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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005



or



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



FOR THE TRANSITION PERIOD FROM  TO
.



COMMISSION FILE NO. 1-13683



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REMY INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 35-1909253                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|2902 Enterprise Drive Anderson, Indiana                        |  | 46013                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(765) 778-6499

(Registrants telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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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 WHETHER THE REGISTRANT IS AN ACCELERATED FILER
(AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).Yes ̈No  x



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



|                       |  |                              
|---------------------- |  | -----------------------------
|                       |  | Outstanding as of May 1, 2005
|Common Stock  Class B |  | 2,503,024.48                 



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Remy International, Inc. and Subsidiaries



INDEX



|              |  |                       |  |                                                                                       |  |     
|------------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|              |  |                       |  |                                                                                       |  | Page
|              |  |                      
|PART I        |  | FINANCIAL INFORMATION |  |                                                                                      
|              |  |                       | 
|              |  | Item 1                |  | Financial Statements                                                                  |  |     
|              |  |                       | 
|              |  |                       |  | Condensed Consolidated Balance Sheets                                                 |  | 3   
|              |  |                       | 
|              |  |                       |  | Condensed Consolidated Statements of Operations                                       |  | 4   
|              |  |                       | 
|              |  |                       |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5   
|              |  |                       | 
|              |  |                       |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|              |  |                       | 
|              |  | Item 2                |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20  
|              |  |                       | 
|              |  | Item 3                |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 27  
|              |  |                       | 
|              |  | Item 4                |  | Controls and Procedures                                                               |  | 27  
|              |  |                      
|PART II       |  | OTHER INFORMATION     |  |                                                                                      
|              |  |                       | 
|              |  | Item 1                |  | Legal Proceedings                                                                     |  | 28  
|              |  |                       | 
|              |  | Item 2                |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 30  
|              |  |                       | 
|              |  | Item 3                |  | Defaults Upon Senior Securities                                                       |  | 30  
|              |  |                       | 
|              |  | Item 4                |  | Submission of Matters to a Vote of Security Holders                                   |  | 30  
|              |  |                       | 
|              |  | Item 5                |  | Other Information                                                                     |  | 30  
|              |  |                       | 
|              |  | Item 6                |  | Exhibits                                                                              |  | 30  
|              | 
|SIGNATURES    |  | 31                   
|              | 
|EXHIBIT INDEX |  | 32                   



2



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PART I FINANCIAL INFORMATION



Item 1. Financial Statements



Remy International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets



|                                             |  |                |          |   |                  |   |          |  
|-------------------------------------------- |  | -------------- | -------- | - | ---------------- | - | -------- | -
|IN THOUSANDS,At                              |  | March 31, 2005 |          |   | December 31,2004 |  
|                                             |  | (unaudited)    |          |   |                  |  
|Assets:                                      |  |                |          |   |                  |   |          |  
|Current assets:                              |  |                |          |   |                  |   |          |  
|Cash and cash equivalents                    |  | $              | 23,085   |   |                  | $ | 62,545   |  
|Trade accounts receivable, net               |  |                | 176,097  |   |                  |   | 154,333  |  
|Other receivables                            |  |                | 22,219   |   |                  |   | 19,097   |  
|Inventories                                  |  |                | 284,041  |   |                  |   | 217,912  |  
|Assets of discontinued operations            |  |                | 296      |   |                  |   | 356      |  
|Other current assets                         |  |                | 10,274   |   |                  |   | 11,214   |  
|                                             |  |                |          |   |                  |   |          |  
|Total current assets                         |  |                | 516,012  |   |                  |   | 465,457  |  
|                                             |  |               
|Property, plant and equipment                |  |                | 355,305  |   |                  |   | 329,637  |  
|Less accumulated depreciation                |  |                | 195,015  |   |                  |   | 192,344  |  
|                                             |  |                |          |   |                  |   |          |  
|Property, plant and equipment, net           |  |                | 160,290  |   |                  |   | 137,293  |  
|                                             |  |               
|Deferred financing costs, net                |  |                | 14,257   |   |                  |   | 14,842   |  
|Goodwill, net                                |  |                | 168,245  |   |                  |   | 106,400  |  
|Investments in joint ventures                |  |                | 5,790    |   |                  |   | 5,706    |  
|Other assets                                 |  |                | 38,079   |   |                  |   | 26,060   |  
|                                             |  |                |          |   |                  |   |          |  
|Total assets                                 |  | $              | 902,673  |   |                  | $ | 755,758  |  
|                                             |  |                |          |   |                  |   |          |  
|Liabilities and Stockholders Deficit:       |  |                |          |   |                  |   |          |  
|Current liabilities:                         |  |                |          |   |                  |   |          |  
|Accounts payable                             |  | $              | 206,483  |   |                  | $ | 170,776  |  
|Accrued interest                             |  |                | 19,515   |   |                  |   | 8,210    |  
|Accrued restructuring                        |  |                | 11,553   |   |                  |   | 6,451    |  
|Liabilities of discontinued operations       |  |                | 2,525    |   |                  |   | 2,799    |  
|Deferred income taxes                        |  |                | 2,611    |   |                  |   | 3,065    |  
|Other liabilities and accrued expenses       |  |                | 116,499  |   |                  |   | 84,157   |  
|Current maturities of long-term debt         |  |                | 28,539   |   |                  |   | 22,890   |  
|                                             |  |                |          |   |                  |   |          |  
|Total current liabilities                    |  |                | 387,725  |   |                  |   | 298,348  |  
|                                             |  |               
|Long-term debt, net of current portion       |  |                | 629,856  |   |                  |   | 610,330  |  
|Post-retirement benefits other than pensions |  |                | 16,537   |   |                  |   | 16,302   |  
|Accrued pension benefits                     |  |                | 13,831   |   |                  |   | 13,511   |  
|Accrued restructuring                        |  |                | 3,158    |   |                  |   | 4,407    |  
|Other non-current liabilities                |  |                | 50,283   |   |                  |   | 4,962    |  
|Commitments and contingencies                |  |                |          |   |                  |   |          |  
|Minority interest                            |  |                | 10,985   |   |                  |   | 10,498   |  
|                                             |  |               
|Stockholders deficit:                       |  |                |          |   |                  |   |          |  
|Common stock:                                |  |                |          |   |                  |   |          |  
|Class B shares                               |  |                | 3        |   |                  |   | 3        |  
|Paid-in capital                              |  |                | 334,336  |   |                  |   | 334,336  |  
|Retained deficit                             |  |                | (534,033 | ) |                  |   | (531,136 | )
|Accumulated other comprehensive loss         |  |                | (10,008  | ) |                  |   | (5,803   | )
|                                             |  |                |          |   |                  |   |          |  
|Total stockholders deficit                  |  |                | (209,702 | ) |                  |   | (202,600 | )
|                                             |  |                |          |   |                  |   |          |  
|Total liabilities and stockholders deficit  |  | $              | 902,673  |   |                  | $ | 755,758  |  
|                                             |  |                |          |   |                  |   |          |  



See notes to the condensed
consolidated financial statements.



3



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Remy International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                                                                                            |  |      |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|IN THOUSANDS,For the three months ended March 31,                                                                           |  | 2005 |         |   | 2004 |  
|Net sales                                                                                                                   |  | $    | 281,568 |   |      | $ | 269,028 |  
|Cost of goods sold                                                                                                          |  |      | 236,209 |   |      |   | 218,758 |  
|                                                                                                                            |  |      |         |   |      |   |         |  
|Gross profit                                                                                                                |  |      | 45,359  |   |      |   | 50,270  |  
|                                                                                                                            |  |     
|Selling, general and administrative expenses                                                                                |  |      | 31,257  |   |      |   | 26,914  |  
|Restructuring (credit) charge                                                                                               |  |      | (799    | ) |      |   | 813     |  
|                                                                                                                            |  |      |         |   |      |   |         |  
|Operating income                                                                                                            |  |      | 14,901  |   |      |   | 22,543  |  
|                                                                                                                            |  |     
|Interest expense                                                                                                            |  |      | 15,392  |   |      |   | 14,601  |  
|                                                                                                                            |  |      |         |   |      |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest and loss from unconsolidated joint ventures |  |      | (491    | ) |      |   | 7,942   |  
|                                                                                                                            |  |     
|Income tax expense                                                                                                          |  |      | 1,350   |   |      |   | 1,240   |  
|Minority interest                                                                                                           |  |      | 1,093   |   |      |   | 548     |  
|Loss (income) from unconsolidated joint ventures                                                                            |  |      | (83     | ) |      |   | 454     |  
|                                                                                                                            |  |      |         |   |      |   |         |  
|Net (loss) income from continuing operations                                                                                |  |      | (2,851  | ) |      |   | 5,700   |  
|                                                                                                                            |  |     
|Discontinued operations:                                                                                                    |  |      |         |   |      |   |         |  
|Loss from discontinued operations, net of tax                                                                               |  |      | (201    | ) |      |   | (552    | )
|Gain on disposal of discontinued operations, net of tax                                                                     |  |      | 155     |   |      |   | 108     |  
|                                                                                                                            |  |      |         |   |      |   |         |  
|Net loss from discontinued operations, net of tax                                                                           |  |      | (46     | ) |      |   | (444    | )
|                                                                                                                            |  |      |         |   |      |   |         |  
|Net (loss) income                                                                                                           |  |      | (2,897  | ) |      |   | 5,256   |  
|                                                                                                                            |  |     
|Accretion for redemption of preferred stock                                                                                 |  |      |        |   |      |   | 8,552   |  
|                                                                                                                            |  |      |         |   |      |   |         |  
|Net loss attributable to common stockholders                                                                                |  | $    | (2,897  | ) |      | $ | (3,296  | )
|                                                                                                                            |  |      |         |   |      |   |         |  



See notes to the condensed
consolidated financial statements.



4



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Remy International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                            |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|IN THOUSANDS,For the three months ended March 31,                                           |  | 2005 |         |   | 2004 |  
|Cash Flows from Operating Activities:                                                       |  |      |         |   |      |   |         |  
|Net loss attributable to common stockholders                                                |  | $    | (2,897  | ) |      | $ | (3,296  | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   |  |      |         |   |      |   |         |  
|Discontinued operations                                                                     |  |      | 46      |   |      |   | 444     |  
|Depreciation and amortization                                                               |  |      | 6,534   |   |      |   | 5,393   |  
|Non-cash interest expense                                                                   |  |      | 852     |   |      |   | 1,028   |  
|Accretion for redemption of preferred stock                                                 |  |      |        |   |      |   | 8,552   |  
|Minority interest and loss from unconsolidated joint ventures                               |  |      | 1,010   |   |      |   | 1,002   |  
|Deferred income taxes                                                                       |  |      | (427    | ) |      |   | 2       |  
|Accrued pension and post-retirement benefits, net                                           |  |      | 555     |   |      |   | 325     |  
|Restructuring (credit) charge                                                               |  |      | (799    | ) |      |   | 813     |  
|Cash payments for restructuring charges                                                     |  |      | (509    | ) |      |   | (6,409  | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges: |  |      |         |   |      |   |         |  
|Accounts receivable                                                                         |  |      | (11,182 | ) |      |   | (19,041 | )
|Inventories                                                                                 |  |      | (11,816 | ) |      |   | (15,481 | )
|Accounts payable                                                                            |  |      | 17,944  |   |      |   | 15,479  |  
|Other current assets and liabilities                                                        |  |      | 7,031   |   |      |   | 2,068   |  
|Other non-current assets and liabilities, net                                               |  |      | (3,775  | ) |      |   | 984     |  
|                                                                                            |  |      |         |   |      |   |         |  
|Net cash provided by (used in) operating activities of continuing operations                |  |      | 2,567   |   |      |   | (8,137  | )
|                                                                                            |  |     
|Cash Flows from Investing Activities:                                                       |  |      |         |   |      |   |         |  
|Acquisitions, net of cash acquired                                                          |  |      | (56,014 | ) |      |   |        |  
|Net proceeds on sale of businesses                                                          |  |      | 156     |   |      |   | 108     |  
|Purchases of property, plant and equipment                                                  |  |      | (10,860 | ) |      |   | (5,915  | )
|                                                                                            |  |      |         |   |      |   |         |  
|Net cash used in investing activities of continuing operations                              |  |      | (66,718 | ) |      |   | (5,807  | )
|                                                                                            |  |     
|Cash Flows from Financing Activities:                                                       |  |      |         |   |      |   |         |  
|Net borrowings under revolving line of credit and other                                     |  |      | 25,176  |   |      |   | 11,678  |  
|Distributions to minority interests                                                         |  |      |        |   |      |   | (1,010  | )
|                                                                                            |  |      |         |   |      |   |         |  
|Net cash provided by financing activities of continuing operations                          |  |      | 25,176  |   |      |   | 10,668  |  
|                                                                                            |  |     
|Effect of exchange rate changes on cash                                                     |  |      | (252    | ) |      |   | 244     |  
|                                                                                            |  |     
|Cash flows of discontinued operations                                                       |  |      | (233    | ) |      |   | (1,050  | )
|                                                                                            |  |      |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                   |  |      | (39,460 | ) |      |   | (4,082  | )
|Cash and cash equivalents at beginning of year                                              |  |      | 62,545  |   |      |   | 21,207  |  
|                                                                                            |  |      |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $    | 23,085  |   |      | $ | 17,125  |  
|                                                                                            |  |      |         |   |      |   |         |  



See notes to the condensed
consolidated financial statements.



5



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AMOUNTS IN THOUSANDS, EXCEPT AS INDICATED

Quarters Ended March 31, 2005 and 2004

(Unaudited)



1. Basis of Presentation



The accompanying unaudited, condensed consolidated financial statements in
this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2004. The unaudited, condensed consolidated
financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation
have been included. The Company reclassified operating results and cash flows in 2004 to reflect the classification of the Companys transmission remanufacturing businesses, Williams Technologies, Inc. (Williams), JAX Reman, L.L.C.
(JAX) and AutoMatic Transmission International A/S (AMT), as discontinued operations.



Operating results for the three-month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the full year.
The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements.
The Company has not materially changed its significant accounting policies from those disclosed in its Form 10-K for the year ended December 31, 2004. For further information, refer to the consolidated financial statements and notes thereto for the
year ended December 31, 2004.



2. Additional Balance Sheet Information



Inventories



The components of inventory were as follows:



|                |  |               |         |                  |   |        
|--------------- |  | ------------- | ------- | ---------------- | - | -------
|                |  | March 31,2005 |         | December 31,2004
|Raw material    |  | $             | 141,639 |                  | $ | 116,807
|Work-in-process |  |               | 6,785   |                  |   | 7,577  
|Finished goods  |  |               | 135,617 |                  |   | 93,528 
|                |  |               |         |                  |   |        
|Total           |  | $             | 284,041 |                  | $ | 217,912
|                |  |               |         |                  |   |        



Warranty



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



|                                         |  |                            |         |   |                            |   |         |  
|---------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | -
|                                         |  | Quarter EndedMarch 31,2005 |         |   | Year EndedDecember 31,2004 |  
|Balance at beginning of period           |  | $                          | 17,633  |   |                            | $ | 20,471  |  
|Provision for warranty                   |  |                            | 10,575  |   |                            |   | 39,665  |  
|Payments and charges against the accrual |  |                            | (10,571 | ) |                            |   | (42,503 | )
|Other (including acquisitions)           |  |                            | 4,767   |   |                            |   |        |  
|                                         |  |                            |         |   |                            |   |         |  
|Balance at end of period                 |  | $                          | 22,404  |   |                            | $ | 17,633  |  
|                                         |  |                            |         |   |                            |   |         |  



6



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3. Acquisitions



On March 18, 2005, the Company acquired substantially all of the assets and assumed certain liabilities of Unit Parts Company (UPC). UPC is a
major supplier to the automotive aftermarket for new and remanufactured starters and alternators, offering custom branding, packaging and logistics solutions as well as complete engineering and support services. The purchase price consisted of
approximately $55,300 in cash and the assumption of approximately $69,200 in liabilities (including a preliminary estimate of $5,300 in exit costs). Additionally, the purchase agreement contains a contingent earn out to be paid over a four-year
period if incremental financial performance objectives above the current performance of the combined electrical aftermarket business are attained. Contingent consideration earned and paid will increase the purchase price and result in additional
goodwill. The Company funded this acquisition with cash on hand and borrowings available under its existing revolving credit facility.



Liabilities assumed include customer obligations related to several customer contracts acquired through the acquisition. These liabilities are reflected
in Other liabilities and accrued expenses in the accompanying condensed consolidated balance sheet. These contracts designate the Company as the exclusive supplier to the respective customer and require the Company to issue credit memos
to each respective customer over several years. The following table summarizes the net present value, as of March 31, 2005, of future payments due over the next five years under the customer obligation contracts:



|           |  |   |       
|---------- |  | - | ------
|2005       |  | $ | 14,887
|2006       |  |   | 13,719
|2007       |  |   | 8,312 
|2008       |  |   | 6,596 
|2009       |  |   | 6,243 
|Thereafter |  |   | 11,380
|           |  |   |       
|Total      |  | $ | 61,137
|           |  |   |       



In connection with
this acquisition the Company entered into Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement, more fully described in Note 7.



UPCs results of operations are included in the Companys statement of operations beginning March 18, 2005. The Company recorded approximately
$5,000 in incremental revenue and approximately $300 in incremental operating income during the quarter ended March 31, 2005. The purchase price allocation has not been finalized. The preliminary purchase price allocation is summarized as follows:



|                               |  |   |        
|------------------------------ |  | - | -------
|Current assets                 |  | $ | 65,548 
|Intangible assets and goodwill |  |   | 68,885 
|Other assets                   |  |   | 23,070 
|                               |  |   |        
|Total assets                   |  | $ | 157,503
|                               |  |   |        
|Total liabilities              |  | $ | 102,225
|                               |  |   |        
|Cash paid                      |  | $ | 55,278 
|                               |  |   |        



The Company made no
acquisitions during the three months ended March 31, 2004.



7



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4. Accounts Receivable Programs



The Company participates in two programs that accelerate the collection of accounts receivable. Under one program, the
Company sells the accounts of certain of its aftermarket customers to a bank, on a non-recourse basis, at a discount. At March 31, 2005 and 2004, the amount of receivables under this program was approximately $32,200 and $35,800, respectively. The
second program is an early pay plan under which a third party acts as paying agent for one of the Companys customers. The accounts are paid, at a discounted rate, in five to seven days after shipment instead of the regular terms. This program
is also without recourse. The amount covered by this plan at March 31, 2005 and 2004 was approximately $10,100 and $13,600, respectively.



5. Discontinued Operations



Selected financial information for discontinued operations for the three months ended March 31 is as follows:



|                   |  |      |      |   |      |   |        |  
|------------------ |  | ---- | ---- | - | ---- | - | ------ | -
|                   |  | 2005 |      |   | 2004 |  
|Net sales          |  | $    | 625  |   |      | $ | 24,170 |  
|Interest expense   |  |      | 3    |   |      |   | 1,601  |  
|Loss before tax    |  |      | (201 | ) |      |   | (355   | )
|Income tax expense |  |      |     |   |      |   | 197    |  
|                   |  |      |      |   |      |   |        |  
|Net loss           |  | $    | (201 | ) |      | $ | (552   | )
|                   |  |      |      |   |      |   |        |  



6. Restructuring Charges



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



Continuing Operations



In the first quarter of 2005, the Company completed plans for the closure of a manufacturing facility in Europe. This action will result in a workforce reduction of sixteen employees.



8



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The net restructuring credit of $799 in the first quarter of 2005 consisted of a $1,066 credit for the
reversal of accrued maintenance expenses reflecting the Companys utilization of a previously idled Anderson, Indiana facility and the renegotiation of other maintenance agreements. In addition, charges totaling $267 were recorded relative to
the closure of operations in Anderson, Indiana in 2003 and the consolidation of operations in Europe.



The following table summarizes the activity in the restructuring accrual of continuing operations in the first quarter of 2005:



|                             |  |                      |        |     |                       |   |        |       |  |   |        |     
|---------------------------- |  | -------------------- | ------ | --- | --------------------- | - | ------ | ----- |  | - | ------ | ----
|                             |  | Termination Benefits |        |     | Exit/Impairment Costs |   |        | Total | 
|Reserve at December 31, 2004 |  | $                    | 5,285  |     |                       | $ | 5,573  |       |  | $ | 10,858 |     
|Provision                    |  |                      | 182    |     |                       |   | (1,066 | )     |  |   | (884   | )(b)
|Payments                     |  |                      | (289   | )   |                       |   | (221   | )     |  |   | (510   | )   
|Other                        |  |                      | 5,254  | (a) |                       |   | (7     | )     |  |   | 5,247  |     
|                             |  |                      |        |     |                       |   |        |       |  |   |        |     
|Reserve at March 31, 2005    |  | $                    | 10,432 |     |                       | $ | 4,279  |       |  | $ | 14,711 |     
|                             |  |                      |        |     |                       |   |        |       |  |   |        |     

---

|(a) | Includes a preliminary estimate of $5,250 for exit costs established in connection with the acquisition of UPC.
|--- | ---------------------------------------------------------------------------------------------------------------

|(b) | Excludes a charge of $85 for the write-down of fixed assets.
|--- | ------------------------------------------------------------



Discontinued Operations



The restructuring charges, payments and liabilities relative to discontinued operations are classified as discontinued operations in the Companys
condensed consolidated financial statements.



The following
table summarizes the activity in the restructuring accrual of discontinued operations in the first quarter of 2005 which relates to exit/impairment costs:



|                             |  |                      |   |                       |   |     |       |  |   |     |  
|---------------------------- |  | -------------------- | - | --------------------- | - | --- | ----- |  | - | --- | -
|                             |  | Termination Benefits |   | Exit/Impairment Costs |   |     | Total | 
|Reserve at December 31, 2004 |  | $                    |  |                       | $ | 294 |       |  | $ | 294 |  
|Provision                    |  |                      |  |                       |   |    |       |  |   |    |  
|Payments                     |  |                      |  |                       |   | (79 | )     |  |   | (79 | )
|Other                        |  |                      |  |                       |   |    |       |  |   |    |  
|                             |  |                      |   |                       |   |     |       |  |   |     |  
|Reserve at March 31, 2005    |  | $                    |  |                       | $ | 215 |       |  | $ | 215 |  
|                             |  |                      |   |                       |   |     |       |  |   |     |  



7. Long-Term Debt



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



9



---

8. Employee Benefit Plans



The components of expense for the plans as of March 31 are as follows:



|                                   |  |                  |      |   |                                                     |   |      |      |  |      |     |  |   |    
|---------------------------------- |  | ---------------- | ---- | - | --------------------------------------------------- | - | ---- | ---- |  | ---- | --- |  | - | ---
|                                   |  | Pension Benefits |      |   | Post-Retirement Health Careand Life Insurance Plans
|Components of expense              |  | 2005             |      |   | 2004                                                |   |      | 2005 |  | 2004
|Service costs                      |  | $                | 499  |   |                                                     | $ | 471  |      |  | $    | 90  |  | $ | 118
|Interest costs                     |  |                  | 631  |   |                                                     |   | 624  |      |  |      | 268 |  |   | 269
|Expected return on plan assets     |  |                  | (482 | ) |                                                     |   | (448 | )    |  |      |    |  |   |   
|Amortization of prior service cost |  |                  | 56   |   |                                                     |   | 24   |      |  |      |    |  |   |   
|Recognized net actuarial loss      |  |                  | 101  |   |                                                     |   | 97   |      |  |      | 17  |  |   | 36 
|Curtailments                       |  |                  |     |   |                                                     |   |     |      |  |      |    |  |   |   
|                                   |  |                  |      |   |                                                     |   |      |      |  |      |     |  |   |    
|Net periodic pension cost          |  | $                | 805  |   |                                                     | $ | 768  |      |  | $    | 375 |  | $ | 423
|                                   |  |                  |      |   |                                                     |   |      |      |  |      |     |  |   |    



Cash Flows



The Company contributed $775 in the first quarter of 2005 and plans to
contribute between $3.9 and $5.0 million to its pension plans for all of 2005. The post-retirement health care plan is funded as benefits are paid.



9. Income Taxes



Income tax expense of $1,350 in the first quarter of 2005 consisted of provision for U.S. federal alternative minimum tax of $27, domestic state and local
taxes of $134 and taxes in various foreign jurisdictions of $1,189. Income tax expense of $1,240 in the first quarter of 2004 consisted of provisions for domestic state and local taxes of $6 and taxes in various foreign jurisdictions of $1,234. In
accordance with SFAS No. 109, Accounting for Income Taxes, the Company established a valuation allowance for domestic U.S. deferred tax assets in 2003, which resulted in no U.S. ordinary tax provision on first quarter 2005 domestic loss.
Accordingly, the Company has recorded a valuation allowance related to the domestic net operating loss generated in the three months ended March 31, 2005.



10. Accumulated Other Comprehensive Income (Loss)



The Companys other comprehensive income (loss) consists of unrealized net gains and losses on the translation of the assets and liabilities of its
foreign operations, currency instruments and minimum pension liability adjustments. The before tax income (loss), related income tax effect and accumulated balance for the first quarter of 2005 are as follows:



|                                  |  |                                      |        |   |                                           |   |                                    |  |   |                                     |   |  |   |         |  
|--------------------------------- |  | ------------------------------------ | ------ | - | ----------------------------------------- | - | ---------------------------------- |  | - | ----------------------------------- | - |  | - | ------- | -
|                                  |  | ForeignCurrencyTranslationAdjustment |        |   | Unrealized Gains onDerivative Instruments |   | MinimumPensionLiabilityAdjustments |  |   | AccumulatedOther Comprehensive Loss |  
|Balances at December 31, 2004     |  | $                                    | 1,964  |   |                                           | $ | 439                                |  | $ | (8,206                              | ) |  | $ | (5,803  | )
|Before tax income (loss)          |  |                                      | (4,300 | ) |                                           |   | 101                                |  |   |                                    |   |  |   | (4,199  | )
|Income tax effect                 |  |                                      |       |   |                                           |   | 6                                  |  |   |                                    |   |  |   | 6       |  
|                                  |  |                                      |        |   |                                           |   |                                    |  |   |                                     |   |  |   |         |  
|Other comprehensive income (loss) |  |                                      | (4,300 | ) |                                           |   | 95                                 |  |   |                                    |   |  |   | (4,205  | )
|                                  |  |                                      |        |   |                                           |   |                                    |  |   |                                     |   |  |   |         |  
|Balances at March 31, 2005        |  | $                                    | (2,336 | ) |                                           | $ | 534                                |  | $ | (8,206                              | ) |  | $ | (10,008 | )
|                                  |  |                                      |        |   |                                           |   |                                    |  |   |                                     |   |  |   |         |  



10



---

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



|                                  |  |   |        |  
|--------------------------------- |  | - | ------ | -
|Three months ended March 31, 2005 |  | $ | (7,102 | )
|Three months ended March 31, 2004 |  | $ | 7,841  |  



11. Commitments and Contingencies



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



UAW Litigation



On
April 16, 2003, the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW) and its Local Union 662 filed suit against the Company and Remy, Inc. (RI), in Federal District Court in
the Southern District of Indiana, Indianapolis Division. The lawsuit was filed under Section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, seeking enforcement of an expired Supplemental Unemployment Benefits plan (SUB
plan). The plaintiffs allege that the SUB plan provides supplemental unemployment benefits for 52 weeks and separation pay in an amount exceeding $20,000 for employees who were terminated as a result of the closure of RIs Anderson,
Indiana production facilities at the end of March 2003. The plaintiffs also seek to enforce terminated provisions of a health care program, which the plaintiffs allege provides the terminated employees with 25 months of continued hospital, surgical,
medical, hearing aid, prescription drug, mental health, substance abuse and vision insurance coverage. The terminated employees were represented by the UAW and its Local Union 662 under various agreements, which expired on March 31, 2003. The
lawsuit was filed shortly after the UAW membership failed to ratify RIs last, best and final offer for a Shutdown Agreement. The UAW filed an amended complaint on July 8, 2003 to which the Company filed an answer on July 24, 2003. The trial
was previously expected to begin in January 2005, however, that date was continued and has been reset for October 10, 2005. The Company denies the material allegations of the complaint, denies any wrongdoing and intends to defend itself vigorously,
but is unable to predict whether the proceedings will have a material adverse effect on the Company.



Prison Labor Matter



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



11



---

judgment to the Company on April 21, 2005, and decertified the Plaintiff class. Plaintiffs time to appeal or ask
for reconsideration has not yet run. The Company continues to deny the material allegations of the complaint and any wrongdoing and intends to defend itself vigorously. However, at this time, the Company is unable to predict whether the proceedings
will have a material adverse effect on the Company.



Import/Export Matters



During 2004 the Company continued to expand
globally to take advantage of global economic conditions and related cost structures. The Company is subject to various duties and import/export taxes. The Company is in the process of reviewing its import/export processes in North America, Europe
and parts of Asia to verify the appropriate import duty classification, value and duty rate, including import value added tax.



Remy Reman Facilities



The Remy Reman facilities in Mississippi identified certain possible violations of state air laws and notified the state environmental agency under the
state voluntary audit disclosure rules. The Mississippi Department of Environmental Quality (MDEQ) issued Notices of Violation regarding alleged violations of state air laws by two of the Remy Reman facilities in Mississippi. Remy Reman resolved
this liability through payment in January 2005 of approximately $170.



Franklin Power Products Facility



In September
2000, one of Franklin Power Products, Inc.s Indiana facilities received a Finding of Violation and Order for Compliance from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products,
Inc. has installed wastewater treatment equipment and is in compliance with the terms of the Order and has eliminated the discharge. In July 2004, the Company and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of
Justice on behalf of the EPA, which tolled the statute of limitations on the EPAs potential claim for penalties. Since that time, the Company has been cooperating with the EPA by providing additional information and has entered into settlement
negotiations with EPA and the Department of Justice.



12. Financial
Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries



The Company conducts a significant portion of its business through its subsidiaries. The Companys 8 5/8% Senior Notes Due 2007, 11% Senior Subordinated Notes Due 2009, Second Priority Senior Floating Rate Notes,
and the 9 3/8% Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries of the Company (the Subsidiary Guarantors). Certain of the Companys subsidiaries
do not guarantee the notes (the Non-Guarantor Subsidiaries). The claims of creditors of Non-Guarantor Subsidiaries have priority over the rights of the Company to receive dividends or distributions from such subsidiaries.



Presented below is condensed consolidating financial information for the
Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at March 31, 2005 and December 31, 2004 and for the three-month periods ended March 31, 2005 and 2004.



12



---

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



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



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



13



---

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



Condensed Consolidating Balance Sheet

(unaudited)



|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS,At March 31, 2005                       |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS:                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                           | 273      |   |                      | $ | 674     |                           |  | $ | 22,138       |   |  | $            |         |      |  | $ | 23,085   |  
|Trade accounts receivable, net                       |  |                                             |         |   |                      |   | 132,584 |                           |  |   | 43,513       |   |  |              |         |      |  |   | 176,097  |  
|Other receivables                                    |  |                                             | 1,589    |   |                      |   | 4,568   |                           |  |   | 16,062       |   |  |              |         |      |  |   | 22,219   |  
|Inventories                                          |  |                                             |         |   |                      |   | 214,650 |                           |  |   | 70,742       |   |  |              | (1,351   | )(c) |  |   | 284,041  |  
|Assets of discontinued operations                    |  |                                             |         |   |                      |   |        |                           |  |   | 296          |   |  |              |         |      |  |   | 296      |  
|Other currents assets                                |  |                                             | 859      |   |                      |   | 2,399   |                           |  |   | 7,016        |   |  |              |         |      |  |   | 10,274   |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current assets                                 |  |                                             | 2,721    |   |                      |   | 354,875 |                           |  |   | 159,767      |   |  |              | (1,351   | )    |  |   | 516,012  |  
|                                                     |  |                                             |          |   |                     
|Property, plant and equipment                        |  |                                             | 23,766   |   |                      |   | 182,228 |                           |  |   | 149,311      |   |  |              |         |      |  |   | 355,305  |  
|Less accumulated depreciation                        |  |                                             | 20,099   |   |                      |   | 115,892 |                           |  |   | 59,024       |   |  |              |         |      |  |   | 195,015  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Property, plant and equipment, net                   |  |                                             | 3,667    |   |                      |   | 66,336  |                           |  |   | 90,287       |   |  |              |         |      |  |   | 160,290  |  
|Deferred financing costs, net                        |  |                                             | 14,257   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 14,257   |  
|Goodwill, net                                        |  |                                             |         |   |                      |   | 156,100 |                           |  |   | 12,145       |   |  |              |         |      |  |   | 168,245  |  
|Investments in subsidiaries and joint ventures       |  |                                             | 503,294  |   |                      |   |        |                           |  |   |             |   |  |              | (497,504 | )(a) |  |   | 5,790    |  
|Other assets                                         |  |                                             | 3,247    |   |                      |   | 25,621  |                           |  |   | 9,211        |   |  |              |         |      |  |   | 38,079   |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total assets                                         |  | $                                           | 527,186  |   |                      | $ | 602,932 |                           |  | $ | 271,410      |   |  | $            | (498,855 | )    |  | $ | 902,673  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY:      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                           | 1,899    |   |                      | $ | 142,050 |                           |  | $ | 62,534       |   |  | $            |         |      |  | $ | 206,483  |  
|Intercompany accounts                                |  |                                             | 69,194   |   |                      |   | (91,377 | )                         |  |   | 22,784       |   |  |              | (601     | )(c) |  |   |         |  
|Accrued interest                                     |  |                                             | 19,390   |   |                      |   |        |                           |  |   | 125          |   |  |              |         |      |  |   | 19,515   |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 11,224  |                           |  |   | 329          |   |  |              |         |      |  |   | 11,553   |  
|Liabilities of discontinued operations               |  |                                             |         |   |                      |   | 338     |                           |  |   | 2,187        |   |  |              |         |      |  |   | 2,525    |  
|Deferred income taxes                                |  |                                             |         |   |                      |   | (144    | )                         |  |   | 2,755        |   |  |              |         |      |  |   | 2,611    |  
|Other liabilities and accrued expenses               |  |                                             | 9,404    |   |                      |   | 93,798  |                           |  |   | 13,297       |   |  |              |         |      |  |   | 116,499  |  
|Current maturities of long-term debt                 |  |                                             |         |   |                      |   | 1,571   |                           |  |   | 26,968       |   |  |              |         |      |  |   | 28,539   |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current liabilities                            |  |                                             | 99,887   |   |                      |   | 157,460 |                           |  |   | 130,979      |   |  |              | (601     | )    |  |   | 387,725  |  
|                                                     |  |                                             |          |   |                     
|Long-term debt, net of current portion               |  |                                             | 604,023  |   |                      |   | 14,806  |                           |  |   | 11,027       |   |  |              |         |      |  |   | 629,856  |  
|Post-retirement benefits other than pensions         |  |                                             | 16,246   |   |                      |   |        |                           |  |   | 291          |   |  |              |         |      |  |   | 16,537   |  
|Accrued pension benefits                             |  |                                             | 13,540   |   |                      |   |        |                           |  |   | 291          |   |  |              |         |      |  |   | 13,831   |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 3,158   |                           |  |   |             |   |  |              |         |      |  |   | 3,158    |  
|Other non-current liabilities                        |  |                                             | 1,390    |   |                      |   | 47,945  |                           |  |   | 948          |   |  |              |         |      |  |   | 50,283   |  
|Minority interest                                    |  |                                             |         |   |                      |   | 3,127   |                           |  |   | 7,858        |   |  |              |         |      |  |   | 10,985   |  
|                                                     |  |                                             |          |   |                     
|Stockholders (deficit) equity:                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                             | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Paid-in capital                                      |  |                                             | 334,336  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 334,336  |  
|Retained (deficit) earnings                          |  |                                             | (534,033 | ) |                      |   | 49,592  |                           |  |   | 3,060        |   |  |              | (52,652  | )(b) |  |   | (534,033 | )
|Subsidiary investment                                |  |                                             |         |   |                      |   | 327,325 |                           |  |   | 118,277      |   |  |              | (445,602 | )(a) |  |   |         |  
|Accumulated other comprehensive loss                 |  |                                             | (8,206   | ) |                      |   | (481    | )                         |  |   | (1,321       | ) |  |              |         |      |  |   | (10,008  | )
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total stockholders (deficit) equity                 |  |                                             | (207,900 | ) |                      |   | 376,436 |                           |  |   | 120,016      |   |  |              | (498,254 | )    |  |   | (209,702 | )
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total liabilities and stockholders (deficit) equity |  | $                                           | 527,186  |   |                      | $ | 602,932 |                           |  | $ | 271,410      |   |  | $            | (498,855 | )    |  | $ | 902,673  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  

---

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

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

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



14



---

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



Condensed Consolidating Balance Sheet



|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------- | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS,December 31, 2004                       |  | RemyInternational,Inc. (ParentCompany Only) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS:                                              |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                           | 40,740   |   |                      | $ | 689     |                           |  | $ | 21,116       |   |  | $            |         |      |  | $ | 62,545   |  
|Trade accounts receivable, net                       |  |                                             |         |   |                      |   | 109,923 |                           |  |   | 44,410       |   |  |              |         |      |  |   | 154,333  |  
|Other receivables                                    |  |                                             | 1,685    |   |                      |   | 3,584   |                           |  |   | 13,828       |   |  |              |         |      |  |   | 19,097   |  
|Inventories                                          |  |                                             |         |   |                      |   | 149,338 |                           |  |   | 69,925       |   |  |              | (1,351   | )(c) |  |   | 217,912  |  
|Assets of discontinued operations                    |  |                                             |         |   |                      |   | (7      | )                         |  |   | 363          |   |  |              |         |      |  |   | 356      |  
|Other currents assets                                |  |                                             | 1,700    |   |                      |   | 1,919   |                           |  |   | 7,595        |   |  |              |         |      |  |   | 11,214   |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current assets                                 |  |                                             | 44,125   |   |                      |   | 265,446 |                           |  |   | 157,237      |   |  |              | (1,351   | )    |  |   | 465,457  |  
|                                                     |  |                                             |          |   |                     
|Property, plant and equipment                        |  |                                             | 2,610    |   |                      |   | 181,525 |                           |  |   | 145,502      |   |  |              |         |      |  |   | 329,637  |  
|Less accumulated depreciation                        |  |                                             | 203      |   |                      |   | 134,842 |                           |  |   | 57,299       |   |  |              |         |      |  |   | 192,344  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Property, plant and equipment, net                   |  |                                             | 2,407    |   |                      |   | 46,683  |                           |  |   | 88,203       |   |  |              |         |      |  |   | 137,293  |  
|Deferred financing costs, net                        |  |                                             | 14,842   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 14,842   |  
|Goodwill, net                                        |  |                                             | (12      | ) |                      |   | 94,255  |                           |  |   | 12,157       |   |  |              |         |      |  |   | 106,400  |  
|Investment in subsidiaries and joint ventures        |  |                                             | 426,358  |   |                      |   |        |                           |  |   |             |   |  |              | (420,652 | )(a) |  |   | 5,706    |  
|Other assets                                         |  |                                             | 4,531    |   |                      |   | 12,456  |                           |  |   | 9,073        |   |  |              |         |      |  |   | 26,060   |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total assets                                         |  | $                                           | 492,251  |   |                      | $ | 418,840 |                           |  | $ | 266,670      |   |  | $            | (422,003 | )    |  | $ | 755,758  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY:      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                           | 1,583    |   |                      | $ | 110,434 |                           |  | $ | 58,759       |   |  | $            |         |      |  | $ | 170,776  |  
|Intercompany accounts                                |  |                                             | 64,243   |   |                      |   | (92,507 | )                         |  |   | 28,865       |   |  |              | (601     | )(c) |  |   |         |  
|Accrued interest                                     |  |                                             | 8,105    |   |                      |   |        |                           |  |   | 105          |   |  |              |         |      |  |   | 8,210    |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 6,074   |                           |  |   | 377          |   |  |              |         |      |  |   | 6,451    |  
|Liabilities of discontinued operations               |  |                                             |         |   |                      |   | 436     |                           |  |   | 2,363        |   |  |              |         |      |  |   | 2,799    |  
|Deferred income taxes                                |  |                                             |         |   |                      |   |        |                           |  |   | 3,065        |   |  |              |         |      |  |   | 3,065    |  
|Other liabilities and accrued expenses               |  |                                             | 8,010    |   |                      |   | 62,289  |                           |  |   | 13,858       |   |  |              |         |      |  |   | 84,157   |  
|Current maturities of long-term debt                 |  |                                             |         |   |                      |   | 1,455   |                           |  |   | 21,435       |   |  |              |         |      |  |   | 22,890   |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current liabilities                            |  |                                             | 81,941   |   |                      |   | 88,181  |                           |  |   | 128,827      |   |  |              | (601     | )    |  |   | 298,348  |  
|                                                     |  |                                             |          |   |                     
|Long-term debt, net of current portion               |  |                                             | 583,857  |   |                      |   | 15,249  |                           |  |   | 11,224       |   |  |              |         |      |  |   | 610,330  |  
|Post-retirement benefits other than pensions         |  |                                             | 16,302   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 16,302   |  
|Accrued pension benefits                             |  |                                             | 13,510   |   |                      |   |        |                           |  |   | 1            |   |  |              |         |      |  |   | 13,511   |  
|Accrued restructuring                                |  |                                             |         |   |                      |   | 4,407   |                           |  |   |             |   |  |              |         |      |  |   | 4,407    |  
|Other non-current liabilities                        |  |                                             | 1,561    |   |                      |   | 2,370   |                           |  |   | 1,031        |   |  |              |         |      |  |   | 4,962    |  
|Minority interest                                    |  |                                             |         |   |                      |   | 2,055   |                           |  |   | 8,443        |   |  |              |         |      |  |   | 10,498   |  
|                                                     |  |                                             |          |   |                     
|Stockholders (deficit) equity:                      |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                             | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Paid-in-capital                                      |  |                                             | 334,336  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 334,336  |  
|Retained (deficit) earnings                          |  |                                             | (531,136 | ) |                      |   | 37,002  |                           |  |   | (981         | ) |  |              | (36,021  | )(b) |  |   | (531,136 | )
|Subsidiary investment                                |  |                                             |         |   |                      |   | 270,048 |                           |  |   | 115,333      |   |  |              | (385,381 | )(a) |  |   |         |  
|Accumulated other comprehensive loss                 |  |                                             | (8,123   | ) |                      |   | (472    | )                         |  |   | 2,792        |   |  |              |         |      |  |   | (5,803   | )
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total stockholders (deficit) equity                 |  |                                             | (204,920 | ) |                      |   | 306,578 |                           |  |   | 117,144      |   |  |              | (421,402 | )    |  |   | (202,600 | )
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total liabilities and stockholders (deficit) equity |  | $                                           | 492,251  |   |                      | $ | 418,840 |                           |  | $ | 266,670      |   |  | $            | (422,003 | )    |  | $ | 755,758  |  
|                                                     |  |                                             |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  

---

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

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

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



15



---

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



Condensed Consolidating Statement of Operations

(unaudited)



|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the three months Ended March 31, 2005                                                                        |  | RemyInternational,Inc. (ParentCompany Only) |         |   | Subsidiary Guarantors |   |         | Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net sales                                                                                                                     |  | $                                           |        |   |                       | $ | 259,301 |                            |  | $ | 125,476      |   |  | $            | (103,209 | )(a) |  | $ | 281,568 |  
|Cost of goods sold                                                                                                            |  |                                             | (377    | ) |                       |   | 226,592 |                            |  |   | 113,203      |   |  |              | (103,209 | )(a) |  |   | 236,209 |  
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Gross profit                                                                                                                  |  |                                             | 377     |   |                       |   | 32,709  |                            |  |   | 12,273       |   |  |              |         |      |  |   | 45,359  |  
|                                                                                                                              |  |                                             |         |   |                      
|Selling, general and administrative expenses                                                                                  |  |                                             | 5,224   |   |                       |   | 19,467  |                            |  |   | 6,566        |   |  |              |         |      |  |   | 31,257  |  
|Restructuring charges                                                                                                         |  |                                             | 28      |   |                       |   | (976    | )                          |  |   | 149          |   |  |              |         |      |  |   | (799    | )
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Operating (loss) income                                                                                                       |  |                                             | (4,875  | ) |                       |   | 14,218  |                            |  |   | 5,558        |   |  |              |         |      |  |   | 14,901  |  
|                                                                                                                              |  |                                             |         |   |                      
|Interest expense                                                                                                              |  |                                             | 14,392  |   |                       |   | 579     |                            |  |   | 421          |   |  |              |         |      |  |   | 15,392  |  
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest and income from unconsolidated joint ventures |  |                                             | (19,267 | ) |                       |   | 13,639  |                            |  |   | 5,137        |   |  |              |         |      |  |   | (491    | )
|                                                                                                                              |  |                                             |         |   |                      
|Income tax expense                                                                                                            |  |                                             | 261     |   |                       |   | 167     |                            |  |   | 922          |   |  |              |         |      |  |   | 1,350   |  
|Minority interest                                                                                                             |  |                                             |        |   |                       |   | 1,071   |                            |  |   | 22           |   |  |              |         |      |  |   | 1,093   |  
|Income from unconsolidated joint ventures                                                                                     |  |                                             |        |   |                       |   |        |                            |  |   | (83          | ) |  |              |         |      |  |   | (83     | )
|Equity in earnings of subsidiaries                                                                                            |  |                                             | (16,631 | ) |                       |   |        |                            |  |   |             |   |  |              | 16,631   | (b)  |  |   |        |  
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income from continuing operations                                                                                  |  |                                             | (2,897  | ) |                       |   | 12,401  |                            |  |   | 4,276        |   |  |              | (16,631  | )    |  |   | (2,851  | )
|                                                                                                                              |  |                                             |         |   |                      
|Discontinued operations:                                                                                                      |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from discontinued operations, net of tax                                                                        |  |                                             |        |   |                       |   | 34      |                            |  |   | (235         | ) |  |              |         |      |  |   | (201    | )
|Gain on disposal of discontinued operations, net of tax                                                                       |  |                                             |        |   |                       |   | 155     |                            |  |   |             |   |  |              |         |      |  |   | 155     |  
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from discontinued operations, net of tax                                                                        |  |                                             |        |   |                       |   | 189     |                            |  |   | (235         | ) |  |              |         |      |  |   | (46     | )
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income                                                                                                             |  |                                             | (2,897  | ) |                       |   | 12,590  |                            |  |   | 4,041        |   |  |              | (16,631  | )    |  |   | (2,897  | )
|                                                                                                                              |  |                                             |         |   |                      
|Accretion for redemption of preferred stock                                                                                   |  |                                             |        |   |                       |   |        |                            |  |   |             |   |  |              |         |      |  |   |        |  
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                                                         |  | $                                           | (2,897  | ) |                       | $ | 12,590  |                            |  | $ | 4,041        |   |  | $            | (16,631  | )    |  | $ | (2,897  | )
|                                                                                                                              |  |                                             |         |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |         |  

---

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

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





16



---

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



Condensed Consolidating Statement of Operations

(unaudited)



|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the three months Ended March 31, 2004                                                                      |  | Remy International, Inc. (Parent Company Only) |         |   | Subsidiary Guarantors |   |         | Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                                                                                   |  | $                                              |        |   |                       | $ | 251,906 |                            |  | $ | 115,167      |   |  | $            | (98,045 | )(a) |  | $ | 269,028 |  
|Cost of goods sold                                                                                                          |  |                                                |        |   |                       |   | 211,766 |                            |  |   | 105,037      |   |  |              | (98,045 | )(a) |  |   | 218,758 |  
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Gross profit                                                                                                                |  |                                                |        |   |                       |   | 40,140  |                            |  |   | 10,130       |   |  |              |        |      |  |   | 50,270  |  
|                                                                                                                            |  |                                                |         |   |                      
|Selling, general and administrative expenses                                                                                |  |                                                | 4,400   |   |                       |   | 16,641  |                            |  |   | 5,873        |   |  |              |        |      |  |   | 26,914  |  
|Restructuring charges                                                                                                       |  |                                                |        |   |                       |   | 579     |                            |  |   | 234          |   |  |              |        |      |  |   | 813     |  
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Operating (loss) income                                                                                                     |  |                                                | (4,400  | ) |                       |   | 22,920  |                            |  |   | 4,023        |   |  |              |        |      |  |   | 22,543  |  
|                                                                                                                            |  |                                                |         |   |                      
|Interest expense                                                                                                            |  |                                                | 13,315  |   |                       |   | 631     |                            |  |   | 655          |   |  |              |        |      |  |   | 14,601  |  
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest and loss from unconsolidated joint ventures |  |                                                | (17,715 | ) |                       |   | 22,289  |                            |  |   | 3,368        |   |  |              |        |      |  |   | 7,942   |  
|                                                                                                                            |  |                                                |         |   |                      
|Income tax expense                                                                                                          |  |                                                | 536     |   |                       |   | (470    | )                          |  |   | 1,174        |   |  |              |        |      |  |   | 1,240   |  
|Minority interest                                                                                                           |  |                                                |        |   |                       |   | 248     |                            |  |   | 300          |   |  |              |        |      |  |   | 548     |  
|Loss from unconsolidated joint ventures                                                                                     |  |                                                |        |   |                       |   |        |                            |  |   | 454          |   |  |              |        |      |  |   | 454     |  
|Equity in earnings of subsidiaries                                                                                          |  |                                                | (23,507 | ) |                       |   |        |                            |  |   |             |   |  |              | 23,507  | (b)  |  |   |        |  
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net income (loss) from continuing operations                                                                                |  |                                                | 5,256   |   |                       |   | 22,511  |                            |  |   | 1,440        |   |  |              | (23,507 | )    |  |   | 5,700   |  
|                                                                                                                            |  |                                                |         |   |                      
|Discontinued operations:                                                                                                    |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from discontinued operations, net of tax                                                                      |  |                                                |        |   |                       |   | 168     |                            |  |   | (720         | ) |  |              |        |      |  |   | (552    | )
|Gain on disposal of discontinued operations, net of tax                                                                     |  |                                                |        |   |                       |   | 108     |                            |  |   |             |   |  |              |        |      |  |   | 108     |  
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from discontinued operations, net of tax                                                                      |  |                                                |        |   |                       |   | 276     |                            |  |   | (720         | ) |  |              |        |      |  |   | (444    | )
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net income (loss)                                                                                                           |  |                                                | 5,256   |   |                       |   | 22,787  |                            |  |   | 720          |   |  |              | (23,507 | )    |  |   | 5,256   |  
|                                                                                                                            |  |                                                |         |   |                      
|Accretion for redemption of preferred stock                                                                                 |  |                                                | 8,552   |   |                       |   |        |                            |  |   |             |   |  |              |        |      |  |   | 8,552   |  
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                                                       |  | $                                              | (3,296  | ) |                       | $ | 22,787  |                            |  | $ | 720          |   |  | $            | (23,507 | )    |  | $ | (3,296  | )
|                                                                                                                            |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  

---

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

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



17



---

REMY INTERNATIONAL, INC. AND SUBSIDIARIES



Condensed Consolidating Statement of Cash Flows

(unaudited)



|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|IN THOUSANDS,For the three months Ended March 31, 2005                                             |  | Remy International, Inc. (Parent Company Only) |         |   | Subsidiary Guarantors |   |         | Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash Flows from Operating Activities:                                                              |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net (loss) income attributable to common stockholders                                              |  | $                                              | (2,897  | ) |                       | $ | 12,590  |                            |  | $ | 4,041        |   |  | $            | (16,631 | ) |  | $ | (2,897  | )
|                                                                                                   |  |                                                |         |   |                      
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Discontinued operations                                                                            |  |                                                |        |   |                       |   | (189    | )                          |  |   | 235          |   |  |              |        |   |  |   | 46      |  
|Depreciation and amortization                                                                      |  |                                                | 500     |   |                       |   | 2,792   |                            |  |   | 3,242        |   |  |              |        |   |  |   | 6,534   |  
|Non-cash interest expense                                                                          |  |                                                | 852     |   |                       |   |        |                            |  |   |             |   |  |              |        |   |  |   | 852     |  
|Minority interest and loss from unconsolidated joint ventures, net                                 |  |                                                |        |   |                       |   | 1,071   |                            |  |   | (61          | ) |  |              |        |   |  |   | 1,010   |  
|Equity in earnings of subsidiaries                                                                 |  |                                                | (16,631 | ) |                       |   |        |                            |  |   |             |   |  |              | 16,631  |   |  |   |        |  
|Deferred income taxes                                                                              |  |                                                |        |   |                       |   | (144    | )                          |  |   | (283         | ) |  |              |        |   |  |   | (427    | )
|Post retirement benefits other than pensions and accrued pension benefits, net                     |  |                                                | (27     | ) |                       |   |        |                            |  |   | 582          |   |  |              |        |   |  |   | 555     |  
|Restructuring charges (credits)                                                                    |  |                                                | 28      |   |                       |   | (976    | )                          |  |   | 149          |   |  |              |        |   |  |   | (799    | )
|Cash payments for restructuring charges                                                            |  |                                                | (28     | ) |                       |   | (379    | )                          |  |   | (102         | ) |  |              |        |   |  |   | (509    | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges:        |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Accounts receivable                                                                                |  |                                                |        |   |                       |   | (12,079 | )                          |  |   | 897          |   |  |              |        |   |  |   | (11,182 | )
|Inventories                                                                                        |  |                                                |        |   |                       |   | (11,000 | )                          |  |   | (816         | ) |  |              |        |   |  |   | (11,816 | )
|Accounts payable                                                                                   |  |                                                | 315     |   |                       |   | 13,854  |                            |  |   | 3,775        |   |  |              |        |   |  |   | 17,944  |  
|Intercompany accounts                                                                              |  |                                                | 4,951   |   |                       |   | 1,130   |                            |  |   | (6,081       | ) |  |              |        |   |  |   |        |  
|Other current assets and liabilities                                                               |  |                                                | 14,355  |   |                       |   | (5,116  | )                          |  |   | (2,208       | ) |  |              |        |   |  |   | 7,031   |  
|Other non-current assets and liabilities, net                                                      |  |                                                | (5,441  | ) |                       |   | 5,182   |                            |  |   | (3,516       | ) |  |              |        |   |  |   | (3,775  | )
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                                | (4,023  | ) |                       |   | 6,736   |                            |  |   | (146         | ) |  |              |        |   |  |   | 2,567   |  
|                                                                                                   |  |                                                |         |   |                      
|Cash Flows from Investing Activities:                                                              |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|                                                                                                   |  |                                                |         |   |                      
|Acquisitions, net of cash acquired                                                                 |  |                                                | (56,014 | ) |                       |   |        |                            |  |   |             |   |  |              |        |   |  |   | (56,014 | )
|                                                                                                   |  |                                                |         |   |                      
|Net proceeds on sale of businesses                                                                 |  |                                                |        |   |                       |   | 156     |                            |  |   |             |   |  |              |        |   |  |   | 156     |  
|                                                                                                   |  |                                                |         |   |                      
|Purchases of property, plant and equipment                                                         |  |                                                | (596    | ) |                       |   | (6,403  | )                          |  |   | (3,861       | ) |  |              |        |   |  |   | (10,860 | )
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash used in investing activities of continuing operations                                     |  |                                                | (56,610 | ) |                       |   | (6,247  | )                          |  |   | (3,861       | ) |  |              |        |   |  |   | (66,718 | )
|                                                                                                   |  |                                                |         |   |                      
|Cash Flows from Financing Activities:                                                              |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net borrowings (repayments) under revolving line of credit and other                               |  |                                                | 20,166  |   |                       |   | (326    | )                          |  |   | 5,336        |   |  |              |        |   |  |   | 25,176  |  
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                                | 20,166  |   |                       |   | (326    | )                          |  |   | 5,336        |   |  |              |        |   |  |   | 25,176  |  
|                                                                                                   |  |                                                |         |   |                      
|Effect of exchange rate changes on cash                                                            |  |                                                |        |   |                       |   |        |                            |  |   | (252         | ) |  |              |        |   |  |   | (252    | )
|Cash flows of discontinued operation                                                               |  |                                                |        |   |                       |   | (178    | )                          |  |   | (55          | ) |  |              |        |   |  |   | (233    | )
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net (decrease) increase in cash and cash equivalents                                               |  |                                                | (40,467 | ) |                       |   | (15     | )                          |  |   | 1,022        |   |  |              |        |   |  |   | (39,460 | )
|Cash and cash equivalents at beginning of year                                                     |  |                                                | 40,740  |   |                       |   | 689     |                            |  |   | 21,116       |   |  |              |        |   |  |   | 62,545  |  
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                                              | 273     |   |                       | $ | 674     |                            |  | $ | 22,138       |   |  | $            |        |   |  | $ | 23,085  |  
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  





18



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES



Condensed Consolidating Statement of Cash Flows

(unaudited)



|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the three months Ended March 31, 2004                                             |  | Remy International, Inc. (Parent Company Only) |         |   | Subsidiary Guarantors |   |         | Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash Flows from Operating Activities:                                                              |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                              |  | $                                              | (3,296  | ) |                       | $ | 22,787  |                            |  | $ | 720          |   |  | $            | (23,507 | )(a) |  | $ | (3,296  | )
|                                                                                                   |  |                                                |         |   |                      
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Discontinued operations                                                                            |  |                                                |        |   |                       |   | (276    | )                          |  |   | 720          |   |  |              |        |      |  |   | 444     |  
|Depreciation and amortization                                                                      |  |                                                | 251     |   |                       |   | 2,591   |                            |  |   | 2,551        |   |  |              |        |      |  |   | 5,393   |  
|Non-cash interest expense                                                                          |  |                                                | 1,028   |   |                       |   |        |                            |  |   |             |   |  |              |        |      |  |   | 1,028   |  
|Accretion for redemption of preferred stock                                                        |  |                                                | 8,552   |   |                       |   |        |                            |  |   |             |   |  |              |        |      |  |   | 8,552   |  
|Minority interest and loss from unconsolidated joint ventures, net                                 |  |                                                |        |   |                       |   | 248     |                            |  |   | 754          |   |  |              |        |      |  |   | 1,002   |  
|Equity in earnings of subsidiaries                                                                 |  |                                                | (23,507 | ) |                       |   |        |                            |  |   |             |   |  |              | 23,507  | (a)  |  |   |        |  
|Deferred income taxes                                                                              |  |                                                |        |   |                       |   |        |                            |  |   | 2            |   |  |              |        |      |  |   | 2       |  
|Post retirement benefits other than pensions and accrued pension benefits, net                     |  |                                                | 325     |   |                       |   |        |                            |  |   |             |   |  |              |        |      |  |   | 325     |  
|Restructuring charges                                                                              |  |                                                |        |   |                       |   | 579     |                            |  |   | 234          |   |  |              |        |      |  |   | 813     |  
|Cash payments for restructuring charges                                                            |  |                                                |        |   |                       |   | (6,171  | )                          |  |   | (238         | ) |  |              |        |      |  |   | (6,409  | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges:        |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Accounts receivable                                                                                |  |                                                |        |   |                       |   | (12,973 | )                          |  |   | (6,068       | ) |  |              |        |      |  |   | (19,041 | )
|Inventories                                                                                        |  |                                                |        |   |                       |   | (19,742 | )                          |  |   | 4,261        |   |  |              |        |      |  |   | (15,481 | )
|Accounts payable                                                                                   |  |                                                | (1,881  | ) |                       |   | 38,513  |                            |  |   | (21,153      | ) |  |              |        |      |  |   | 15,479  |  
|Intercompany accounts                                                                              |  |                                                | 10,076  |   |                       |   | (45,585 | )                          |  |   | 35,509       |   |  |              |        |      |  |   |        |  
|Other current assets and liabilities                                                               |  |                                                | 8,349   |   |                       |   | (1,700  | )                          |  |   | (4,581       | ) |  |              |        |      |  |   | 2,068   |  
|Other non-current assets and liabilities, net                                                      |  |                                                | (14,138 | ) |                       |   | 24,954  |                            |  |   | (9,832       | ) |  |              |        |      |  |   | 984     |  
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                                | (14,241 | ) |                       |   | 3,225   |                            |  |   | 2,879        |   |  |              |        |      |  |   | (8,137  | )
|                                                                                                   |  |                                                |         |   |                      
|Cash Flows from Investing Activities:                                                              |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|                                                                                                   |  |                                                |         |   |                      
|Net proceeds on sale of business                                                                   |  |                                                |        |   |                       |   | 108     |                            |  |   |             |   |  |              |        |      |  |   | 108     |  
|                                                                                                   |  |                                                |         |   |                      
|Purchases of property, plant and equipment                                                         |  |                                                | (70     | ) |                       |   | (2,958  | )                          |  |   | (2,887       | ) |  |              |        |      |  |   | (5,915  | )
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash used in investing activities of continuing operations                                     |  |                                                | (70     | ) |                       |   | (2,850  | )                          |  |   | (2,887       | ) |  |              |        |      |  |   | (5,807  | )
|                                                                                                   |  |                                                |         |   |                      
|Cash Flows from Financing Activities:                                                              |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net borrowings (repayments) under revolving line of credit and other                               |  |                                                | 14,311  |   |                       |   | (274    | )                          |  |   | (2,359       | ) |  |              |        |      |  |   | 11,678  |  
|Distributions to minority interests                                                                |  |                                                |        |   |                       |   |        |                            |  |   | (1,010       | ) |  |              |        |      |  |   | (1,010  | )
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                                | 14,311  |   |                       |   | (274    | )                          |  |   | (3,369       | ) |  |              |        |      |  |   | 10,668  |  
|                                                                                                   |  |                                                |         |   |                      
|Effect of exchange rate changes on cash                                                            |  |                                                |        |   |                       |   |        |                            |  |   | 244          |   |  |              |        |      |  |   | 244     |  
|Cash flows of discontinued operation                                                               |  |                                                |        |   |                       |   | (277    | )                          |  |   | (773         | ) |  |              |        |      |  |   | (1,050  | )
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Net decrease in cash and cash equivalents                                                          |  |                                                |        |   |                       |   | (176    | )                          |  |   | (3,906       | ) |  |              |        |      |  |   | (4,082  | )
|Cash and cash equivalents at beginning of year                                                     |  |                                                | 1       |   |                       |   | 249     |                            |  |   | 20,957       |   |  |              |        |      |  |   | 21,207  |  
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                                              | 1       |   |                       | $ | 73      |                            |  | $ | 17,051       |   |  | $            |        |      |  | $ | 17,125  |  
|                                                                                                   |  |                                                |         |   |                       |   |         |                            |  |   |              |   |  |              |         |      |  |   |         |  

---

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





19



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|        |  |                                           |  | 
|------- |  | ----------------------------------------- |  | 
|Item 2. |  | REMY INTERNATIONAL, INC. AND SUBSIDIARIES |  | 



MANAGEMENTS
DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the three month periods ended March 31, 2005 and 2004



Introduction



The following managements discussion and analysis of financial condition and results of operations should be read in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 2004, including the financial statements and accompanying notes.



On March 18, 2005, we acquired substantially all of the assets and assumed certain liabilities of Unit Parts Company, which we refer to as UPC (see Note 3
to our financial statements in Item 1). The assets and liabilities of UPC are included in our condensed consolidated balance sheet at March 31, 2005. The operating results of UPC for the period March 18 through March 31, 2005 are included in our
condensed consolidated statements of operations and cash flows for the quarter ended March 31, 2005 and are reflected in the Electrical aftermarket discussion of net sales and gross profit below. The operating results of UPC did not have a material
effect on our results of operations and cash flows in the first quarter of 2005.



Results of operations and cash flows for 2005 and 2004 also reflect the classification of our remanufactured transmission business, retail gas engine business and contract remanufacturing gas engine business as
discontinued operations.



Results of Operations



Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004



|                       |  |      |       |      |   |                      |  |   |         |   |  |      |   
|---------------------- |  | ---- | ----- | ---- | - | -------------------- |  | - | ------- | - |  | ---- | --
|Product Categories     |  | 2005 |       | 2004 |   | Increase/ (Decrease) |  |   | %Change |  
|Automotive OEM         |  | $    | 72.6  |      | $ | 78.9                 |  | $ | (6.3    | ) |  | (8.0 | )%
|Heavy duty OEM         |  |      | 51.1  |      |   | 43.1                 |  |   | 8.0     |   |  | 18.6 |   
|Electrical aftermarket |  |      | 107.6 |      |   | 110.7                |  |   | (3.1    | ) |  | (2.8 | ) 
|Powertrain             |  |      | 34.7  |      |   | 22.9                 |  |   | 11.8    |   |  | 51.5 |   
|Core services          |  |      | 15.6  |      |   | 13.4                 |  |   | 2.2     |   |  | 16.4 |   
|                       |  |      |       |      |   |                      |  |   |         |   |  |      |   
|Total Net Sales        |  | $    | 281.6 |      | $ | 269.0                |  | $ | 12.6    |   |  | 4.7  | % 
|                       |  |      |       |      |   |                      |  |   |         |   |  |      |   



Net Sales



Net sales to Automotive Original Equipment Manufacturers, which we refer to
as OEMs, declined due primarily to lower customer demand as a result of reduced production levels, particularly in North America. Heavy-duty OEM sales increased due to strong demand from Class 5  8 truck customers. Year over year OEM sales
were also favorably impacted by the weak U.S. dollar. Electrical aftermarket sales were down due to a continuation of the soft market conditions experienced in 2004 and the loss of a U.S. retail customer in mid 2004, partially offset by the
inclusion of sales from UPC ($5.0 million). Powertrain sales increased due to higher diesel engine, parts and locomotive product volume. Third party sales in the core services business increased due to general market conditions.



20



---

Gross Profit



Gross profit of $45.4 million in the first quarter of 2005 declined $4.9 million, or 9.8%, compared with the first quarter of 2004, and as a percentage of
net sales was 16.1% in 2005 compared with 18.7% in 2004. Automotive OEM gross profit declined $10.9 million due to lower sales volume, higher material and fuel costs, price reductions and costs associated with new alternator product lines.
Heavy-duty OEM gross profit increased $5.5 million primarily due to higher sales volume, partially offset by higher material and fuel costs. Electrical aftermarket gross profit declined $1.9 million primarily due to the decrease in sales volume.
Powertrain gross profit increased $2.6 million as a result of higher sales and continued cost improvements. Gross profit on core services decreased $0.2 million due to unfavorable product mix, largely offset by higher sales volume.



Selling, General and Administrative Expenses



Selling, general and administrative, which we refer to as SG&A,
expenses of $31.3 million in the first quarter of 2005 increased $4.3 million, or 16.1%, from $26.9 million in the first quarter of 2004. As a percentage of net sales, SG&A expenses were 11.1% in the first quarter of 2005 compared with 10.0% in
the first quarter of 2004. The year over year increase in SG&A expenses reflects higher expenditures on product engineering, systems and marketing expenses, in part required to support future business including new hybrid technology and
expansion in China.



Restructuring (Credit) Charge



A restructuring credit of $0.8 million in the first quarter of 2005
consisted of a $1.1 million credit for the reversal of accrued maintenance expenses reflecting our utilization of a previously idled Anderson, Indiana facility and the renegotiation of other maintenance agreements. Also, additional charges totaling
$0.3 million were recorded relative to the closure of our starter and alternator manufacturing operations in Anderson, Indiana in 2003 and the consolidation of operations in Europe.



In the first quarter of 2004, we recorded a restructuring charge of $0.8 million relative to (i) the closure of our starter
and alternator manufacturing operations in Anderson, Indiana; (ii) the closure of our electrical aftermarket remanufacturing and distribution facilities in Reed City, Michigan; (iii) the consolidation of our alternator and starter remanufacturing
operations in Mississippi; (iv) the consolidation of certain operations in Europe; and (v) the closure and consolidation of certain manufacturing and distribution facilities at our operations in Mexico.



Operating Income



Operating income of $14.9 million in the first quarter of 2005 compares with operating income of $22.5 million in the first
quarter of 2004 and reflects the net sales, gross profit, SG&A expense and restructuring charge factors discussed above.



Interest Expense



Interest expense of $15.4 million in the first quarter of 2005 increased $0.8 million from $14.6 million in the first quarter of 2004. This increase
reflected $1.6 million of interest expense charged to continuing operations in 2005 that was charged to discontinued operations in 2004 and $2.0 million of interest on our Second Priority Senior Secured Floating Rate Notes issued in the second
quarter of



21



---

2004, offset by a $1.9 million decrease in interest on our senior credit facility which was paid down in connection with
the sale of Williams Technologies, Inc., which we refer to as Williams, and JAX Reman, L.L.C., which we refer to as JAX, in the third quarter of 2004 and a decrease in deferred amortization expense and other items totaling $0.9 million.



Income Taxes



Income tax expense of $1.4 million in the first quarter of 2005 consisted of provisions for U.S. federal alternative minimum
tax of $0.02 million, domestic state and local taxes of $0.13 million and taxes in various foreign jurisdictions of $1.2 million. Income tax expense of $1.2 million in the first quarter of 2004 consisted primarily of taxes in various foreign
jurisdictions. We established a valuation allowance for domestic U.S. deferred tax assets in 2003, which resulted in no domestic U.S. tax provision on first quarter 2005 domestic loss. Accordingly, we recorded a valuation allowance related to the
domestic net operating loss generated in the three months ended March 31, 2005.



Minority Interest



Minority interest in income
of subsidiaries of $1.1 million in the first quarter of 2005 consisted of minority shareholders interests in the earnings of our joint venture with International Truck and Engine Corporation and earnings of Hubei Delphi Automotive Generators
Company, Ltd., which we refer to as Hubei. Minority interest in the first quarter of 2004 of $0.5 million included minority shareholders interests in the earnings of our joint venture with International Truck and Engine Corporation and
earnings of Hubei and Remy Mexico, S. de R.L. de C.V., which we refer to as RM. We purchased the remaining minority shareholders interest in RM effective in the second quarter of 2004 after finalization of the Mexico arbitration.



Loss (Income) From Unconsolidated Joint Ventures



The income from unconsolidated joint ventures of $0.1 million in the first
quarter of 2005 consisted of our share of income recorded by Sahney Paris Rhone Ltd., which we refer to as SPR. The loss from unconsolidated joint ventures of $0.5 million in the first quarter of 2004 consisted of our share of losses recorded by
Hitachi Remy Automotive GmbH, which we refer to as Hitachi, and iPower Technologies, L.L.C., which we refer to as iPower, partially offset by income recorded by SPR. Our share of losses for Hitachi and iPower recorded in 2004 reduced the carrying
value of these investments to zero. Accordingly, we discontinued recognition of losses related to these joint ventures effective in the fourth quarter of 2004. The business operations of iPower were assumed by our joint venture partner in 2004.



Discontinued Operations



The loss from discontinued operations of $0.2 million and $0.6 million in
the first quarter of 2005 and 2004, respectively, consisted of losses recorded by our remanufactured transmission business in both years and, in 2004, expenses recorded by our contract and retail gas engine businesses. We recorded an additional gain
of $0.2 million in 2005 and $0.1 million in 2004 relative to the sale of Tractech, Inc. and Kraftube, Inc. in 2003.



22



---

Liquidity and Capital Resources



Our short-term liquidity needs include required debt service (including capital lease payments), day-to-day operating
expenses, working capital requirements, the funding of capital expenditures, acquisition payments (primarily related to machinery and equipment) for previously completed business acquisitions and restructuring actions. Long-term liquidity
requirements consist primarily of principal payments of long-term debt and payments for contingent earn out arrangements relative to the acquisition of UPC. These contingent earn out payments are based on incremental financial performance objectives
above the current performance of the combined electrical aftermarket business and are to be paid over a four-year period. The amount of contingent consideration, if any, is not currently determinable. Our contractual obligations are provided in the
table under the section Contractual Obligations, Contingent Liabilities and Commitments appearing below. Our principal payments on long-term capital lease obligations are presented in Note 9 to our consolidated financial statements under
Item 8 of our 2004 Form 10-K.



Our principal sources of cash to
fund our short-term liquidity needs consist of cash generated by operations and borrowings under our senior credit facility. The senior credit facility is collateralized by liens on substantially all of our assets and substantially all of the assets
of our domestic and certain of our foreign subsidiaries and by the capital stock of such subsidiaries. In connection with the acquisition of UPC on March 18, 2005, we entered into Amendment No. 2 to the Second Amended and Restated Loan and Security
Agreement, which we refer to as the Amendment. Among other matters, the Amendment increases the maximum draw available (subject to a borrowing base calculation) under our senior credit facility from $120.0 million to $145.0 million, eliminates the
Earnings Before Interest, Taxes, Depreciation and Amortization, which we refer to as EBITDA, and Fixed Charge covenants from the facility and extends the maturity of the facility to June 30, 2008 with provisions for annual extensions thereafter. At
March 31, 2005, the rate for the revolving credit facility was 4.85%, borrowings were $20.1 million, and letters of credit totaled $7.2 million. Based on the collateral supporting the senior credit facility at March 31, 2005, $117.7 million was
available, net of letters of credit.



We participate in two
programs that accelerate the collection of accounts receivable. Under one program, we sell the accounts of certain of our aftermarket customers to banks, on a non-recourse basis, at a discount. At March 31, 2005, the amount of receivables under this
program was approximately $32.2 million. The second program is an early pay plan under which a third party acts as paying agent for one of our customers. The accounts are paid, at a discounted rate, in five to seven days after shipment instead of
the regular terms. This program is also without recourse. The amount covered by this plan at March 31, 2005 was approximately $10.1 million.



We believe that cash generated from operations, together with the amounts available under the senior credit facility and other borrowings, will be
adequate to meet our debt service, capital expenditure, prior acquisition payments, restructuring and working capital requirements for at least the next twelve months, although no assurance can be given in this regard. We also continue to explore
additional financing options, both in the U.S. and abroad, in an effort to further enhance liquidity.



Cash provided by operating activities of continuing operations of $2.6 million in the first quarter of 2005 reflected a $2.0 million decrease in net
working capital (consisting of accounts receivable, inventory, accounts payable and other current assets and liabilities) from year end 2004 and cash restructuring payments of $0.5 million. Accounts receivable increased $11.2 million in the first
quarter



23



---

of 2005 due primarily to stronger first quarter heavy duty OEM, diesel engine and locomotive shipments, partially offset
by an increase in accelerated collections under the receivables programs discussed above. Inventories increased $11.8 million in the first quarter of 2005 due primarily to builds in support of anticipated higher Electrical Aftermarket sales in the
second and third quarters. The $18.0 million increase in accounts payable reflected timing of vendor payments. The net decrease in other current assets and liabilities of $7.0 million primarily reflected timing of interest payments. Cash
restructuring payments of $0.5 million in the first quarter of 2005 consisted of $0.3 million of employee termination benefits relative to the 2003, 2004 and 2005 restructuring actions and $0.2 million of other items. All other non-cash and
reconciling items totaled $1.1 million.



Cash used in operating
activities of continuing operations in the first quarter of 2004 of $8.1 million reflected a $17.0 million increase in net working capital from year end 2003 and cash restructuring payments of $6.4 million. Accounts receivable increased $19.0
million due primarily to strong first quarter shipments, partially offset by an increase in collections under the receivables programs. Inventories increased $15.5 million in the first quarter of 2004 due primarily to increases in support of
anticipated higher future retail aftermarket and heavy-duty OEM sales. Accounts payable increased $15.5 million due primarily to higher productions levels and timing of vendor payments. Cash restructuring payments of $6.4 million consisted of $4.7
million and $1.1 million of employee termination benefits relative to the 2001 and 2003 restructuring actions, respectively, and $0.6 million of other items. All other non-cash and reconciling items totaled $15.3 million.



Cash used in investing activities of continuing operations of $66.7 million
in the first quarter of 2005 compares with cash used of $5.8 million in the first quarter of 2004. Acquisition payments in the first quarter of 2005 consisted entirely of payments for the acquisition of UPC, including costs related thereto. Cash
proceeds on the sale of Tractech and Kraftube of $0.2 million and $0.1 million were recorded in the first quarter of 2005 and 2004, respectively. Capital expenditures in both 2005 and 2004 were primarily for production, engineering and distribution
equipment and include investments associated with the launch of new products and establishment of new technology centers.



Cash provided by financing activities of continuing operations of $25.2 million and $10.7 million in the first quarter of 2005 and 2004, respectively,
consisted primarily of borrowings under our senior credit facility. Also during the first quarter of 2004, $1.0 million in cash dividends were paid to the minority shareholders of Hubei.



Contingencies



We are a party to various legal actions and administrative proceedings and subject to various claims arising in the ordinary course of business, including
those relating to commercial transactions, product liability, safety, health, taxes, environmental and other matters. For a description of certain of our legal proceedings, see Note 11 to the Condensed Consolidated Financial Statements in Item 1 of
Part I.



24



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Contractual Obligations, Contingent Liabilities and Commitments



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



|                                       |  |                        |     |                |   |    |            |  |            |     |           |   |     |  |   |    
|-------------------------------------- |  | ---------------------- | --- | -------------- | - | -- | ---------- |  | ---------- | --- | --------- | - | --- |  | - | ---
|                                       |  | Payments Due by Period
|Contractual Obligations                |  | Total                  |     | Balanceof 2005 |   |    | 2006 -2008 |  | 2009 -2010 |     | After2010
|Long-Term Debt(1)                      |  | $                      | 643 |                | $ | 19 | (2)        |  | $          | 182 |           | $ | 292 |  | $ | 150
|Customer Obligations(3)                |  |                        | 68  |                |   | 21 |            |  |            | 29  |           |   | 11  |  |   | 7  
|Capital Lease Obligations              |  |                        | 16  |                |   | 1  |            |  |            | 7   |           |   | 5   |  |   | 3  
|Pension Funding(4)                     |  |                        | 4   |                |   | 4  |            |  |            |    |           |   |    |  |   |   
|Other Post Retirement Benefits Funding |  |                        | 10  |                |   |   |            |  |            | 3   |           |   | 2   |  |   | 5  
|Operating Leases                       |  |                        | 61  |                |   | 8  |            |  |            | 27  |           |   | 13  |  |   | 13 
|Acquisition Payments(5)                |  |                        | 6   |                |   | 4  |            |  |            | 2   |           |   |    |  |   |   
|Employee Termination Benefits          |  |                        | 10  |                |   | 5  |            |  |            | 5   |           |   |    |  |   |   
|Other                                  |  |                        | 5   |                |   | 1  |            |  |            | 3   |           |   |    |  |   | 1  
|                                       |  |                        |     |                |   |    |            |  |            |     |           |   |     |  |   |    
|Total Contractual Cash Obligations     |  | $                      | 823 |                | $ | 63 |            |  | $          | 258 |           | $ | 323 |  | $ | 179
|                                       |  |                        |     |                |   |    |            |  |            |     |           |   |     |  |   |    

---

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

|(2) | Includes $3 million related to foreign revolving credit agreements which will be renewed in 2005 with maturity dates of one year.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(3) | Reported at present value; $61 million relates to the UPC acquisition.
|--- | ----------------------------------------------------------------------

|(4) | Amounts beyond 2005 are not currently estimable.
|--- | ------------------------------------------------

|(5) | Payments in connection with the acquisition of Delphi Corporations light vehicle alternator business, including purchasing its machinery and equipment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the contractual obligations
disclosed above, we have a variety of other contractual agreements related to the procurement of materials and other commitments. With respect to these agreements, we are not subject to any contracts that commit us to significant non-cancelable
commitments. With respect to agreements related to the procurement of inventory used in our manufacturing and remanufacturing processes, we had approximately $70 million to $80 million of open purchase orders at March 31, 2005.



Seasonality



Our business is seasonal, as our major OEM customers historically have one to two week shutdowns of operations during July
and December. Our sales results in the third and fourth quarters reflect the effects of these shutdowns. Our working capital requirements also are affected by seasonality, as we build inventory for the summer sales months in the aftermarket.
Typically our working capital requirements are highest from April through August and the change from the highest month to the lowest month (typically December) for accounts receivable, inventory and accounts payable has averaged approximately $40.0
million over the past three years, excluding UPC.



Foreign Operations



Approximately 26% of our net sales in the three months
ending March 31, 2005 were derived from net sales made in foreign countries. We also have manufacturing and other operations located in certain foreign countries. Because of these foreign sales and operations, our business is subject to the risks of
doing business abroad, including currency exchange rate fluctuations, limits on repatriation of funds, transportation and delivery risks, compliance with foreign laws and other economic and political uncertainties.



25



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Forward-Looking Statements



From time to time, we make oral and written statements that may constitute forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995, which we refer to as the Act, or by the Securities and Exchange Commission, which we refer to as the SEC, in its rules, regulations and releases. We desire to take advantage of the safe
harbor provisions in the Act for forward-looking statements made from time to time, including, but not limited to, the forward-looking statements relating to our future performance contained in this Form 10-Q, our Annual Report on Form 10-K
for the year ended December 31, 2004, and in other filings with the SEC. Any statements set forth in writing or orally by us, other than statements of current or historical fact, may constitute forward-looking statements. These statements relate to
our future plans, objectives, expectations and intentions and may be identified by words like anticipate, believe, continue, estimate, expect, intend, may,
plan, will and similar expressions. We caution readers that forward-looking statements involve risks, uncertainties, and other factors that may cause our actual results and performance to differ materially from any future
results or performance expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, among others, the following:



| |  |  | uncertainty of future financial results;
| | - |  | ----------------------------------------



| |  |  | acquisitions;
| | - |  | -------------



| |  |  | additional financing requirements;
| | - |  | ----------------------------------



| |  |  | development of new products and services;
| | - |  | -----------------------------------------



| |  |  | the effect of competitive products or pricing;
| | - |  | ----------------------------------------------



| |  |  | costs and difficulties related to integrations of acquired businesses;
| | - |  | ----------------------------------------------------------------------



| |  |  | pending and future legal proceedings, including environmental regulatory matters;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | reliance upon or loss of a major customer;
| | - |  | ------------------------------------------



| |  |  | international operating and supply risks;
| | - |  | -----------------------------------------



| |  |  | weather conditions, including their impact on demand for our aftermarket products;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | raw material and energy costs, including the cost of steel and availability;
| | - |  | ----------------------------------------------------------------------------



| |  |  | foreign exchange rate changes;
| | - |  | ------------------------------



| |  |  | transportation and related fuel costs;
| | - |  | --------------------------------------



| |  |  | effectiveness of restructuring and cost saving initiatives;
| | - |  | -----------------------------------------------------------



| |  |  | labor relations;
| | - |  | ----------------



| |  |  | the ability to obtain and maintain adequate prices for our products;
| | - |  | --------------------------------------------------------------------



| |  |  | our substantial indebtedness and limitations under debt agreements;
| | - |  | -------------------------------------------------------------------



| |  |  | costs for pension and post retirement benefit plans; and
| | - |  | --------------------------------------------------------



| |  |  | the effect of economic conditions and other uncertainties, including the current conditions in the Light-Duty OEM Market.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



Due to these uncertainties, we cannot assure readers that any forward-looking
statements will prove to have been correct. Our forward-looking statements speak only as of the date made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.



26



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Factors that May Affect Future Results



We believe that results for the remainder of 2005 will continue to be negatively impacted by year over year softness in the
North American car and truck market, pricing pressures, higher commodity and fuel costs, adverse currency fluctuations and investments in engineering and systems.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



As of March 31, 2005, there have been no material changes in our market risk exposure as described in Item 7A contained in our Annual Report on Form 10-K
for the year ended December 31, 2004.



Item 4. Controls and Procedures



| | (a) | The Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of
the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this report. Based on this evaluation,
the Companys principal executive officer and principal financial officer concluded that the Companys disclosure controls and procedures are effective in timely alerting it to material information required to be included in the
Companys periodic SEC reports.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | In addition, the Company reviewed its internal controls, and, other than as described below, there have been no significant changes during the quarter ended March 31, 2005 that have
materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. The Company is currently implementing a global Enterprise Resource Planning system. In the quarter ended March 31, 2005
the Company began the implementation at its facilities in Mexico.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



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PART II OTHER INFORMATION



Item 1. Legal Proceedings



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



UAW Litigation



On April 16, 2003, the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America
(UAW) and its Local Union 662 filed suit against the Company and Remy, Inc. (RI), in Federal District Court in the Southern District of Indiana, Indianapolis Division. The lawsuit was filed under Section 301 of the Labor
Management Relations Act, 29 U.S.C. Sec. 185, seeking enforcement of an expired Supplemental Unemployment Benefits plan (SUB plan). The plaintiffs allege that the SUB plan provides supplemental unemployment benefits for 52 weeks and
separation pay in an amount exceeding $20 million for employees who were terminated as a result of the closure of RIs Anderson, Indiana production facilities at the end of March 2003. The plaintiffs also seek to enforce terminated provisions
of a health care program, which the plaintiffs allege provides the terminated employees with 25 months of continued hospital, surgical, medical, hearing aid, prescription drug, mental health, substance abuse and vision insurance coverage. The
terminated employees were represented by the UAW and its Local Union 662 under various agreements, which expired on March 31, 2003. The lawsuit was filed shortly after the UAW membership failed to ratify RIs last, best and final offer for a
Shutdown Agreement. The UAW filed an amended complaint on July 8, 2003 to which the Company filed an answer on July 24, 2003. The trial was previously expected to begin in January 2005, however, that date was continued and has been reset for October
10, 2005. The Company denies the material allegations of the complaint, denies any wrongdoing and intends to defend itself vigorously, but is unable to predict whether the proceedings will have a material adverse effect on the Company.



Prison Labor Matter



In January 2004, a class action on behalf of all prisoners who worked in a South Carolina Department of Corrections
(SCDC) Services Training Program at Lieber Correctional Institute was brought against the SCDC and our former subsidiary Williams Technologies, Inc. (Williams), which was sold to Caterpillar, Inc., in September 2004. The
Plaintiffs claim that (a) they should have been paid industry prevailing wage under a South Carolina prison industries authorization statute, (b) the SCDC and Williams violated the Payment of Wages Act and (c) the SCDC and Williams committed a tort
under the South Carolina Tort Claims Act. Under the terms of the sale, the Company retained liability and responsibility for this claim. The Circuit Court for Dorchester County granted summary judgment to the Company on April 21, 2005, and
decertified the Plaintiff class. Plaintiffs time to appeal or ask for reconsideration has not yet run. The Company continues to deny the material allegations of the complaint and any wrongdoing and intends to defend itself vigorously. However,
at this time, the Company is unable to predict whether the proceedings will have a material adverse effect on the Company.



28



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Remy Reman Facilities



The Remy Reman facilities in Mississippi identified certain possible violations of state air laws and notified the state environmental agency under the
state voluntary audit disclosure rules. The MDEQ issued Notices of Violation regarding alleged violations of state air laws by two of the Remy Reman facilities in Mississippi. Remy Reman resolved this liability through payment in January 2005 of
approximately $0.2 million.



Franklin Power Products Facility



In September 2000, one of Franklin Power Products,
Inc.s Indiana facilities received a Finding of Violation and Order for Compliance from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. has installed wastewater treatment
equipment and is in compliance with the terms of the Order and has eliminated the discharge. In July 2004, the Company and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on behalf of the EPA, which tolled
the statute of limitations on the EPAs potential claim for penalties. Since that time, we have been cooperating with the EPA by providing additional information and have entered into settlement negotiations with the EPA and the Department of
Justice.



29



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Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities



None.



Item 3. Defaults Upon Senior Securities



Not applicable.



Item 4. Submission of Matters to a Vote of Security Holders



None.



Item 5. Other Information



None.



Item 6. Exhibits



|     |  |                                                                                                                                                                                                                                                                             
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Asset Purchase Agreement, dated as of February 25, 2005, by and among the Company, UPC Acquisition Corporation, the Sellers Representative and each of the other signatories
thereto.                                                                                       
|     | 
|10.2 |  | Amendment No. 1 to the Asset Purchase Agreement, dated as of March 16, 2005, by and among the Company, UPC Acquisition Corporation and Jack Vollbrecht, as Sellers
Representative.                                                                                          
|     | 
|10.3 |  | Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement, dated as of March 16, 2005, by and among the Company, certain subsidiaries of the Company, Congress Financial
Corporation (Central), as agent, and the financial institutions party thereto.
|     | 
|31.1 |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                      
|     | 
|31.2 |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                        
|     | 
|32.1 |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                       
|     | 
|32.2 |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                         



30



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                   |  |                          |  |                                        
|------------------ |  | ------------------------ |  | ---------------------------------------
|                   |  | REMY INTERNATIONAL, INC.
|                   |  | (Registrant)            
|                   |  |                         
|Date: May 16, 2005 |  | By:                      |  | /s/ Rajesh K. Shah                     
|                   |  |                          |  | Rajesh K. Shah                         
|                   |  |                          |  | Executive Vice President and           
|                   |  |                          |  | Chief Financial Officer                
|                   |  |                         
|Date: May 16, 2005 |  | By:                      |  | /s/ Amitabh Rai                        
|                   |  |                          |  | Amitabh Rai                            
|                   |  |                          |  | Vice President and Corporate Controller
|                   |  |                          |  | Chief Accounting Officer               



31



---

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                 
|10.1        |  | Asset Purchase Agreement, dated as of February 25, 2005, by and among the Company, UPC Acquisition Corporation, the Sellers Representative and each of the other signatories
thereto.                                                                                       
|            | 
|10.2        |  | Amendment No. 1 to the Asset Purchase Agreement, dated as of March 16, 2005, by and among the Company, UPC Acquisition Corporation and Jack Vollbrecht, as Sellers
Representative.                                                                                          
|            | 
|10.3        |  | Amendment No. 2 to the Second Amended and Restated Loan and Security Agreement, dated as of March 16, 2005, by and among the Company, certain subsidiaries of the Company, Congress Financial
Corporation (Central), as agent, and the financial institutions party thereto.
|            | 
|31.1        |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                      
|            | 
|31.2        |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                        
|            | 
|32.1        |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                       
|            | 
|32.2        |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                         



32