   Eliminations       Subsidiaries
                                            ------       ---------      ------------   ------------       ------------
<S>                                      <C>             <C>            <C>            <C>               <C>
Net sales                                  $228,375       $ 44,230        $ 20,433        $  (586) (a)      $ 292,452
Cost of goods sold                          174,424         38,492          17,275           (600) (a)        229,591
                                           --------       --------        --------        -------           ---------
         Gross profit                        53,951          5,738           3,158             14              62,861
Selling, general, administrative and
   other operating expenses                  32,025          4,593           2,449           (163)             38,904
Intercompany FSC commission                   4,163            259          (4,422)            --                  --
                                           --------       --------        --------        -------           ---------
         Operating income                    17,763            886           5,131            177              23,957
Interest, net                                 9,706            325           1,476            162              11,669
                                           --------       --------        --------        -------           ---------
         Income before income taxes
           and extraordinary item             8,057            561           3,655             15              12,288
Income taxes                                  3,060            999           1,398             --               5,457
                                           --------       --------        --------        -------           ---------
         Income (loss) before
           extraordinary item                 4,997           (438)          2,257             15               6,831
Extraordinary gain, net                         951             --              --             --                 951
                                           --------       --------        --------        -------           ---------
         Net income (loss)                 $  5,948       $   (438)       $  2,257        $    15           $   7,782
                                           ========       ========        ========        =======           =========
</TABLE>

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


                                      F-29
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
                                                                   Year Ended December 31, 1999
                                         -----------------------------------------------------------------------------
                                          Stanadyne                          Non-                           Stanadyne
                                         Corporation     Subsidiary       Guarantor                      Corporation &
                                            Parent       Guarantor      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                  30,588          4,092             804             32              35,516
Intercompany FSC commissions                  5,711            683          (6,394)            --                  --
                                           --------       --------        --------        -------           ---------
         Operating income                    10,045          4,637           7,315           (137)             21,860
Interest, net                                11,036          1,127           1,423            (10)             13,576
                                           --------       --------        --------        -------           ---------
         (Loss) income before income
           taxes (benefit) and
           extraordinary item                  (991)         3,510           5,892           (127)              8,284
Income taxes (benefit)                         (815)         2,285           1,658             --               3,128
                                           --------       --------        --------        -------           ---------
         (Loss) income before
           extraordinary item                  (176)         1,225           4,234           (127)              5,156
Extraordinary gain, net                         750             --              --             --                 750
                                           --------       --------        --------        -------           ---------
         Net income (loss)                 $    574       $  1,225        $  4,234        $  (127)          $   5,906
                                           ========       ========        ========        =======           =========
</TABLE>

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


                                      F-30
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
                                                                         Year Ended December 31, 2001
                                                 --------------------------------------------------------------------------
                                                  Stanadyne                        Non-                         Stanadyne
                                                 Corporation     Subsidiary      Guarantor                    Corporation &
                                                   Parent        Guarantor     Subsidiaries    Eliminations    Subsidiaries
                                                   ------        ---------     ------------    ------------    ------------
<S>                                              <C>             <C>           <C>             <C>            <C>
Cash flows from operating activities:
     Net income (loss)                            $  3,450        $(4,590)       $  (381)         $   114        $ (1,407)
     Adjustments to reconcile net income
       (loss) to net cash provided by (used
       in) operating activities:
           Depreciation and amortization            16,028          3,609          1,398               --          21,035
           Other adjustments                          (884)          (254)          (356)              --          (1,494)
           Changes in operating assets
              and liabilities                       (6,281)         3,348          1,008           (2,063)         (3,988)
                                                  --------        -------        -------          -------        --------
           Net cash provided by (used in)
              operating activities                  12,313          2,113          1,669           (1,949)         14,146
                                                  --------        -------        -------          -------        --------

Cash flows from investing activities:
     Capital expenditures                          (15,280)        (2,122)          (960)             391         (17,971)
     Proceeds from disposal of property,
       plant and equipment                             613             --              8             (391)            230
                                                  --------        -------        -------          -------        --------
           Net cash used in investing
              activities                           (14,667)        (2,122)          (952)              --         (17,741)
                                                  --------        -------        -------          -------        --------

Cash flows from financing activities:
     Net change in debt                            (10,545)            --            (29)              --         (10,574)
                                                  --------        -------        -------          -------        --------
           Net cash used in financing
              activities                           (10,545)            --            (29)              --         (10,574)
                                                  --------        -------        -------          -------        --------

Net (decrease) increase in cash and cash
   equivalents                                     (12,899)            (9)           688           (1,949)        (14,169)
Effect of exchange rate changes on cash                 (1)            --             (1)             644             642
Cash and cash equivalents at
   beginning of year                                13,383             14             85              165          13,647
                                                  --------        -------        -------          -------        --------
Cash and cash equivalents at
   end of year                                    $    483        $     5        $   772          $(1,140)       $    120
                                                  ========        =======        =======          =======        ========
</TABLE>


                                      F-31
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
                                                                        Year Ended December 31, 2000
                                                 --------------------------------------------------------------------------
                                                  Stanadyne                        Non-                         Stanadyne
                                                 Corporation     Subsidiary      Guarantor                    Corporation &
                                                   Parent        Guarantor     Subsidiaries    Eliminations    Subsidiaries
                                                   ------        ---------     ------------    ------------    ------------
<S>                                              <C>             <C>           <C>             <C>            <C>
Cash flows from operating activities:
     Net income (loss)                            $  5,948        $  (438)       $ 2,257          $    15        $  7,782
     Adjustments to reconcile net income
       (loss) to net cash provided by (used
       in) operating activities:
           Depreciation and amortization            16,336          3,561          1,380               --          21,277
           Other adjustments                           116           (163)           424               --             377
           Changes in operating assets
              and liabilities                        8,854         (2,489)          (564)            (175)          5,626
                                                  --------        -------        -------          -------        --------
           Net cash provided by (used in)
              operating activities                  31,254            471          3,497             (160)         35,062
                                                  --------        -------        -------          -------        --------

Cash flows from investing activities:
     Capital expenditures                           (8,029)          (508)          (928)              --          (9,465)
     Proceeds from disposal of property,
       plant and equipment                             200             49              2               --             251
                                                  --------        -------        -------          -------        --------
           Net cash used in investing
              activities                            (7,829)          (459)          (926)              --          (9,214)
                                                  --------        -------        -------          -------        --------

Cash flows from financing activities:
     Net change in debt                            (13,802)            --         (2,668)              --         (16,470)
                                                  --------        -------        -------          -------        --------
           Net cash used in financing
              activities                           (13,802)            --         (2,668)              --         (16,470)
                                                  --------        -------        -------          -------        --------

Net increase (decrease) in cash and cash
   equivalents                                       9,623             12            (97)            (160)          9,378
Effect of exchange rate changes on cash                 --             --             (2)             214             212
Cash and cash equivalents at
   beginning of year                                 3,760              2            184              111           4,057
                                                  --------        -------        -------          -------        --------
Cash and cash equivalents at
   end of year                                    $ 13,383        $    14        $    85          $   165        $ 13,647
                                                  ========        =======        =======          =======        ========
</TABLE>


                                      F-32
<PAGE>
                     STANADYNE CORPORATION AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
                                                                        Year Ended December 31, 1999
                                                 --------------------------------------------------------------------------
                                                  Stanadyne                        Non-                         Stanadyne
                                                 Corporation     Subsidiary      Guarantor                    Corporation &
                                                   Parent        Guarantor     Subsidiaries    Eliminations    Subsidiaries
                                                   ------        ---------     ------------    ------------    ------------
<S>                                              <C>             <C>           <C>             <C>            <C>
Cash flows from operating activities:
     Net income (loss)                            $    574        $ 1,225        $ 4,234          $  (127)       $  5,906
     Adjustments to reconcile net income
       (loss) to net cash provided by (used
       in) operating activities:
           Depreciation and amortization            15,902          3,306          1,596               --          20,804
           Other adjustments                          (191)          (652)           564               --            (279)
           Changes in operating assets
              and liabilities                       10,156         (2,679)        (7,909)             (85)           (517)
                                                  --------        -------        -------          -------        --------
           Net cash provided by (used in)
              operating activities                  26,441          1,200         (1,515)            (212)         25,914
                                                  --------        -------        -------          -------        --------

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                            (14,791)            --         (1,461)              --         (16,252)
     Net change in equity                               --             --          3,992           (3,992)             --
                                                  --------        -------        -------          -------        --------
           Net cash (used in) provided by
              financing activities                 (14,791)            --          2,531           (3,992)        (16,252)
                                                  --------        -------        -------          -------        --------

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-33
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.


                                       20
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age as of December 31, 2001 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         53     President, Chief Executive Officer and Director, Stanadyne Corporation
Stephen S. Langin         43     Vice President, Chief Financial Officer and Secretary, Stanadyne Corporation
Donald Buonomo            62     Vice President, Quality and Reliability, Stanadyne Corporation
Leon P. Janik             58     Vice President and General Manager, Power Products and Fuel Injectors,
                                 Stanadyne Corporation
William W. Kelly          50     Vice President and General Manager, Fuel Pumps, Stanadyne Corporation
Jean S. McCarthy          54     Vice President, Human Resources, Stanadyne Corporation
Mark E. Murray            50     Vice President, Precision Components and Assembly, Stanadyne Corporation
Michael J. O'Day          42     Vice President and General Manager, Precision Engine Products Corp.
W. Richard Bingham        66     Director
Kenneth J. Diekroeger     39     Director
Kirk R. Ferguson          33     Director
Kim A. Marvin             40     Director
Theodore C. Rogers        67     Director and Chairman of the Board
</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 Corporation. In 1995, he became
President and Chief Executive Officer of the Company.

Mr. Langin joined Stanadyne's Diesel Systems Division in 1981. In 1989, Mr.
Langin became Controller, Stanadyne Corporation and on February 7, 2001 became
Vice President and Chief Financial Officer.

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.

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. Kelly joined Stanadyne in 1982. Effective with the formation of Stanadyne
Corporation 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.


                                       21
<PAGE>
Ms. McCarthy joined Stanadyne in October 2000 as Vice President, Human
Resources. Prior to joining Stanadyne, she served as Vice President of Human
Resources with CTG Resources, Inc. since 1995.

Mr. Murray joined Stanadyne on January 1, 2001 as Vice President, Precision
Components and Assembly. Prior to joining Stanadyne, he worked as an independent
consultant from 1999 to 2000. During 1999 he served as Vice President of Sales
for API Motion. Mr. Murray also served with FAG Bearings Corporation as
Executive Vice President, Sales and Marketing from 1997 to 1998 and General
Manager from 1991 to 1996 and with Pope Spindle Corporation as President from
1996 to 1997.

Mr. O'Day joined Stanadyne's Precision Engine Products Corp. in April 2000 and
became Vice President and General Manager, Precision Engine Products Corp. in
October 2000. Prior to joining Stanadyne, he served with International Fuel
Cells as Vice President, Business Development from 1999 to 2000. Mr. O'Day also
was employed with various business units of United Technologies Automotive as
Vice President, General Motors Business Unit from 1997 to 1999, Vice President,
Quality and Enterprise Productivity from 1996 to 1997 and Director,
Sales/Marketing and Manufacturing Planning from 1995 to 1996.

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 Corporation, MBA Polymers, Sanluis
Developments, L.L.C., and Dearfield Associates. He was elected to the Board of
Directors of the Company in December 1997.

Mr. Diekroeger is a founder and managing director of Golden Gate Capital, a San
Francisco based private equity firm. Prior to joining Golden Gate Capital in
2000, he was a managing director and partner with AIP from 1996 to 2000, where
he sourced, executed and served as a director for several investments and
buyouts. He was elected to the Board of Directors of the Company in December
1997.

Mr. Ferguson joined the New York office of AIP in 2001 and serves as a Managing
Director of the firm. Mr. Ferguson was previously a principal of Saratoga
Partners, a private equity investment firm where he had been employed from 1997
to 2001. He was elected to the Board of Directors of the Company in September
2001. Additionally, he currently serves or has served as a director of several
private companies.

Mr. Marvin joined the San Francisco office of AIP in 1997 and serves as a
Managing Director of the firm. Mr. Marvin worked in the Mergers and Acquisitions
department of Goldman Sachs & Co. where he had been employed from 1994 to 1997.
He was elected to the Board of Directors of the Company in January 2001.
Additionally, he serves as a director of Bucyrus International, Consoltex Inc.,
Great Lakes Carbon Corporation and Sweetheart Holdings Inc.


                                       22
<PAGE>
Mr. Rogers became Chairman of the Board effective February 7, 2001. 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, Consoltex Inc., RBX Group,
Steel Heddle Group and Derby International, Incorporated. He was elected to the
Board of Directors of the Company in December 1997.

Directors do not receive compensation for their services as directors, with the
exception of Mr. Diekroeger who receives $125,000 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.


                                       23
<PAGE>
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 the five most highly compensated officers of the Company (the "Named
Executive Officers") for services rendered in fiscal 2001, 2000 and 1999.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                        Long Term
                                                                       Compensation
                                                                          Awards
                                           Annual Compensation (1)      Securities
                                           -----------------------      Underlying       All Other
Name and Position               Year        Salary         Bonus      Options (#)(3)  Compensation (2)
-----------------               ----        ------         -----      --------------  ----------------
<S>                             <C>        <C>            <C>          <C>            <C>
William D. Gurley               2001       $371,000       $ 53,053           --           $24,021
   (President, Chief            2000        358,000        269,143           --            24,021
   Executive Officer and        1999        345,000        395,715          842            15,829
   Director)

Stephen S. Langin               2001        176,344         25,630           --               300
   (Vice President, Chief
   Financial Officer and
   Secretary)

Leon P. Janik                   2001        238,250         68,616           --            25,015
   (Vice President and          2000        223,750        200,755           --            25,015
   General Manager)             1999        213,500        244,244          324             7,277

William W. Kelly                2001        242,500         69,840           --            14,073
   (Vice President and          2000        234,000        209,952           --            14,073
   General Manager)             1999        225,500        257,972          432             8,055

Mark E. Murray                  2001        165,000         38,016           --            95,292
   (Vice President)
</TABLE>

(1)   None of the Named Executive Officers received personal benefits or other
      annual compensation in excess of the lesser of $50,000 or 10% of the
      combined salary and bonus in each respective year.

(2)   All Other Compensation included the employer match under the Company's
      401(k) savings plan for each Named Executive Officer of $300 per year. The
      remainder of the balance is the premium paid for executive life insurance,
      with the exception that Mr. Murray was reimbursed $94,992 for moving
      expenses.

(3)   Options are for shares of common stock in Holdings.

                                       24
<PAGE>
EMPLOYMENT AGREEMENTS

The Company has entered into identical employment agreements with Messrs. Gurley
and Kelly. Pursuant to these agreements, Messrs. Gurley and Kelly served in
their noted capacities during 2001 at current base salaries of $371,000 and
$242,500, 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.

Messrs. Langin, Janik and Murray are at-will employees.


                                       25
<PAGE>
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 to the Named Executive Officers during the
year ended December 31, 2001.

STOCK OPTION EXERCISES

There were no stock options exercised by the Named Executive Officers during the
twelve months ended December 31, 2001. For the number of shares underlying
exercisable options held by the Named Executive Officers at December 31, 2001,
see the table in Item 12.

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 Corporation 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 $200.00.

THE STANADYNE CORPORATION PENSION PLAN

The Stanadyne Corporation 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 Stanadyne Corporation
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 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


                                       26
<PAGE>
accrued benefit payable under Formula One of the Stanadyne Corporation 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 Stanadyne Corporation Pension Plan provides salaried
participants with an accrued monthly benefit equal to $21.00 times Years of
Credited Service less an Annuity for employees actively employed prior to July
2, 1988 (where applicable).

Benefits provided under the Stanadyne Corporation 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 Stanadyne Corporation Pension Plan for
hourly employees employed at the Washington and Jacksonville locations is equal
to: $14.00 multiplied by the participant's Years of Credited Service. Hourly
employees employed at the Windsor facility receive a monthly benefit of $21.00
multiplied by Years of Credited Service.

For purposes of the Stanadyne Corporation 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 Stanadyne Corporation Pension Plan is limited to
$200,000 for 2001, 2000 and 1999 pursuant to requirements imposed by the
Internal Revenue Code of 1986, as amended (the "Code"), as amended by the
Economic Growth and Tax Relief Reconciliation Act ("EGTRRA") for prior years as
well as for future years. 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
Corporation Benefit Equalization Plan" and the "Stanadyne Corporation
Supplemental Retirement Plan" (together, the "SERP"), which are designed to
supplement the benefits payable under the Stanadyne Corporation 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 Stanadyne Corporation Pension Plan if certain Code limitations did not apply
and the designated employee's SAC Pension Plan benefit.

Benefits may be paid under the Stanadyne Corporation 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.


                                       27
<PAGE>
                            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
      Stanadyne Corporation 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 Stanadyne Corporation Pension Plan at
December 31, 2001, were 17.8, 20.8, 31.8, 20.0 and 1.0 for Messrs. Gurley,
Langin, Janik, Kelly and Murray, respectively. The estimated annual benefits
payable under the Stanadyne Corporation Pension Plan and the SERP, assuming
termination on December 31, 2001 and retirement at age 65, are illustrated as
follows:

                                Estimated Accrued
                         Pension Benefit as of 12/31/01

<TABLE>
<CAPTION>
                                          The
                                       Stanadyne
                                      Corporation
                                     Pension Plan*      The SERP          Total
                                     -------------      --------          -----
<S>                                  <C>                <C>             <C>
Gurley ........................         $49,754         $82,659         $132,413
Langin ........................          35,673           1,188           36,861
Janik .........................          70,481          49,936          120,417
Kelly .........................          52,697          35,991           88,688
Murray ........................             N/A             N/A              N/A
</TABLE>

*     Based on EGTRRA $200,000 pensionable compensation limit.


                                       28
<PAGE>
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") of which 993,986 shares were outstanding on December 31, 2001. 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.

As of December 31, 2001, there were 19 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, 2001, 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 Corporation, 92 Deerfield Road, Windsor, CT 06095.

<TABLE>
<CAPTION>
                                                                                       Exercisable
                                                                       Total           Options (3)
                             Name                                    Number (1)      Included in Total     Percentage
                             ----                                    ----------      -----------------     ----------
<S>                                                                  <C>             <C>                   <C>
American Industrial Partners Capital Fund II, L.P. (2) ..........     951,301                  0             94.06%
W. Richard Bingham (2) ..........................................           0                  0                 *
Kenneth J. Diekroeger (5) .......................................           0                  0                 *
Kirk R. Ferguson (4) ............................................           0                  0                 *
Kim A. Marvin (2) ...............................................           0                  0                 *
William D. Gurley ...............................................      20,792              6,692              2.06%
William W. Kelly ................................................      11,726              3,432              1.16%
Leon P. Janik ...................................................       8,257              2,574                 *
Stephen S. Langin ...............................................       1,673                486                 *
Mark E. Murray ..................................................           0                  0                 *
Theodore C. Rogers (4) ..........................................           0                  0                 *
All directors and executive officers as a group (10 persons) ....      44,514             13,671              4.40%
</TABLE>

*     Represents less than 1%

(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.


                                       29
<PAGE>
(2)   The address of such entity or person is One Maritime Plaza, Suite 2525,
      San Francisco, California 94111.

(3)   Represents an aggregate of 13,671 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 December 31, 2001.

(4)   The address of such person is 551 Fifth Avenue, Suite 3800, New York, New
      York 10176.

(5)   The address of such person is One Embarcadero, 33rd Floor, San Francisco,
      CA 94111


                                       30
<PAGE>
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.

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.


                                       31
<PAGE>
                                     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         (1) Amended and Restated Certificate of Incorporation of Stanadyne
            Automotive Corp.
3.1.1       (9) Certificate of Amendment of Certificate of Incorporation of
            Stanadyne Automotive Corp.
3.2         (1) Amended and Restated By-laws of Stanadyne Automotive Corp.
4.1         (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         (1) Purchase Agreement dated as of December 4, 1997 among SAC
            Automotive, Inc. and Donaldson, Lufkin & Jenrette
4.3         (1) Registration Rights Agreement dated as of December 11, 1997 by
            and among Stanadyne Automotive Corp. and Donaldson, Lufkin &
            Jenrette
10.1        (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      (3) 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      (4) 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      (5) 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
10.1.4      (7) Consent Regarding Repurchase of Senior Subordinated Notes dated
            January 24, 2000
</TABLE>


                                       32
<PAGE>
<TABLE>
<S>         <C>
10.1.5      (8) Limited Waiver Regarding Stanadyne Corporation dated August 10,
            2001 with respect to the Credit Agreement dated as of December 11,
            1997, as amended, among Stanadyne Automotive Corp., SAC Automotive,
            Inc., the Lenders and Bank One, NA as administrative agent for
            Lenders
10.1.6      (9) Third Amendment to Credit Agreement dated August 24, 2001 to
            amend the Credit Agreement dated as of December 11, 1997, as
            amended, among Stanadyne Corporation, SAC Automotive, Inc., the
            Lenders and Bank One, NA as administrative agent for Lenders
10.2        (1) 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        (1) Form of Amended and Restated Employment Agreement by and between
            Stanadyne Automotive Corp. and William Gurley and William Kelly
10.5        (1) Stanadyne Automotive Corp. Pension Plan effective December 31,
            1994
10.6        (1) Stanadyne Automotive Corp. Savings Plus Plan restated as of
            January 1, 1993
10.7        (1) Precision Engine Products Corp. Retirement Fund effective as of
            January 1, 1998
10.8        (1) Stanadyne Automotive Corp. Benefit Equalization Plan effective
            as of January 1, 1992
10.9        (1) Stanadyne Automotive Corp. Supplemental Retirement Plan
            effective as of January 1, 1992
10.10       (1) Supply Agreement dated as of December 8, 1995 between Precision
            Engine Products Corp. and the Ina Bearing Company (Pursuant to Rule
            24b-2 under The Exchange Act, the Company has requested confidential
            treatment of portions of this exhibit deleted from the filed copy.)
10.12       (1) Customer Agreement dated as of January 22, 1996 between
            Stanadyne Automotive Corp. and General Motors Powertrain Group
            (Pursuant to Rule 24b-2 under The Exchange Act, the Company has
            requested confidential treatment of portions of this exhibit deleted
            from the filed copy.)
10.12.1     (2) Amendment dated March 13, 1998 to Customer Agreement dated as of
            January 22, 1996 between Stanadyne Automotive Corp. and General
            Motors Powertrain Group (Pursuant to Rule 24b-2 under The Exchange
            Act, the Company has requested confidential treatment of portions of
            this exhibit deleted from the filed copy.)
10.13       (2) Management Services Agreement dated as of December 11, 1997
            between Stanadyne Automotive Corp. and American Industrial Partners.
10.14       (6) Stanadyne Automotive Holding Corp. Management Stock Option Plan
            effective as of June 5, 1998
10.15       Customer Agreement dated as of December 14, 2001 between Stanadyne
            Corporation and Deere & Company (Pursuant to Rule 24b-2 under The
            Exchange Act, the Company has requested confidential treatment of
            portions of this exhibit deleted from the filed copy.)
12.1        Statement of Computation of Ratios
21.1        Subsidiaries of Stanadyne Corporation
</TABLE>

(1)   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.

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

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

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

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


                                       33
<PAGE>
(6)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-K filed March 2, 2000.

(7)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-Q filed May 9, 2000.

(8)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-Q filed August 14, 2001.

(9)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-Q filed November 13, 2001.

(b)   Reports on Form 8-K:

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


                                       34
<PAGE>
Signatures

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

                                         Stanadyne Corporation
                                         ---------------------
                                         (Registrant)


Date: March 28, 2002                 By: /s/ William D. Gurley
      --------------                     ---------------------------------------
                                         William D. Gurley
                                         President and Chief Executive
                                           Officer

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 Corporation
and in the capacities and on the dates indicated.


Date: March 28, 2002                 By: /s/ William D. Gurley
      --------------                     ---------------------------------------
                                         William D. Gurley
                                         President, Chief Executive Officer and
                                         Director


Date: March 28, 2002                 By: /s/ Stephen S. Langin
      --------------                     ---------------------------------------
                                         Stephen S. Langin
                                         Vice President, Chief Financial Officer
                                         and Secretary


Date: March 28, 2002                 By: /s/ W. Richard Bingham
      --------------                     ---------------------------------------
                                         W. Richard Bingham
                                         Director


Date: March 28, 2002                 By: /s/ Kenneth J. Diekroeger
      --------------                     ---------------------------------------
                                         Kenneth J. Diekroeger
                                         Director


Date: March 28, 2002                 By: /s/ Theodore C. Rogers
      --------------                     ---------------------------------------
                                         Theodore C. Rogers
                                         Chairman of the Board and Director


Date: March 28, 2002                 By: /s/ Kim A. Marvin
      --------------                     ---------------------------------------
                                         Kim A Marvin
                                         Director


Date: March 28, 2002                 By: /s/ Kirk R. Ferguson
      --------------                     ---------------------------------------
                                         Kirk R. Ferguson
                                         Director


                                       35
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
TABLE
NUMBER                                DESCRIPTION
------      --------------------------------------------------------------------
<S>         <C>
3.1         (1) Amended and Restated Certificate of Incorporation of Stanadyne
            Automotive Corp.
3.1.1       (9) Certificate of Amendment of Certificate of Incorporation of
            Stanadyne Automotive Corp.
3.2         (1) Amended and Restated By-laws of Stanadyne Automotive Corp.
4.1         (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         (1) Purchase Agreement dated as of December 4, 1997 among SAC
            Automotive, Inc. and Donaldson, Lufkin & Jenrette
4.3         (1) Registration Rights Agreement dated as of December 11, 1997 by
            and among Stanadyne Automotive Corp. and Donaldson, Lufkin &
            Jenrette
10.1        (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      (3) 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      (4) 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      (5) 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
10.1.4      (7) Consent Regarding Repurchase of Senior Subordinated Notes dated
            January 24, 2000
10.1.5      (8) Limited Waiver Regarding Stanadyne Corporation dated August 10,
            2001 with respect to the Credit Agreement dated as of December 11,
            1997, as amended, among Stanadyne Automotive Corp., SAC Automotive,
            Inc., the Lenders and Bank One, NA as administrative agent for
            Lenders
10.1.6      (9) Third Amendment to Credit Agreement dated August 24, 2001 to
            amend the Credit Agreement dated as of December 11, 1997, as
            amended, among Stanadyne Corporation, SAC Automotive, Inc., the
            Lenders and Bank One, NA as administrative agent for Lenders
10.2        (1) 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        (1) Form of Amended and Restated Employment Agreement by and between
            Stanadyne Automotive Corp. and William Gurley and William Kelly
10.5        (1) Stanadyne Automotive Corp. Pension Plan effective December 31,
            1994
10.6        (1) Stanadyne Automotive Corp. Savings Plus Plan restated as of
            January 1, 1993
10.7        (1) Precision Engine Products Corp. Retirement Fund effective as of
            January 1, 1998
10.8        (1) Stanadyne Automotive Corp. Benefit Equalization Plan effective
            as of January 1, 1992
10.9        (1) Stanadyne Automotive Corp. Supplemental Retirement Plan
            effective as of January 1, 1992
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
10.10       (1) Supply Agreement dated as of December 8, 1995 between Precision
            Engine Products Corp. and the Ina Bearing Company (Pursuant to Rule
            24b-2 under The Exchange Act, the Company has requested confidential
            treatment of portions of this exhibit deleted from the filed copy.)
10.12       (1) Customer Agreement dated as of January 22, 1996 between
            Stanadyne Automotive Corp. and General Motors Powertrain Group
            (Pursuant to Rule 24b-2 under The Exchange Act, the Company has
            requested confidential treatment of portions of this exhibit deleted
            from the filed copy.)
10.12.1     (2) Amendment dated March 13, 1998 to Customer Agreement dated as of
            January 22, 1996 between Stanadyne Automotive Corp. and General
            Motors Powertrain Group (Pursuant to Rule 24b-2 under The Exchange
            Act, the Company has requested confidential treatment of portions of
            this exhibit deleted from the filed copy.)
10.13       (1) Management Services Agreement dated as of December 11, 1997
            between Stanadyne Automotive Corp. and American Industrial Partners.
10.14       (6) Stanadyne Automotive Holding Corp. Management Stock Option Plan
            effective as of June 5, 1998
10.15       Customer Agreement dated as of December 14, 2001 between Stanadyne
            Corporation and Deere & Company (Pursuant to Rule 24b-2 under The
            Exchange Act, the Company has requested confidential treatment of
            portions of this exhibit deleted from the filed copy.)
12.1        Statement of Computation of Ratios
21.1        Subsidiaries of Stanadyne Corporation
</TABLE>

(1)   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.

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

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

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

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

(6)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-K filed March 2, 2000.

(7)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-Q filed May 9, 2000.

(8)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-Q filed August 14, 2001.

(9)   Incorporated by reference to corresponding exhibit filed as an exhibit to
      Form 10-Q filed November 13, 2001.