##### Table of Contents

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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 SEPTEMBER 30, 2006

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

LARGE ACCELERATED FILER ̈ACCELERATED FILER ̈NON-ACCELERATED
FILER  x

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (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 September 30, 2006
|Common Stock  Class B |  | 2,503,024.48                        



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##### Table of Contents

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 |  | 27  
|              |  |                                                                                      
|Item 3        |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 40  
|              |  |                                                                                      
|Item 4        |  | Controls and Procedures                                                               |  | 40  
|              |  |                                                                                      
|PART II       |  | OTHER INFORMATION                                                                     |  |     
|              |  |                                                                                      
|Item 1        |  | Legal Proceedings                                                                     |  | 41  
|              |  |                                                                                      
|Item 1A       |  | Risk Factors                                                                          |  | 43  
|              |  |                                                                                      
|Item 2        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 43  
|              |  |                                                                                      
|Item 3        |  | Defaults Upon Senior Securities                                                       |  | 43  
|              |  |                                                                                      
|Item 4        |  | Submission of Matters to a Vote of Security Holders                                   |  | 43  
|              |  |                                                                                      
|Item 5        |  | Other Information                                                                     |  | 43  
|              |  |                                                                                      
|Item 6        |  | Exhibits                                                                              |  | 43  
|              | 
|SIGNATURES    |  | 44                                                                                   
|              | 
|EXHIBIT INDEX |  | 45                                                                                   



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##### Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Remy International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets



|                                             |  |                   |          |   |                   |   |          |  
|-------------------------------------------- |  | ----------------- | -------- | - | ----------------- | - | -------- | -
|IN THOUSANDS,At                              |  | September 30,2006 |          |   | December 31, 2005 |  
|                                             |  | (unaudited)       |          |   |                   |  
|Assets:                                      |  |                   |          |   |                   |   |          |  
|Current assets:                              |  |                   |          |   |                   |   |          |  
|Cash and cash equivalents                    |  | $                 | 27,154   |   |                   | $ | 20,022   |  
|Trade accounts receivable, net               |  |                   | 201,851  |   |                   |   | 184,818  |  
|Other receivables                            |  |                   | 24,379   |   |                   |   | 13,537   |  
|Inventories                                  |  |                   | 280,109  |   |                   |   | 261,821  |  
|Deferred income taxes                        |  |                   | 1,793    |   |                   |   | 1,155    |  
|Assets of discontinued operations            |  |                   | 4        |   |                   |   | 16       |  
|Other current assets                         |  |                   | 9,610    |   |                   |   | 5,784    |  
|                                             |  |                   |          |   |                   |   |          |  
|Total current assets                         |  |                   | 544,900  |   |                   |   | 487,153  |  
|                                             |  |                  
|Property, plant and equipment                |  |                   | 380,662  |   |                   |   | 364,841  |  
|Less accumulated depreciation                |  |                   | (209,525 | ) |                   |   | (190,310 | )
|                                             |  |                   |          |   |                   |   |          |  
|Property, plant and equipment, net           |  |                   | 171,137  |   |                   |   | 174,531  |  
|                                             |  |                  
|Deferred financing costs, net                |  |                   | 10,762   |   |                   |   | 13,962   |  
|Goodwill, net                                |  |                   | 156,650  |   |                   |   | 156,650  |  
|Investments in unconsolidated subsidiaries   |  |                   | 2,274    |   |                   |   | 5,917    |  
|Other assets                                 |  |                   | 34,013   |   |                   |   | 32,962   |  
|                                             |  |                   |          |   |                   |   |          |  
|Total assets                                 |  | $                 | 919,736  |   |                   | $ | 871,175  |  
|                                             |  |                   |          |   |                   |   |          |  
|Liabilities and Stockholders Deficit:       |  |                   |          |   |                   |   |          |  
|Current liabilities:                         |  |                   |          |   |                   |   |          |  
|Accounts payable                             |  | $                 | 231,531  |   |                   | $ | 194,123  |  
|Accrued interest                             |  |                   | 21,244   |   |                   |   | 8,906    |  
|Accrued restructuring                        |  |                   | 5,955    |   |                   |   | 12,669   |  
|Liabilities of discontinued operations       |  |                   | 239      |   |                   |   | 443      |  
|Other liabilities and accrued expenses       |  |                   | 149,699  |   |                   |   | 114,824  |  
|Current maturities of long-term debt         |  |                   | 28,335   |   |                   |   | 27,501   |  
|                                             |  |                   |          |   |                   |   |          |  
|Total current liabilities                    |  |                   | 437,003  |   |                   |   | 358,466  |  
|                                             |  |                  
|Long-term debt, net of current portion       |  |                   | 723,729  |   |                   |   | 714,181  |  
|Post-retirement benefits other than pensions |  |                   | 16,408   |   |                   |   | 15,850   |  
|Accrued pension benefits                     |  |                   | 14,746   |   |                   |   | 13,140   |  
|Accrued restructuring                        |  |                   | 1,054    |   |                   |   | 481      |  
|Deferred income taxes                        |  |                   | 11,731   |   |                   |   | 10,390   |  
|Other non-current liabilities                |  |                   | 46,456   |   |                   |   | 51,420   |  
|Commitments and contingencies                |  |                   |          |   |                   |   |          |  
|Minority interest                            |  |                   | 14,521   |   |                   |   | 11,558   |  
|                                             |  |                  
|Stockholders deficit:                       |  |                   |          |   |                   |   |          |  
|Common stock:                                |  |                   |          |   |                   |   |          |  
|Class B shares                               |  |                   | 3        |   |                   |   | 3        |  
|Paid-in capital                              |  |                   | 334,336  |   |                   |   | 334,336  |  
|Retained deficit                             |  |                   | (676,956 | ) |                   |   | (628,120 | )
|Accumulated other comprehensive loss         |  |                   | (3,295   | ) |                   |   | (10,530  | )
|                                             |  |                   |          |   |                   |   |          |  
|Total stockholders deficit                  |  |                   | (345,912 | ) |                   |   | (304,311 | )
|                                             |  |                   |          |   |                   |   |          |  
|Total liabilities and stockholders deficit  |  | $                 | 919,736  |   |                   | $ | 871,175  |  
|                                             |  |                   |          |   |                   |   |          |  

See notes to the condensed consolidated financial statements.



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##### Table of Contents

Remy International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------ | ------- | - | ----------- | - | ------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                                                                                                   |  | Three Months |         |   | Nine Months |  
|IN THOUSANDS,For the three & nine months ended
September 30,                                                       |  | 2006         |         |   | 2005        |   |         | 2006 |  |   | 2005      |  
|Net sales                                                                                                          |  | $            | 354,738 |   |             | $ | 315,963 |      |  | $ | 1,078,506 |   |  | $ | 909,872 |  
|Cost of goods sold                                                                                                 |  |              | 324,597 |   |             |   | 271,470 |      |  |   | 948,579   |   |  |   | 789,510 |  
|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|Gross profit                                                                                                       |  |              | 30,141  |   |             |   | 44,493  |      |  |   | 129,927   |   |  |   | 120,362 |  
|                                                                                                                   |  |              |         |  
|Selling, general and administrative expenses                                                                       |  |              | 30,593  |   |             |   | 40,938  |      |  |   | 97,924    |   |  |   | 104,531 |  
|Restructuring charges                                                                                              |  |              | 2,511   |   |             |   | 2,095   |      |  |   | 6,405     |   |  |   | 2,595   |  
|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|Operating (loss) income                                                                                            |  |              | (2,963  | ) |             |   | 1,460   |      |  |   | 25,598    |   |  |   | 13,236  |  
|                                                                                                                   |  |              |         |  
|Interest expense                                                                                                   |  |              | 21,501  |   |             |   | 18,025  |      |  |   | 62,869    |   |  |   | 50,912  |  
|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|Loss from continuing operations before income taxes, minority interest and income from unconsolidated subsidiaries |  |              | (24,464 | ) |             |   | (16,565 | )    |  |   | (37,271   | ) |  |   | (37,676 | )
|                                                                                                                   |  |              |         |  
|Income tax expense                                                                                                 |  |              | 1,030   |   |             |   | 10,799  |      |  |   | 4,352     |   |  |   | 12,370  |  
|Minority interest                                                                                                  |  |              | 1,248   |   |             |   | 563     |      |  |   | 3,850     |   |  |   | 2,681   |  
|Loss (income) from unconsolidated subsidiaries                                                                     |  |              | 3,777   |   |             |   | (32     | )    |  |   | 3,641     |   |  |   | (163    | )
|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|Net loss from continuing operations                                                                                |  |              | (30,519 | ) |             |   | (27,895 | )    |  |   | (49,114   | ) |  |   | (52,564 | )
|                                                                                                                   |  |              |         |  
|Discontinued operations:                                                                                           |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|Loss from discontinued operations, net of tax                                                                      |  |              | (29     | ) |             |   | (190    | )    |  |   | (45       | ) |  |   | (484    | )
|Gain on disposal of discontinued operations, net of tax                                                            |  |              | 108     |   |             |   | 107     |      |  |   | 323       |   |  |   | 786     |  
|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|Net income (loss) from discontinued operations, net of tax                                                         |  |              | 79      |   |             |   | (83     | )    |  |   | 278       |   |  |   | 302     |  
|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  
|Net loss attributable to common stockholders                                                                       |  | $            | (30,440 | ) |             | $ | (27,978 | )    |  | $ | (48,836   | ) |  | $ | (52,262 | )
|                                                                                                                   |  |              |         |   |             |   |         |      |  |   |           |   |  |   |         |  

See notes to the condensed consolidated financial statements.



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##### Table of Contents

Remy International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                            |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|IN THOUSANDS,For the nine months ended
September 30,                                        |  | 2006 |         |   | 2005 |  
|Cash Flows from Operating Activities:                                                       |  |      |         |   |      |   |         |  
|Net loss attributable to common stockholders                                                |  | $    | (48,836 | ) |      | $ | (52,262 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   |  |      |         |   |      |   |         |  
|Discontinued operations                                                                     |  |      | (278    | ) |      |   | (302    | )
|Depreciation and amortization                                                               |  |      | 26,024  |   |      |   | 22,499  |  
|Non-cash interest expense                                                                   |  |      | 5,419   |   |      |   | 4,360   |  
|Minority interest and income from unconsolidated subsidiaries, net                          |  |      | 7,492   |   |      |   | 2,518   |  
|Deferred income taxes                                                                       |  |      | 755     |   |      |   | 6,032   |  
|Accrued pension and post-retirement benefits, net                                           |  |      | 2,165   |   |      |   | 259     |  
|Restructuring charges                                                                       |  |      | 6,405   |   |      |   | 2,595   |  
|Cash payments for restructuring charges                                                     |  |      | (11,955 | ) |      |   | (4,211  | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges: |  |      |         |   |      |   |         |  
|Accounts receivable                                                                         |  |      | (17,033 | ) |      |   | (14,805 | )
|Inventories                                                                                 |  |      | (10,865 | ) |      |   | 5,653   |  
|Accounts payable                                                                            |  |      | 32,085  |   |      |   | 1,224   |  
|Other current assets and liabilities                                                        |  |      | 30,061  |   |      |   | 14,574  |  
|Other non-current assets and liabilities, net                                               |  |      | (2,171  | ) |      |   | (15,437 | )
|                                                                                            |  |      |         |   |      |   |         |  
|Net cash provided by (used in) operating activities of continuing operations                |  |      | 19,268  |   |      |   | (27,303 | )
|                                                                                            |  |     
|Cash Flows from Investing Activities:                                                       |  |      |         |   |      |   |         |  
|Acquisitions, net of cash acquired                                                          |  |      | (2,101  | ) |      |   | (57,273 | )
|Net proceeds on sale of businesses                                                          |  |      | 323     |   |      |   | 611     |  
|Purchases of property, plant and equipment                                                  |  |      | (18,104 | ) |      |   | (27,770 | )
|                                                                                            |  |      |         |   |      |   |         |  
|Net cash used in investing activities of continuing operations                              |  |      | (19,882 | ) |      |   | (84,432 | )
|                                                                                            |  |     
|Cash Flows from Financing Activities:                                                       |  |      |         |   |      |   |         |  
|Net borrowings under revolving line of credit and other                                     |  |      | 8,125   |   |      |   | 77,176  |  
|Deferred financing costs                                                                    |  |      |        |   |      |   | (325    | )
|Distributions to minority interests                                                         |  |      | (986    | ) |      |   |        |  
|                                                                                            |  |      |         |   |      |   |         |  
|Net cash provided by financing activities of continuing operations                          |  |      | 7,139   |   |      |   | 76,851  |  
|                                                                                            |  |     
|Effect of exchange rate changes on cash                                                     |  |      | 837     |   |      |   | (757    | )
|                                                                                            |  |     
|Cash flows of discontinued operations  operating activities                                |  |      | (230    | ) |      |   | (637    | )
|                                                                                            |  |      |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                        |  |      | 7,132   |   |      |   | (36,278 | )
|Cash and cash equivalents at beginning of year                                              |  |      | 20,022  |   |      |   | 62,545  |  
|                                                                                            |  |      |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $    | 27,154  |   |      | $ | 26,267  |  
|                                                                                            |  |      |         |   |      |   |         |  

See notes to the condensed consolidated financial statements.



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AMOUNTS IN THOUSANDS, EXCEPT AS INDICATED

For the three month and nine month periods ended September 30, 2006 and 2005

and Year ended
December 31, 2005

(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 Remy International, Inc., (the Company) Annual Report on Form 10-K for the year ended December 31, 2005. 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. Certain prior year amounts have been reclassified to conform to the current years presentation.

Operating results for the three-month and nine-month periods ended September 30, 2006 are not necessarily indicative of the results that may be expected for the full year. The balance sheet at December 31, 2005 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, 2005. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2005.

2. Business, Industry, General Economic Conditions and Liquidity

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



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##### Table of Contents

The Company believes it is the largest producer in the world of remanufactured starters and alternators
for the aftermarket. The Companys remanufacturing operations obtain failed products, commonly known as cores, from its customers as returns. These cores are an essential material needed for the remanufacturing operations. The Company also
provides exchange services for cores for third party aftermarket remanufacturers. At the time of the Companys separation from General Motors Corporation (GM) in August 1994, the Company was predominantly a North American original
equipment manufacturer with a majority of the 1995 sales derived from GM. Through strategic capital investments, acquisitions, divestitures and facility and workforce rationalization, the Company has become a low cost, global manufacturer and
remanufacturer with a more balanced business and product mix between the aftermarket and the original equipment market. Since fiscal year 1995, the Company has increased sales, broadened its product line, expanded manufacturing and remanufacturing
capabilities, diversified its customer base and end markets, lowered its cost base and extended its participation in international markets.

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

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

The Companys operating results for 2005 were significantly below 2004. While annual net sales increased to $1,228,950 in 2005 from $1,051,165 in
2004, gross margin percentage decreased to approximately 12% in 2005. This decrease in gross margin percentage, coupled with impairment and restructuring charges in 2005 led to an operating loss of $10,749 and a net loss (from continuing operations)
of $96,579 for the year ended December 31, 2005. The decrease in gross margin percentage was driven by decreasing sales prices, commodity price increases, start up and launch costs in transferring certain manufacturing and remanufacturing
production to Mexico and unfavorable foreign currency exchange fluctuations (primarily in the US dollar vs. the Korean Won).

The
Companys operating income for the nine months ended September 30, 2006 improved as compared to the same period in 2005. Net sales increased to $1,078,506 for the nine months ended September 30, 2006, from $909,872 for the same period
in 2005. The gross margin percentage was 12.0% for the nine months ended September 30, 2006 compared to 13.2% for the same period in 2005. During the third quarter of 2006, the Company experienced an unusual increase in warranty returns for a
limited class of heavy duty products primarily made in prior years. Accordingly, the Company revised its estimate and recorded an increase to its warranty obligation of $8.8 million. The Company believes that the issues which caused this high level
of claims have since been corrected. Selling, general and administrative expenses decreased 2.4% as a percentage of sales for the nine months ended September 30, 2006, as compared with the same period in 2005. Net loss attributable to common
stockholders decreased to $48,836 for the nine months ended September 30, 2006, as compared to $52,262 net loss attributable to stockholders for the same period of 2005.



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##### Table of Contents

For the full year 2005, the Company used $46,887 of cash for operating activities and $41,382 of cash for
capital expenditures. In December 2005, the Company obtained an additional $80,000 term loan. For the nine months ended September 30, 2006, cash provided by operating activities was $19,268 compared with $27,303 of cash used in operating
activities in the same period of 2005. Net loss attributable to common stockholders for the nine months ended September 30, 2006 decreased to $48,836 compared to $52,262 in the same period in 2005. Cash required to service the Companys
substantial indebtedness places significant demands on the Companys liquidity.

In order to improve its 2006 cash flow from
operations as well as its overall liquidity, the Company has taken specific actions to improve its overall cost structure. These actions include certain customer price increases, supplier price concessions, and price reductions on freight, plant
rationalizations and headcount reductions. Further, the Company continues to develop plans to complete the integration of the acquisition of Unit Parts Company (UPC) in 2007.

During the nine months ended September 30, 2006, the Company experienced operating income at a level less than anticipated, but higher than the
comparable prior year period. The Company performs its annual impairment test for assets in the fourth quarter each year, which requires re-evaluation of certain assumptions in determining fair value, including assumptions about the future cash
flows of the businesses.

The Companys $145,000, 85/8% Senior Notes are due December 15, 2007. In anticipation of the due date and in consideration of the Companys substantial indebtedness, the Company is exploring
various strategic alternatives, including, but not limited to, refinancing some or all of its debt. In addition, the Board of Directors has authorized management to explore refinancing alternatives including the engagement of investment bankers to
assist the Company in analyzing the optimal allocation of proceeds from the potential divestitures of certain non-core businesses.

The Company believes that the actions discussed above provide the foundation for improved operating performance in 2006 and future periods and that the Companys expected future operating results and liquidity are sufficient to satisfy
its operating and liquidity requirements during 2006. The Company is prepared to take actions to maintain sufficient liquidity in the event of any unforeseen downturns or other circumstances. For more information see the Companys 2005 Form
10-K.

3. Additional Balance Sheet Information

Cash
and Cash Equivalents

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

Book overdrafts of approximately $9,200 and
$5,600 at September 30, 2006 and December 31, 2005, respectively, are reflected in accounts payable.

As of September 30,
2006 and December 31, 2005, approximately $1,900 and $1,800, respectively, of cash at Remy Korea Limited, a wholly owned non guarantor subsidiary, is being held in escrow related to a bi-lateral advanced pricing agreement between Remy Korea
Limited and Remy



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##### Table of Contents

International, Inc. This matter has been resolved and the Company expects the Korean authorities to release the escrowed
funds in the fourth quarter of 2006. The restricted cash discussed above is included in cash and cash equivalents on the accompanying condensed consolidated balance sheets.

Inventories

The components of inventory were as follows at:



|                |  |                   |         |                  |   |        
|--------------- |  | ----------------- | ------- | ---------------- | - | -------
|                |  | September 30,2006 |         | December 31,2005
|Raw material    |  | $                 | 135,430 |                  | $ | 127,677
|Work-in-process |  |                   | 10,435  |                  |   | 9,474  
|Finished goods  |  |                   | 134,244 |                  |   | 124,670
|                |  |                   |         |                  |   |        
|Total           |  | $                 | 280,109 |                  | $ | 261,821
|                |  |                   |         |                  |   |        

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. In the third quarter of 2006,
the Company experienced an unusual increase in warranty returns for a limited class of products primarily made in prior years. Accordingly, the Company revised its estimate and recorded an increase of $8,844 to its warranty obligation. The Company
believes that the product issues which caused this high level of claims have been corrected.

The Companys warranty liability is
reflected in Other liabilities and accrued expenses in the accompanying condensed consolidated balance sheets. Changes to the Companys warranty liability, excluding discontinued operations, are summarized as follows:



|                                         |  |                   |         |   |                  |   |         |  
|---------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                         |  | September 30,2006 |         |   | December 31,2005 |  
|Balance at beginning of year             |  | $                 | 21,189  |   |                  | $ | 17,633  |  
|Provision for warranty                   |  |                   | 51,623  |   |                  |   | 54,308  |  
|Payments and charges against the accrual |  |                   | (39,476 | ) |                  |   | (55,285 | )
|Other (including acquisitions)           |  |                   |        |   |                  |   | 4,533   |  
|                                         |  |                   |         |   |                  |   |         |  
|Balance at end of period                 |  | $                 | 33,336  |   |                  | $ | 21,189  |  
|                                         |  |                   |         |   |                  |   |         |  

Investment in unconsolidated subsidiaries

In the third quarter of 2006, the Company performed an impairment analysis on its 47.5% investment in Sahney Paris Rhone Ltd., India (SPR).
The Company determined that there was an indication of other than a temporary decline in the value of the investment. As a result of the analysis, the investment in SPR was written down approximately $3,800 at September 30, 2006.



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Allowance for doubtful accounts

The allowance for doubtful accounts was $4,026 and $4,551 at September 31, 2006 and December 31, 2005, respectively.

4. New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, (FIN 48) which clarifies the accounting for uncertainty in tax positions. This interpretation requires the
recognition of a tax position when it is more likely than not that the tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the position. The provisions of FIN 48 are effective for the
Company on January 1, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements.

In September 2006, FASB issued Financial Accounting Statement (FAS) 157, Fair Value Measurements. The Statement defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for the Company on or before January 1, 2008.
The provisions of this Statement shall be applied prospectively as of the date of adoption with a limited form of retrospective application to certain financial instruments that will result in cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of FAS 157 on its financial statements.

In September 2006, FASB issued FAS 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements 87, 88, 106 and 132(R).This Statement requires an employer to
recognize the over funded or under funded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through
comprehensive income of a business entity. The provisions of FAS 158 are effective in stages. For the year ended December 31, 2006 the Company is required to provide disclosure as to a description of the provisions of this Statement, the date
the adoption is required, and when the Company plans to adopt this Statement. For the year ended December 31, 2007, the Company is required to recognize the funded status of the postretirement plan and to provide related disclosures. For the
year ended December 31, 2008, the Company is required to measure plan assets and benefit obligations as of the balance sheet date. The Company is currently evaluating the impact of FAS 158 on its financial statements.



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5. Acquisitions

For the nine months ended September 30, 2006, the Company made cash payments totaling $2,101 relative to the acquisition of Delphi Corporations (Delphi) light vehicle alternator business.

On March 18, 2005, the Company acquired substantially all of the assets and assumed certain liabilities of Unit Parts Company
(UPC). The acquisition accounting has been finalized and no purchase price allocation adjustments were necessary in 2006, although certain prior year guarantor and non-guarantor amounts have been reclassified to conform to the current
years presentation.

UPCs results of operations are included in the Companys condensed consolidated 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. For further information on the
acquisition of UPC, please see the Companys 2005 Form 10-K.

6. Discontinued Operations

Over the past three years the Company has disposed of various non-core businesses. For more information on discontinued operations, please see the
Companys 2005 Form 10-K. Operating results of discontinued operations for the three month and nine month period ended September 30 is as follows:



|                   |  |              |     |   |             |   |      |      |  |   |      |   |  |   |      |  
|------------------ |  | ------------ | --- | - | ----------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                   |  | Three Months |     |   | Nine Months |  
|                   |  | 2006         |     |   | 2005        |   |      | 2006 |  |   | 2005 |  
|Net sales          |  | $            |    |   |             | $ |     |      |  | $ |     |   |  | $ | 973  |  
|Interest expense   |  |              |    |   |             |   |     |      |  |   |     |   |  |   | (5   | )
|Loss before tax    |  |              | (29 | ) |             |   | (190 | )    |  |   | (45  | ) |  |   | (484 | )
|Income tax expense |  |              |    |   |             |   |     |      |  |   |     |   |  |   |     |  
|                   |  |              |     |   |             |   |      |      |  |   |      |   |  |   |      |  
|Net loss           |  | $            | (29 | ) |             | $ | (190 | )    |  | $ | (45  | ) |  | $ | (484 | )
|                   |  |              |     |   |             |   |      |      |  |   |      |   |  |   |      |  



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7. 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 (ETIF 95-03).

Continuing Operations

In the third quarter of 2006, the Company
completed plans for the following actions in conjunction with its ongoing cost reduction initiatives:



| |  |  | Elimination of a layer of senior management in Indiana and Mississippi, U.S.A.
| | - |  | ------------------------------------------------------------------------------



| |  |  | Restructuring of aftermarket operations in Europe which included consolidation of operations in Belgium from three to two facilities, and a reduction in work force including early
retirements and involuntary terminations in the United Kingdom, Belgium, and Hungary for a total reduction in workforce of approximately 51 employees.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total restructuring costs related to the above consisted of approximately $2,200 for employee termination benefits and approximately $300 of exit costs associated with the facilities consolidation.

In the second quarter of 2006, the Company completed plans for the closure of certain electrical aftermarket remanufacturing and distribution facilities
in Michigan and a reduction in workforce totaling approximately 64 employees. The charge consisted of approximately $1,000 for employee termination benefits and approximately $1,800 of exit costs associated with the facilities.

Additionally, a total charge of $1,100 was recorded in the first nine months of 2006 for employee termination benefits mainly relating to the following
actions undertaken in 2005:



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



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



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

Net charges and payments

Cash payments totaling $11,955 were made in the nine months ended September 30, 2006, for
actions taken in 2006 and prior years. The cash payments consisted of $5,565 for the International Union, United Automobile, Aerospace and Agriculture Workers of America (UAW) settlement reached in January 2006, $5,656 for other employee
termination benefits, and $734 for all other exit costs.



12



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##### Table of Contents

The following table summarizes the activity in the restructuring accrual of continuing operations in the
first nine months of 2006:



|                              |  |                      |         |   |                 |   |       |       |  |   |         |  
|----------------------------- |  | -------------------- | ------- | - | --------------- | - | ----- | ----- |  | - | ------- | -
|                              |  | Termination Benefits |         |   | OtherExit Costs |   |       | Total | 
|Reserve at December 31, 2005  |  | $                    | 11,618  |   |                 | $ | 1,532 |       |  | $ | 13,150  |  
|Provision                     |  |                      | 4,372   |   |                 |   | 1,442 |       |  |   | 5,814   |  
|Payments                      |  |                      | (11,221 | ) |                 |   | (734  | )     |  |   | (11,955 | )
|                              |  |                      |         |   |                 |   |       |       |  |   |         |  
|Reserve at September 30, 2006 |  | $                    | 4,769   |   |                 | $ | 2,240 |       |  | $ | 7,009   |  
|                              |  |                      |         |   |                 |   |       |       |  |   |         |  

The following table reconciles the restructuring provisions appearing in the above table with the
total charges (credits) appearing in the consolidated statements of operations for the nine months ended September 30, 2006:



|                                 |  |   |      
|-------------------------------- |  | - | -----
|Provision charged to the accrual |  | $ | 5,814
|Write-down of long-lived assets  |  |   | 591  
|                                 |  |   |      
|Total provision                  |  | $ | 6,405
|                                 |  |   |      

8. Other Liabilities and Accrued Expenses

The other liabilities and accrued expenses consist of the following:



|                                             |  |                   |         |                  |   |        
|-------------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                             |  | September 30,2006 |         | December 31,2005
|Customer obligation                          |  | $                 | 18,545  |                  | $ | 13,814 
|Accrued warranty                             |  |                   | 33,336  |                  |   | 21,189 
|Accrued core liability                       |  |                   | 22,502  |                  |   | 17,322 
|Accrued wages and benefits                   |  |                   | 26,573  |                  |   | 17,189 
|Other                                        |  |                   | 48,743  |                  |   | 45,310 
|                                             |  |                   |         |                  |   |        
|Total other liabilities and accrued expenses |  | $                 | 149,699 |                  | $ | 114,824
|                                             |  |                   |         |                  |   |        

9. Other Non-Current Liabilities

The other non-current liabilities consist of the following:



|                                             |  |                    |        |                  |   |       
|-------------------------------------------- |  | ------------------ | ------ | ---------------- | - | ------
|                                             |  | September 30, 2006 |        | December 31,2005
|Customer obligation                          |  | $                  | 41,298 |                  | $ | 44,488
|Other                                        |  |                    | 5,158  |                  |   | 6,532 
|                                             |  |                    |        |                  |   |       
|Total other liabilities and accrued expenses |  | $                  | 46,456 |                  | $ | 51,420
|                                             |  |                    |        |                  |   |       

10. Employee Benefit Plans

The Company has a defined benefit pension plan covering the majority of its U.S. salaried and hourly employees. In addition, Remy Automotive UK Ltd., a non-guarantor subsidiary of the Company has a defined benefit
pension plan. This plan covers only employees who were part of Lucas prior to the Companys acquisition of Lucas in 1998. For further information on pensions and post-retirement benefits, please see the Companys 2005 Form 10-K.



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In the second quarter of 2006, the Company notified the U.S. salaried employees and the U.S. Internal
Revenue Service (IRS) that the Company had adopted an amendment to its U.S. Salaried Pension Plan (Salaried Plan) which froze the future accrual of benefits under the Salaried Plan for all eligible Salaried Plan participants
as of June 30, 2006 and provides that no new participants will be added to the Salaried Plan after June 30, 2006. The freeze to the Salaried Plan resulted in the recognition of a prior service benefit of $28 and a curtailment gain of
$5,997 applied to the unrecognized actuarial loss.

The components of expense for the three-month and nine-month periods ended
September 30, 2006 and 2005 for the plans are as follows:

Pension Benefits



|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|---------------------------------------------------- |  | ------------ | ---- | - | ----------- | - | ---- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                     |  | Three Months |      |   | Nine Months |  
|Components of expense                                |  | 2006         |      |   | 2005        |   |      | 2006 |  |   | 2005   |  
|Service costs                                        |  | $            | 123  |   |             | $ | 545  |      |  | $ | 1,383  |   |  | $ | 1,543  |  
|Interest costs                                       |  |              | 622  |   |             |   | 647  |      |  |   | 1,985  |   |  |   | 1,909  |  
|Expected return on plan assets                       |  |              | (535 | ) |             |   | (481 | )    |  |   | (1,594 | ) |  |   | (1,446 | )
|Amortization of prior service cost                   |  |              | 57   |   |             |   | 56   |      |  |   | 169    |   |  |   | 168    |  
|Recognized net actuarial loss                        |  |              | 41   |   |             |   | 117  |      |  |   | 246    |   |  |   | 320    |  
|Curtailments                                         |  |              | 0    |   |             |   |     |      |  |   | (28    | ) |  |   |       |  
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|Net periodic pension cost                            |  | $            | 308  |   |             | $ | 884  |      |  | $ | 2,161  |   |  | $ | 2,494  |  
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|                                                     |  |              |      |  
|Post-Retirement Health Care and Life Insurance Plans |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|                                                     |  | Three Months |      |   | Nine Months |  
|Components of expense                                |  | 2006         |      |   | 2005        |   |      | 2006 |  |   | 2005   |  
|Service costs                                        |  | $            | 93   |   |             | $ | 90   |      |  | $ | 278    |   |  | $ | 269    |  
|Interest costs                                       |  |              | 281  |   |             |   | 268  |      |  |   | 844    |   |  |   | 805    |  
|Recognized net actuarial loss                        |  |              | 32   |   |             |   | 17   |      |  |   | 97     |   |  |   | 50     |  
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|Net periodic pension cost                            |  | $            | 406  |   |             | $ | 375  |      |  | $ | 1,219  |   |  | $ | 1,124  |  
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  

Cash Flows

The Company contributed $1,211 in the first nine months of 2006 to its pension plans. In June, the Company filed an application with the IRS requesting a funding waiver for the balance of the 2006 U.S. pension plans
contributions. The IRS responded that they would defer rendering a decision on the funding waiver request until after receipt of the Companys year-end 2006 financial information. The cumulative impact of the funding waiver request on 2006 cash
flow through September 30, 2006 and December 30, 2006, is a deferral of payments of $1,483 and $2,224, respectively.

The
post-retirement health care plan is funded as benefits are paid.

11. Income Taxes

Income tax expense of $4,352 for the first nine months ending September 30, 2006, consisted of a $1,640 provision for U.S. federal and state deferred
income taxes, domestic current state and local taxes of $262 and taxes in various foreign jurisdictions of $2,450, net of $1,125 million reversal of a



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tax contingency. This tax contingency was related to a bi-lateral advanced pricing agreement (APA between
Remy Korea Ltd., and Remy International, Inc. that was recorded in Korea for 2003, 2004, and 2005. The APA matter was resolved in the third quarter of 2006, and accordingly, the Company reversed the related $1,125 tax contingency. Income tax expense
of $12,370 for the first nine months ending September 30, 2005, included a $6,748 increase to the deferred tax valuation allowance for all unresolved domestic deferred tax assets, a provision for domestic state and local taxes of $375, and
taxes in various foreign jurisdictions of $5,247.

In accordance with SFAS No. 109,Accounting for Income Taxes(SFAS
109), the Company established a valuation allowance for the majority of its domestic U.S. deferred tax assets in 2003. In 2005, the Company recorded a deferred tax valuation allowance for the remaining unreserved domestic income tax
assets. Accordingly, the Company has recorded a valuation allowance related to the domestic net operating loss generated in the nine months ended September 30, 2006.

12. 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 derivative instruments that qualify as hedges and minimum pension liability adjustments. The before tax income (loss), related
income tax effect and accumulated balance for the first, second and third quarters of 2006 are as follows:



|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  
|--------------------------------- |  | ------------------------------------ | ------ | - | --------------------------------------------- | - | ----- | ---------------------------------- |  | - | ----------------------------------- | - |  | - | ------- | -
|                                  |  | ForeignCurrencyTranslationAdjustment |        |   | UnrealizedGains(Losses) onCurrencyInstruments |   |       | MinimumPensionLiabilityAdjustments |  |   | AccumulatedOther Comprehensive Loss |  
|Balances at December 31, 2005     |  | $                                    | (2,720 | ) |                                               | $ | 837   |                                    |  | $ | (8,647                              | ) |  | $ | (10,530 | )
|Before tax income                 |  |                                      | 2,648  |   |                                               |   | 2,018 |                                    |  |   |                                    |   |  |   | 4,666   |  
|Income tax effect                 |  |                                      |       |   |                                               |   | (607  | )                                  |  |   |                                    |   |  |   | (607    | )
|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  
|Other comprehensive income        |  |                                      | 2,648  |   |                                               |   | 1,411 |                                    |  |   |                                    |   |  |   | 4,059   |  
|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  
|Balances at March 31, 2006        |  |                                      | (72    | ) |                                               |   | 2,248 |                                    |  |   | (8,647                              | ) |  |   | (6,471  | )
|Before tax income (loss)          |  |                                      | 3,100  |   |                                               |   | (476  | )                                  |  |   |                                    |   |  |   | 2,624   |  
|Income tax effect                 |  |                                      |       |   |                                               |   | 141   |                                    |  |   |                                    |   |  |   | 141     |  
|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  
|Other comprehensive income (loss) |  |                                      | 3,100  |   |                                               |   | (335  | )                                  |  |   |                                    |   |  |   | 2,765   |  
|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  
|Balances at June 30, 2006         |  |                                      | 3,028  |   |                                               |   | 1,913 |                                    |  |   | (8,647                              | ) |  |   | (3,706  | )
|Before tax (loss) income          |  |                                      | (276   | ) |                                               |   | 982   |                                    |  |   |                                    |   |  |   | 706     |  
|Income tax effect                 |  |                                      |       |   |                                               |   | (295  | )                                  |  |   |                                    |   |  |   | (295    | )
|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  
|Other comprehensive (loss) income |  |                                      | (276   | ) |                                               |   | 687   |                                    |  |   |                                    |   |  |   | 411     |  
|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  
|Balances at September 30, 2006    |  | $                                    | 2,752  |   |                                               | $ | 2,600 |                                    |  | $ | (8,647                              | ) |  | $ | (3,295  | )
|                                  |  |                                      |        |   |                                               |   |       |                                    |  |   |                                     |   |  |   |         |  



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##### Table of Contents

The Companys total comprehensive loss was as follows:



|                         |  |              |         |   |             |   |         |      |  |   |         |   |  |   |         |  
|------------------------ |  | ------------ | ------- | - | ----------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                         |  | Three Months |         |   | Nine Months |  
|                         |  | 2006         |         |   | 2005        |   |         | 2006 |  |   | 2005    |  
|Total comprehensive loss |  | $            | (30,029 | ) |             | $ | (27,980 | )    |  | $ | (41,601 | ) |  | $ | (59,107 | )

13. Other Commitments and Contingencies

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

HCS Pay Litigation

On
January 16, 2006, the Company initiated litigation in the Circuit Court of Oakland County, Michigan against Hennessey Capital, LLC; HCSPay, LLC; and SurGen, LLC (the preceding three entities collectively are referred to as Hennessey) and
against Surge Capital; Lancelot Investors Fund LP; Lancelot Investment Management, LLC; AGM II, LLC; and John Maselli (the preceding five entities collectively are referred to as Surge). This litigation seeks the return of approximately $6,083 that
the Company believes is owed to it under a factoring agreement that it entered into with Hennessey plus punitive damages and costs. The Company alleges claims against Hennessey for breach of contract and breach of fiduciary duty. The Company alleges
claims against Surge for conversion, unjust enrichment, declaratory judgment, and constructive trust and seeks the return of the Companys funds plus punitive damages and costs. In response to the Companys Complaint, the Surge entities
moved for summary disposition, asserting that they were within their rights to sweep the account pursuant to their control agreement with HCSPay. On June 14, 2006, the court denied the Surge entities motion. Surge has not yet filed an
answer. On June 13, 2006, certain of the Hennessey entities filed cross-claims under tort and contract theories against Surge. Hennessey also asserts that only HCSPay  the entity that signed the factoring agreement  can be liable to
the Company. The parties are proceeding with discovery, for which the court has set a March 15, 2007 deadline for completion. This matter is ongoing and the Company is pursuing its claims vigorously. At September 30, 2006, the Company had
$6,083 recorded as other receivable related to this matter.

UAW Litigation

On April 16, 2003, UAW and its Local Union 662 filed suit against the Company and Remy, Inc. (RI), in Federal District Court in the
Southern District of Indiana, Indianapolis Division. The lawsuit was filed under Section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, seeking enforcement of an expired Supplemental Unemployment Benefits plan (SUB
plan). The plaintiffs alleged that the SUB plan provided supplemental unemployment benefits for 52 weeks and separation pay in an amount exceeding $20,000 for employees who were terminated as a result of the closure of RIs Anderson,
Indiana production facilities at the end of March 2003. The plaintiffs also sought to enforce terminated provisions of a health care program, which the plaintiffs alleged that the plan provided the terminated employees with 25 months of continued
hospital, surgical, medical, hearing aid, prescription drug, mental health, substance abuse and vision insurance coverage. The terminated employees were represented by the UAW and its Local Union 662 under various agreements, which



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##### Table of Contents

expired on March 31, 2003. The lawsuit was filed shortly after the UAW membership failed to ratify RIs last,
best and final offer for a Shutdown Agreement. The UAW filed an amended complaint on July 8, 2003, to which the Company filed an answer on July 24, 2003. Motions for summary judgment filed by the parties were denied by the court in
September 2005. On January 31, 2006, a final settlement agreement and release was entered into by the parties which fully resolved all of the allegations of the complaint. Under the terms of the settlement agreement, the Company and RI agreed
to contribute approximately $5,250 to the SUB plan in return for a release of all claims alleged in the lawsuit, including any further obligations to fund the SUB plan. The Company paid the $5,250 and associated payroll taxes of $315 in the first
quarter of 2006.

Prison Labor Matter

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

Import/Export Matters

The Company continues to
evaluate its global operations to take advantage of economic conditions and related cost structures. The Company is subject to various duties and import/export taxes. The Company actively reviews its import/export processes in North America, Europe
and Asia to verify the appropriate import duty classification, value and duty rate, including import value added tax. As part of this review process, the Company has identified a potential exposure related to customs duties in the United States. The
resolution of this matter is pending, although the Company paid $1,000 in 2005 and as of September 30, 2006, has accrued approximately $7,800 related to this matter.

Franklin Power Products Facility

In September 2000, one of Franklin Power Products, Inc.s
Indiana facilities received a Finding of Violation and Order for Compliance (the Order) from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. installed wastewater
treatment equipment and is in compliance with the terms of the Order and has eliminated the discharge. In July 2004, the Company and Franklin Power Products, Inc. entered into an agreement with the U.S. Department of Justice on behalf of the EPA,
which tolled the statute of limitations on the EPAs potential claim for penalties. Since that time, the Company has been cooperating with the EPA by providing additional information and has entered into settlement negotiations with the EPA and
the Department of Justice. On April 12, 2006, the EPA and the Company reached a settlement for $851 and entered into a consent decree to resolve this matter. In July 2006, the company paid the $851.



17



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

The Company conducts a significant portion of its business through its subsidiaries. The Companys 85/8% Senior Notes Due 2007, 11% Senior Subordinated Notes Due 2009, Second Priority Senior Floating Rate Notes, and the 93/8% 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 September 30, 2006, and December 31, 2005, and for the three and nine month periods ended September 30,
2006 and 2005. Certain prior year guarantor and non-guarantor amounts have been reclassified to conform to the current years presentation, the effects of which were considered immaterial.

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            |  |       Central Precision Limited                         
|      Franklin Power Products, Inc.     |  |       Remy Automotive Germany GmbH                      
|      International Fuel Systems, Inc.  |  |       Elektro Diesel Rebuild bvba                       
|      M. & M. Knopf Auto Parts, L.L.C.  |  |       Electro-Rebuild Tunisie S.A.R.L.                  
|      Marine Corporation of America     |  |       Magnum Power Products, L.L.C.                     
|      Nabco, Inc.                       |  |       Publitech, Inc.                                   
|      Power Investments, Inc.           |  |       Remy Automotive Brasil Ltda.                      
|      Power Investments Marine, Inc.    |  |       Remy Automotive Europe BVBA                       
|      Powrbilt Products, Inc.           |  |       Remy Automotive Poland, Sp. z o.o.                
|      Reman Holdings, L.L.C.            |  |       Remy Automotive UK Limited                        
|      Remy Inc.                         |  |       Remy Componentes S. de R. L. de C. V.             
|      Remy International Holdings, Inc. |  |       Remy Automotive Hungary Kft                       
|      Remy Powertrain, L.P.             |  |       Remy India Holdings, Inc.                         
|      Remy Reman, L.L.C.                |  |       Remy Korea Holdings, L.L.C.                       
|      Unit Parts Company                |  |       Remy Remanufacturing de Mexico, S. de R.L. de C.V.
|      World Wide Automotive, L.L.C.     |  |       World Wide Automotive Distributors, Inc.          
|      Western Reman Industrial, L.L.C.  |  |       Remy Electricals Hubei Company Limited            
|                                         |  |       QAPI S.A. deC.V.                                  
|                                         |  |       Unit Parts Coahuila, S.A. de C.V                  
|                                         |  |       Remy Korea Ltd.                                   
|                                         |  |       Western Reman Industrial Ltd.                     



18



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet

(Unaudited)



|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ---------------------------------------------- | -------- | - | --------------------- | - | -------- | -------------------------- |  | ------------ | ------- |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS,At September 30, 2006                   |  | Remy International, Inc.
(Parent Company Only) |          |   | Subsidiary Guarantors |   |          | Non-Guarantor Subsidiaries |  | Eliminations |         |  | Consolidated |         
|Assets:                                              |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                              | 628      |   |                       | $ |         |                            |  | $            | 26,526  |  | $            |         |      |  | $ | 27,154   |  
|Trade accounts receivable, net                       |  |                                                |         |   |                       |   | 146,692  |                            |  |              | 55,159  |  |              |         |      |  |   | 201,851  |  
|Other receivables                                    |  |                                                |         |   |                       |   | 10,209   |                            |  |              | 14,170  |  |              |         |      |  |   | 24,379   |  
|Inventories                                          |  |                                                |         |   |                       |   | 209,541  |                            |  |              | 71,097  |  |              | (529     | )(c) |  |   | 280,109  |  
|Deferred income taxes                                |  |                                                |         |   |                       |   |         |                            |  |              | 1,793   |  |              |         |      |  |   | 1,793    |  
|Assets of discontinued operations                    |  |                                                |         |   |                       |   |         |                            |  |              | 4       |  |              |         |      |  |   | 4        |  
|Other current assets                                 |  |                                                | 1,758    |   |                       |   | 2,341    |                            |  |              | 5,511   |  |              |         |      |  |   | 9,610    |  
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Total current assets                                 |  |                                                | 2,386    |   |                       |   | 368,783  |                            |  |              | 174,260 |  |              | (529     | )    |  |   | 544,900  |  
|                                                     |  |                                                |          |   |                      
|Property, plant and equipment                        |  |                                                | 26,112   |   |                       |   | 168,545  |                            |  |              | 186,005 |  |              |         |      |  |   | 380,662  |  
|Less accumulated depreciation                        |  |                                                | 22,612   |   |                       |   | 101,176  |                            |  |              | 85,737  |  |              |         |      |  |   | 209,525  |  
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Property, plant and equipment, net                   |  |                                                | 3,500    |   |                       |   | 67,369   |                            |  |              | 100,268 |  |              |         |      |  |   | 171,137  |  
|Deferred financing costs, net                        |  |                                                | 10,762   |   |                       |   |         |                            |  |              |        |  |              |         |      |  |   | 10,762   |  
|Goodwill, net                                        |  |                                                |         |   |                       |   | 144,506  |                            |  |              | 12,144  |  |              |         |      |  |   | 156,650  |  
|Investments in unconsolidated subsidiaries           |  |                                                | 539,818  |   |                       |   |         |                            |  |              |        |  |              | (537,544 | )(a) |  |   | 2,274    |  
|Other assets                                         |  |                                                | 1,062    |   |                       |   | 24,031   |                            |  |              | 8,920   |  |              |         |      |  |   | 34,013   |  
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Total assets                                         |  | $                                              | 557,528  |   |                       | $ | 604,689  |                            |  | $            | 295,592 |  | $            | (538,073 | )    |  | $ | 919,736  |  
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Liabilities and Stockholders (Deficit) Equity:      |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                              | 995      |   |                       | $ | 155,936  |                            |  | $            | 74,600  |  | $            |         |      |  | $ | 231,531  |  
|Intercompany accounts                                |  |                                                | 124,017  |   |                       |   | (130,064 | )                          |  |              | 5,828   |  |              | 219      | (c)  |  |   |         |  
|Accrued interest                                     |  |                                                | 21,078   |   |                       |   |         |                            |  |              | 166     |  |              |         |      |  |   | 21,244   |  
|Accrued restructuring                                |  |                                                | 1,330    |   |                       |   | 4,102    |                            |  |              | 523     |  |              |         |      |  |   | 5,955    |  
|Liabilities of discontinued operations               |  |                                                |         |   |                       |   | 4        |                            |  |              | 235     |  |              |         |      |  |   | 239      |  
|Other liabilities and accrued expenses               |  |                                                | 12,313   |   |                       |   | 108,628  |                            |  |              | 28,758  |  |              |         |      |  |   | 149,699  |  
|Current maturities of long-term debt                 |  |                                                | 951      |   |                       |   | 1,624    |                            |  |              | 25,760  |  |              |         |      |  |   | 28,335   |  
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Total current liabilities                            |  |                                                | 160,684  |   |                       |   | 140,230  |                            |  |              | 135,870 |  |              | 219      |      |  |   | 437,003  |  
|                                                     |  |                                                |          |   |                      
|Long-term debt, net of current portion               |  |                                                | 705,807  |   |                       |   | 11,151   |                            |  |              | 6,771   |  |              |         |      |  |   | 723,729  |  
|Post-retirement benefits other than pensions         |  |                                                | 16,408   |   |                       |   |         |                            |  |              |        |  |              |         |      |  |   | 16,408   |  
|Accrued pension benefits                             |  |                                                | 12,552   |   |                       |   |         |                            |  |              | 2,194   |  |              |         |      |  |   | 14,746   |  
|Accrued restructuring                                |  |                                                |         |   |                       |   | 1,054    |                            |  |              |        |  |              |         |      |  |   | 1,054    |  
|Deferred income taxes                                |  |                                                | 10,130   |   |                       |   |         |                            |  |              | 1,601   |  |              |         |      |  |   | 11,731   |  
|Other non-current liabilities                        |  |                                                | 1,644    |   |                       |   | 43,775   |                            |  |              | 1,037   |  |              |         |      |  |   | 46,456   |  
|Minority interest                                    |  |                                                |         |   |                       |   | 9,945    |                            |  |              | 4,576   |  |              |         |      |  |   | 14,521   |  
|Stockholders (deficit) equity:                      |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                                | 3        |   |                       |   |         |                            |  |              |        |  |              |         |      |  |   | 3        |  
|Paid-in capital                                      |  |                                                | 334,336  |   |                       |   |         |                            |  |              |        |  |              |         |      |  |   | 334,336  |  
|Retained (deficit) earnings                          |  |                                                | (676,956 | ) |                       |   | 73,760   |                            |  |              | 1,660   |  |              | (75,420  | )(b) |  |   | (676,956 | )
|Subsidiary investment                                |  |                                                |         |   |                       |   | 324,774  |                            |  |              | 138,098 |  |              | (462,872 | )(a) |  |   |         |  
|Accumulated other comprehensive (loss) income        |  |                                                | (7,080   | ) |                       |   |         |                            |  |              | 3,785   |  |              |         |      |  |   | (3,295   | )
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Total stockholders (deficit) equity                 |  |                                                | (349,697 | ) |                       |   | 398,534  |                            |  |              | 143,543 |  |              | (538,292 | )    |  |   | (345,912 | )
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  
|Total liabilities and stockholders (deficit) equity |  | $                                              | 557,528  |   |                       | $ | 604,689  |                            |  | $            | 295,592 |  | $            | (538,073 | )    |  | $ | 919,736  |  
|                                                     |  |                                                |          |   |                       |   |          |                            |  |              |         |  |              |          |      |  |   |          |  

---

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

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

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



19



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet

(Unaudited)



|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ---------------------------------------------- | -------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS,At December 31, 2005                    |  | Remy International, Inc.
(Parent Company Only) |          |   | Subsidiary Guarantors |   |         | Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Assets:                                              |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                              | 302      |   |                       | $ | 342     |                            |  | $ | 19,378       |   |  | $            |         |      |  | $ | 20,022   |  
|Trade accounts receivable, net                       |  |                                                |         |   |                       |   | 137,756 |                            |  |   | 47,062       |   |  |              |         |      |  |   | 184,818  |  
|Other receivables                                    |  |                                                | 37       |   |                       |   | 1,475   |                            |  |   | 12,025       |   |  |              |         |      |  |   | 13,537   |  
|Inventories                                          |  |                                                |         |   |                       |   | 191,775 |                            |  |   | 70,892       |   |  |              | (846     | )(c) |  |   | 261,821  |  
|Deferred income taxes                                |  |                                                |         |   |                       |   |        |                            |  |   | 1,155        |   |  |              |         |      |  |   | 1,155    |  
|Assets of discontinued operations                    |  |                                                |         |   |                       |   |        |                            |  |   | 16           |   |  |              |         |      |  |   | 16       |  
|Other current assets                                 |  |                                                | 1,443    |   |                       |   | 1,608   |                            |  |   | 2,733        |   |  |              |         |      |  |   | 5,784    |  
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Total current assets                                 |  |                                                | 1,782    |   |                       |   | 332,956 |                            |  |   | 153,261      |   |  |              | (846     | )    |  |   | 487,153  |  
|                                                     |  |                                                |          |   |                      
|Property, plant and equipment                        |  |                                                | 26,670   |   |                       |   | 164,271 |                            |  |   | 173,900      |   |  |              |         |      |  |   | 364,841  |  
|Less accumulated depreciation                        |  |                                                | 21,754   |   |                       |   | 98,369  |                            |  |   | 70,187       |   |  |              |         |      |  |   | 190,310  |  
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Property, plant and equipment, net                   |  |                                                | 4,916    |   |                       |   | 65,902  |                            |  |   | 103,713      |   |  |              |         |      |  |   | 174,531  |  
|Deferred financing costs, net                        |  |                                                | 13,962   |   |                       |   |        |                            |  |   |             |   |  |              |         |      |  |   | 13,962   |  
|Goodwill, net                                        |  |                                                |         |   |                       |   | 144,506 |                            |  |   | 12,144       |   |  |              |         |      |  |   | 156,650  |  
|Investments in unconsolidated subsidiaries           |  |                                                | 505,748  |   |                       |   |        |                            |  |   |             |   |  |              | (499,831 | )(a) |  |   | 5,917    |  
|Other assets                                         |  |                                                | 1,947    |   |                       |   | 21,931  |                            |  |   | 9,084        |   |  |              |         |      |  |   | 32,962   |  
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Total assets                                         |  | $                                              | 528,355  |   |                       | $ | 565,295 |                            |  | $ | 278,202      |   |  | $            | (500,677 | )    |  | $ | 871,175  |  
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Liabilities And Stockholders (Deficit) Equity:      |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                              | 1,401    |   |                       | $ | 127,866 |                            |  | $ | 64,856       |   |  | $            |         |      |  | $ | 194,123  |  
|Intercompany accounts                                |  |                                                | 75,343   |   |                       |   | (85,828 | )                          |  |   | 10,581       |   |  |              | (96      | )(c) |  |   |         |  
|Accrued interest                                     |  |                                                | 8,755    |   |                       |   |        |                            |  |   | 151          |   |  |              |         |      |  |   | 8,906    |  
|Accrued restructuring                                |  |                                                | 1,793    |   |                       |   | 10,398  |                            |  |   | 478          |   |  |              |         |      |  |   | 12,669   |  
|Liabilities of discontinued operations               |  |                                                |         |   |                       |   | 25      |                            |  |   | 418          |   |  |              |         |      |  |   | 443      |  
|Other liabilities and accrued expenses               |  |                                                | 9,106    |   |                       |   | 86,001  |                            |  |   | 19,717       |   |  |              |         |      |  |   | 114,824  |  
|Current maturities of long-term debt                 |  |                                                | 1,053    |   |                       |   | 414     |                            |  |   | 26,034       |   |  |              |         |      |  |   | 27,501   |  
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Total current liabilities                            |  |                                                | 97,451   |   |                       |   | 138,876 |                            |  |   | 122,235      |   |  |              | (96      | )    |  |   | 358,466  |  
|                                                     |  |                                                |          |   |                      
|Long-term debt, net of current portion               |  |                                                | 694,171  |   |                       |   | 11,001  |                            |  |   | 9,009        |   |  |              |         |      |  |   | 714,181  |  
|Post-retirement benefits other than pensions         |  |                                                | 15,841   |   |                       |   |        |                            |  |   | 9            |   |  |              |         |      |  |   | 15,850   |  
|Accrued pension benefits                             |  |                                                | 11,574   |   |                       |   |        |                            |  |   | 1,566        |   |  |              |         |      |  |   | 13,140   |  
|Accrued restructuring                                |  |                                                |         |   |                       |   | 481     |                            |  |   |             |   |  |              |         |      |  |   | 481      |  
|Deferred income taxes                                |  |                                                | 8,490    |   |                       |   |        |                            |  |   | 1,900        |   |  |              |         |      |  |   | 10,390   |  
|Other non-current liabilities                        |  |                                                | 1,689    |   |                       |   | 48,516  |                            |  |   | 1,215        |   |  |              |         |      |  |   | 51,420   |  
|Minority interest                                    |  |                                                |         |   |                       |   | 2,689   |                            |  |   | 8,869        |   |  |              |         |      |  |   | 11,558   |  
|                                                     |  |                                                |          |   |                      
|Stockholders (deficit) equity:                      |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                                | 3        |   |                       |   |        |                            |  |   |             |   |  |              |         |      |  |   | 3        |  
|Paid-in-capital                                      |  |                                                | 334,336  |   |                       |   |        |                            |  |   |             |   |  |              |         |      |  |   | 334,336  |  
|Retained (deficit) earnings                          |  |                                                | (628,120 | ) |                       |   | 39,435  |                            |  |   | 6,402        |   |  |              | (45,837  | )(b) |  |   | (628,120 | )
|Subsidiary investment                                |  |                                                |         |   |                       |   | 324,774 |                            |  |   | 129,970      |   |  |              | (454,744 | )(a) |  |   |         |  
|Accumulated other comprehensive loss                 |  |                                                | (7,080   | ) |                       |   | (477    | )                          |  |   | (2,973       | ) |  |              |         |      |  |   | (10,530  | )
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Total stockholders (deficit) equity                 |  |                                                | (300,861 | ) |                       |   | 363,732 |                            |  |   | 133,399      |   |  |              | (500,581 | )    |  |   | (304,311 | )
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  
|Total liabilities and stockholders (deficit) equity |  | $                                              | 528,355  |   |                       | $ | 565,295 |                            |  | $ | 278,202      |   |  | $            | (500,677 | )    |  | $ | 871,175  |  
|                                                     |  |                                                |          |   |                       |   |         |                            |  |   |              |   |  |              |          |      |  |   |          |  

---

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

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

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



20



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the three months ended September 30,
2006                                                                                                      |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net sales                                                                                                                                                       |  | $                                           |        |   |                      | $ | 324,743 |                           |  | $ | 157,154      |   |  | $            | (127,159 | )(a) |  | $ | 354,738 |  
|Cost of goods sold                                                                                                                                              |  |                                             |        |   |                      |   | 300,138 |                           |  |   | 151,618      |   |  |              | (127,159 | )(a) |  |   | 324,597 |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Gross profit                                                                                                                                                    |  |                                             |        |   |                      |   | 24,605  |                           |  |   | 5,536        |   |  |              |         |      |  |   | 30,141  |  
|                                                                                                                                                                |  |                                             |         |   |                     
|Selling, general and administrative expenses                                                                                                                    |  |                                             | 4,497   |   |                      |   | 18,130  |                           |  |   | 7,966        |   |  |              |         |      |  |   | 30,593  |  
|Restructuring charges                                                                                                                                           |  |                                             | 1,402   |   |                      |   | 515     |                           |  |   | 594          |   |  |              |         |      |  |   | 2,511   |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Operating (loss) income                                                                                                                                         |  |                                             | (5,899  | ) |                      |   | 5,960   |                           |  |   | (3,024       | ) |  |              |         |      |  |   | (2,963  | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Interest expense                                                                                                                                                |  |                                             | 19,997  |   |                      |   | 1,004   |                           |  |   | 500          |   |  |              |         |      |  |   | 21,501  |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest, income from unconsolidated subsidiaries and equity in
earnings of subsidiaries |  |                                             | (25,896 | ) |                      |   | 4,956   |                           |  |   | (3,524       | ) |  |              |         |      |  |   | (24,464 | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Income tax expense                                                                                                                                              |  |                                             | (152    | ) |                      |   | 203     |                           |  |   | 979          |   |  |              |         |      |  |   | 1,030   |  
|Minority interest                                                                                                                                               |  |                                             |        |   |                      |   | 1,264   |                           |  |   | (16          | ) |  |              |         |      |  |   | 1,248   |  
|Income from unconsolidated subsidiaries                                                                                                                         |  |                                             | 3,777   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3,777   |  
|Equity in earnings of subsidiaries                                                                                                                              |  |                                             | 919     |   |                      |   |        |                           |  |   |             |   |  |              | (919     | )(b) |  |   |        |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income from continuing operations                                                                                                                    |  |                                             | (30,440 | ) |                      |   | 3,489   |                           |  |   | (4,487       | ) |  |              | 919      |      |  |   | (30,519 | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Discontinued operations:                                                                                                                                        |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Loss from discontinued operations, net of tax                                                                                                                   |  |                                             |        |   |                      |   | (18     | )                         |  |   | (11          | ) |  |              |         |      |  |   | (29     | )
|Gain on disposal of discontinued operations, net of tax                                                                                                         |  |                                             |        |   |                      |   | 108     |                           |  |   |             |   |  |              |         |      |  |   | 108     |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net income (loss) from discontinued operations, net of tax                                                                                                      |  |                                             |        |   |                      |   | 90      |                           |  |   | (11          | ) |  |              |         |      |  |   | 79      |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                                                                                           |  | $                                           | (30,440 | ) |                      | $ | 3,579   |                           |  | $ | (4,498       | ) |  | $            | 919      |      |  | $ | (30,440 | )
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  

---

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

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



21



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the three months ended September 30,
2005                                                                                                      |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net sales                                                                                                                                                       |  | $                                           |        |   |                      | $ | 289,693 |                           |  | $ | 128,258      |   |  | $            | (101,988 | )(a) |  | $ | 315,963 |  
|Cost of goods sold                                                                                                                                              |  |                                             |        |   |                      |   | 254,255 |                           |  |   | 119,203      |   |  |              | (101,988 | )(a) |  |   | 271,470 |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Gross profit                                                                                                                                                    |  |                                             |        |   |                      |   | 35,438  |                           |  |   | 9,055        |   |  |              |         |      |  |   | 44,493  |  
|                                                                                                                                                                |  |                                             |         |   |                     
|Selling, general and administrative expenses                                                                                                                    |  |                                             | 5,509   |   |                      |   | 26,901  |                           |  |   | 8,528        |   |  |              |         |      |  |   | 40,938  |  
|Restructuring charges                                                                                                                                           |  |                                             | 857     |   |                      |   | 351     |                           |  |   | 887          |   |  |              |         |      |  |   | 2,095   |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Operating (loss) income                                                                                                                                         |  |                                             | (6,366  | ) |                      |   | 8,186   |                           |  |   | (360         | ) |  |              |         |      |  |   | 1,460   |  
|                                                                                                                                                                |  |                                             |         |   |                     
|Interest expense                                                                                                                                                |  |                                             | 16,181  |   |                      |   | 1,439   |                           |  |   | 405          |   |  |              |         |      |  |   | 18,025  |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest, income from unconsolidated subsidiaries and equity in
earnings of subsidiaries |  |                                             | (22,547 | ) |                      |   | 6,747   |                           |  |   | (765         | ) |  |              |         |      |  |   | (16,565 | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Income tax (benefit) expense                                                                                                                                    |  |                                             | 7,366   |   |                      |   | 70      |                           |  |   | 3,363        |   |  |              |         |      |  |   | 10,799  |  
|Minority interest                                                                                                                                               |  |                                             |        |   |                      |   | 386     |                           |  |   | 177          |   |  |              |         |      |  |   | 563     |  
|Income from unconsolidated subsidiaries                                                                                                                         |  |                                             | (32     | ) |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | (32     | )
|Equity in earnings of subsidiaries                                                                                                                              |  |                                             | (1,903  | ) |                      |   |        |                           |  |   |             |   |  |              | 1,903    | (b)  |  |   |        |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income from continuing operations                                                                                                                    |  |                                             | (27,978 | ) |                      |   | 6,291   |                           |  |   | (4,305       | ) |  |              | (1,903   | )    |  |   | (27,895 | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Discontinued operations:                                                                                                                                        |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Loss from discontinued operations, net of tax                                                                                                                   |  |                                             |        |   |                      |   | (153    | )                         |  |   | (37          | ) |  |              |         |      |  |   | (190    | )
|Gain on disposal of discontinued operations, net of tax                                                                                                         |  |                                             |        |   |                      |   | 107     |                           |  |   |             |   |  |              |         |      |  |   | 107     |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net loss from discontinued operations, net of tax                                                                                                               |  |                                             |        |   |                      |   | (46     | )                         |  |   | (37          | ) |  |              |         |      |  |   | (83     | )
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                                                                                           |  | $                                           | (27,978 | ) |                      | $ | 6,245   |                           |  | $ | (4,342       | ) |  | $            | (1,903   | )    |  | $ | (27,978 | )
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  

---

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

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



22



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | --------- | -
|IN THOUSANDS,For the nine months ended September 30,
2006                                                                                                       |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net sales                                                                                                                                                       |  | $                                           |        |   |                      | $ | 982,585                   |  | $ | 411,883      |   |  | $            | (315,962 | )(a) |  | $ | 1,078,506 |  
|Cost of goods sold                                                                                                                                              |  |                                             |        |   |                      |   | 879,658                   |  |   | 384,883      |   |  |              | (315,962 | )(a) |  |   | 948,579   |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Gross profit                                                                                                                                                    |  |                                             |        |   |                      |   | 102,927                   |  |   | 27,000       |   |  |              |         |      |  |   | 129,927   |  
|                                                                                                                                                                |  |                                             |         |   |                     
|Selling, general and administrative expenses                                                                                                                    |  |                                             | 15,100  |   |                      |   | 57,617                    |  |   | 25,207       |   |  |              |         |      |  |   | 97,924    |  
|Restructuring charges                                                                                                                                           |  |                                             | 1,816   |   |                      |   | 3,923                     |  |   | 666          |   |  |              |         |      |  |   | 6,405     |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Operating (loss) income                                                                                                                                         |  |                                             | (16,916 | ) |                      |   | 41,387                    |  |   | 1,127        |   |  |              |         |      |  |   | 25,598    |  
|                                                                                                                                                                |  |                                             |         |   |                     
|Interest expense                                                                                                                                                |  |                                             | 58,120  |   |                      |   | 3,298                     |  |   | 1,451        |   |  |              |         |      |  |   | 62,869    |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Income (loss) from continuing operations before income taxes, minority interest, income from unconsolidated subsidiaries and equity in
earnings of subsidiaries |  |                                             | (75,036 | ) |                      |   | 38,089                    |  |   | (324         | ) |  |              |         |      |  |   | (37,271   | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Income tax (benefit) expense                                                                                                                                    |  |                                             | (258    | ) |                      |   | 551                       |  |   | 4,059        |   |  |              |         |      |  |   | 4,352     |  
|Minority interest                                                                                                                                               |  |                                             |        |   |                      |   | 3,536                     |  |   | 314          |   |  |              |         |      |  |   | 3,850     |  
|Income from unconsolidated subsidiaries                                                                                                                         |  |                                             | 3,641   |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 3,641     |  
|Equity in earnings of subsidiaries                                                                                                                              |  |                                             | (29,583 | ) |                      |   |                          |  |   |             |   |  |              | 29,583   | (b)  |  |   |          |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Net (loss) income from continuing operations                                                                                                                    |  |                                             | (48,836 | ) |                      |   | 34,002                    |  |   | (4,697       | ) |  |              | (29,583  | )    |  |   | (49,114   | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Discontinued operations:                                                                                                                                        |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Loss from discontinued operations, net of tax                                                                                                                   |  |                                             |        |   |                      |   |                          |  |   | (45          | ) |  |              |         |      |  |   | (45       | )
|Gain on disposal of discontinued operations, net of tax                                                                                                         |  |                                             |        |   |                      |   | 323                       |  |   |             |   |  |              |         |      |  |   | 323       |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Net income (loss) from discontinued operations, net of tax                                                                                                      |  |                                             |        |   |                      |   | 323                       |  |   | (45          | ) |  |              |         |      |  |   | 278       |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Net (loss) income attributable to common stockholders                                                                                                           |  | $                                           | (48,836 | ) |                      | $ | 34,325                    |  | $ | (4,742       | ) |  | $            | (29,583  | )    |  | $ | (48,836   | )
|                                                                                                                                                                |  |                                             |         |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  

---

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

|(b) | Elimination of equity in earnings of subsidiaries.
|--- | --------------------------------------------------



23



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##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the nine months ended September 30,
2005                                                                                                       |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net sales                                                                                                                                                       |  | $                                           |        |   |                      | $ | 835,024 |                           |  | $ | 378,119      |   |  | $            | (303,271 | )(a) |  | $ | 909,872 |  
|Cost of goods sold                                                                                                                                              |  |                                             |        |   |                      |   | 739,253 |                           |  |   | 353,528      |   |  |              | (303,271 | )(a) |  |   | 789,510 |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Gross profit                                                                                                                                                    |  |                                             |        |   |                      |   | 95,771  |                           |  |   | 24,591       |   |  |              |         |      |  |   | 120,362 |  
|                                                                                                                                                                |  |                                             |         |   |                     
|Selling, general and administrative expenses                                                                                                                    |  |                                             | 15,227  |   |                      |   | 69,338  |                           |  |   | 19,966       |   |  |              |         |      |  |   | 104,531 |  
|Restructuring charges (credit)                                                                                                                                  |  |                                             | 910     |   |                      |   | (403    | )                         |  |   | 2,088        |   |  |              |         |      |  |   | 2,595   |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Operating (loss) income                                                                                                                                         |  |                                             | (16,137 | ) |                      |   | 26,836  |                           |  |   | 2,537        |   |  |              |         |      |  |   | 13,236  |  
|                                                                                                                                                                |  |                                             |         |   |                     
|Interest expense                                                                                                                                                |  |                                             | 46,164  |   |                      |   | 3,484   |                           |  |   | 1,264        |   |  |              |         |      |  |   | 50,912  |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest, income from unconsolidated subsidiaries and equity in
earnings of subsidiaries |  |                                             | (62,301 | ) |                      |   | 23,352  |                           |  |   | 1,273        |   |  |              |         |      |  |   | (37,676 | )
|Income tax expense                                                                                                                                              |  |                                             | 6,591   |   |                      |   | 288     |                           |  |   | 5,491        |   |  |              |         |      |  |   | 12,370  |  
|Minority interest                                                                                                                                               |  |                                             |        |   |                      |   | 2,319   |                           |  |   | 362          |   |  |              |         |      |  |   | 2,681   |  
|Income from unconsolidated subsidiaries                                                                                                                         |  |                                             | (163    | ) |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | (163    | )
|Equity in earnings of subsidiaries                                                                                                                              |  |                                             | (16,467 | ) |                      |   |        |                           |  |   |             |   |  |              | 16,467   | (b)  |  |   |        |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income from continuing operations                                                                                                                    |  |                                             | (52,262 | ) |                      |   | 20,745  |                           |  |   | (4,580       | ) |  |              | (16,467  | )    |  |   | (52,564 | )
|                                                                                                                                                                |  |                                             |         |   |                     
|Discontinued operations:                                                                                                                                        |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Loss from discontinued operations, net of tax                                                                                                                   |  |                                             |        |   |                      |   | (120    | )                         |  |   | (364         | ) |  |              |         |      |  |   | (484    | )
|Gain on disposal of discontinued operations, net of tax                                                                                                         |  |                                             |        |   |                      |   | 370     |                           |  |   | 416          |   |  |              |         |      |  |   | 786     |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net income from discontinued operations, net of tax                                                                                                             |  |                                             |        |   |                      |   | 250     |                           |  |   | 52           |   |  |              |         |      |  |   | 302     |  
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                                                                                           |  | $                                           | (52,262 | ) |                      | $ | 20,995  |                           |  | $ | (4,528       | ) |  | $            | (16,467  | )    |  | $ | (52,262 | )
|                                                                                                                                                                |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |         |  

---

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

|(b) | Elimination of equity in earnings of subsidiaries.
|--- | --------------------------------------------------



24



---

##### Table of Contents

REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows

(Unaudited)



|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the nine months ended September 30,
2006                                          |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash Flows from Operating Activities:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                              |  | $                                           | (48,836 | ) |                      | $ | 34,325  |                           |  | $ | (4,742       | ) |  | $            | (29,583 | )(a) |  | $ | (48,836 | )
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|                                                                                                   |  |                                             |         |   |                     
|Discontinued operations                                                                            |  |                                             |        |   |                      |   | (323    | )                         |  |   | 45           |   |  |              |        |      |  |   | (278    | )
|Depreciation and amortization                                                                      |  |                                             | 1,777   |   |                      |   | 9,973   |                           |  |   | 14,274       |   |  |              |        |      |  |   | 26,024  |  
|Non-cash interest expense                                                                          |  |                                             | 3,200   |   |                      |   | 2,219   |                           |  |   |             |   |  |              |        |      |  |   | 5,419   |  
|Minority interest and loss from unconsolidated subsidiaries, net                                   |  |                                             | 3,642   |   |                      |   | 3,536   |                           |  |   | 314          |   |  |              |        |      |  |   | 7,492   |  
|Equity in earnings of subsidiaries                                                                 |  |                                             | (29,583 | ) |                      |   |        |                           |  |   |             |   |  |              | 29,583  | (a)  |  |   |        |  
|Deferred income taxes                                                                              |  |                                             | 1,640   |   |                      |   |        |                           |  |   | (885         | ) |  |              |        |      |  |   | 755     |  
|Accrued pension and post-retirement benefits, net                                                  |  |                                             | 1,546   |   |                      |   |        |                           |  |   | 619          |   |  |              |        |      |  |   | 2,165   |  
|Restructuring charges                                                                              |  |                                             | 1,816   |   |                      |   | 3,923   |                           |  |   | 666          |   |  |              |        |      |  |   | 6,405   |  
|Cash payments for restructuring charges                                                            |  |                                             | (2,280  | ) |                      |   | (9,055  | )                         |  |   | (620         | ) |  |              |        |      |  |   | (11,955 | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges:        |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Accounts receivable                                                                                |  |                                             |        |   |                      |   | (8,936  | )                         |  |   | (8,097       | ) |  |              |        |      |  |   | (17,033 | )
|Inventories                                                                                        |  |                                             |        |   |                      |   | (17,906 | )                         |  |   | 7,041        |   |  |              |        |      |  |   | (10,865 | )
|Accounts payable                                                                                   |  |                                             | (407    | ) |                      |   | 30,171  |                           |  |   | 2,321        |   |  |              |        |      |  |   | 32,085  |  
|Intercompany accounts                                                                              |  |                                             | 48,676  |   |                      |   | (44,098 | )                         |  |   | (4,578       | ) |  |              |        |      |  |   |        |  
|Other current assets and liabilities                                                               |  |                                             | 15,253  |   |                      |   | 10,677  |                           |  |   | 4,131        |   |  |              |        |      |  |   | 30,061  |  
|Other non-current assets and liabilities, net                                                      |  |                                             | (7,795  | ) |                      |   | (360    | )                         |  |   | 5,984        |   |  |              |        |      |  |   | (2,171  | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                             | (11,351 | ) |                      |   | 14,146  |                           |  |   | 16,473       |   |  |              |        |      |  |   | 19,268  |  
|                                                                                                   |  |                                             |         |   |                     
|Cash Flows from Investing Activities:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Acquisitions, net of cash acquired                                                                 |  |                                             |        |   |                      |   | (2,101  | )                         |  |   |             |   |  |              |        |      |  |   | (2,101  | )
|Net proceeds on sale of businesses                                                                 |  |                                             |        |   |                      |   | 323     |                           |  |   |             |   |  |              |        |      |  |   | 323     |  
|Purchases of property, plant and equipment                                                         |  |                                             | (456    | ) |                      |   | (11,760 | )                         |  |   | (5,888       | ) |  |              |        |      |  |   | (18,104 | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash used in investing activities of continuing operations                                     |  |                                             | (456    | ) |                      |   | (13,538 | )                         |  |   | (5,888       | ) |  |              |        |      |  |   | (19,882 | )
|                                                                                                   |  |                                             |         |   |                     
|Cash Flows from Financing Activities:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|                                                                                                   |  |                                             |         |   |                     
|Net borrowings (repayments) under revolving line of credit and other                               |  |                                             | 11,535  |   |                      |   | (897    | )                         |  |   | (2,513       | ) |  |              |        |      |  |   | 8,125   |  
|Distributions to minority interest                                                                 |  |                                             |        |   |                      |   |        |                           |  |   | (986         | ) |  |              |        |      |  |   | (986    | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                             | 11,535  |   |                      |   | (897    | )                         |  |   | (3,499       | ) |  |              |        |      |  |   | 7,139   |  
|                                                                                                   |  |                                             |         |   |                     
|Effect of exchange rate changes on cash                                                            |  |                                             | 598     |   |                      |   |        |                           |  |   | 239          |   |  |              |        |      |  |   | 837     |  
|                                                                                                   |  |                                             |         |   |                     
|Cash flows of discontinued operations                                                              |  |                                             |        |   |                      |   | (53     | )                         |  |   | (177         | ) |  |              |        |      |  |   | (230    | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net decrease in cash and cash equivalents                                                          |  |                                             | 326     |   |                      |   | (342    | )                         |  |   | 7,148        |   |  |              |        |      |  |   | 7,132   |  
|Cash and cash equivalents at beginning of year                                                     |  |                                             | 302     |   |                      |   | 342     |                           |  |   | 19,378       |   |  |              |        |      |  |   | 20,022  |  
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                                           | 628     |   |                      | $ |        |                           |  | $ | 26,526       |   |  | $            |        |      |  | $ | 27,154  |  
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  

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



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REMY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows

(Unaudited)



|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|IN THOUSANDS,For the nine months ended September 30,
2005                                          |  | RemyInternational,Inc. (ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash Flows from Operating Activities:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                              |  | $                                           | (52,262 | ) |                      | $ | 20,995  |                           |  | $ | (4,528       | ) |  | $            | (16,467 | )(a) |  | $ | (52,262 | )
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|                                                                                                   |  |                                             |         |   |                     
|Discontinued operations                                                                            |  |                                             |        |   |                      |   | (250    | )                         |  |   | (52          | ) |  |              |        |      |  |   | (302    | )
|Depreciation and amortization                                                                      |  |                                             | 1,871   |   |                      |   | 11,129  |                           |  |   | 9,499        |   |  |              |        |      |  |   | 22,499  |  
|Non-cash interest expense                                                                          |  |                                             | 2,569   |   |                      |   | 1,791   |                           |  |   |             |   |  |              |        |      |  |   | 4,360   |  
|Minority interest and loss from unconsolidated subsidiaries, net                                   |  |                                             | (163    | ) |                      |   | 2,319   |                           |  |   | 362          |   |  |              |        |      |  |   | 2,518   |  
|Equity in earnings of subsidiaries                                                                 |  |                                             | (16,467 | ) |                      |   |        |                           |  |   |             |   |  |              | 16,467  | (a)  |  |   |        |  
|Deferred income taxes                                                                              |  |                                             | 6,748   |   |                      |   | (255    | )                         |  |   | (461         | ) |  |              |        |      |  |   | 6,032   |  
|Accrued pension and post-retirement benefits, net                                                  |  |                                             | (495    | ) |                      |   |        |                           |  |   | 754          |   |  |              |        |      |  |   | 259     |  
|Restructuring charges (credits)                                                                    |  |                                             | 910     |   |                      |   | (403    | )                         |  |   | 2,088        |   |  |              |        |      |  |   | 2,595   |  
|Cash payments for restructuring charges                                                            |  |                                             | (501    | ) |                      |   | (2,266  | )                         |  |   | (1,444       | ) |  |              |        |      |  |   | (4,211  | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges:        |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Accounts receivable                                                                                |  |                                             |        |   |                      |   | (15,355 | )                         |  |   | 550          |   |  |              |        |      |  |   | (14,805 | )
|Inventories                                                                                        |  |                                             |        |   |                      |   | 3,596   |                           |  |   | 2,057        |   |  |              |        |      |  |   | 5,653   |  
|Accounts payable                                                                                   |  |                                             | (165    | ) |                      |   | 2,408   |                           |  |   | (1,019       | ) |  |              |        |      |  |   | 1,224   |  
|Intercompany accounts                                                                              |  |                                             | 12,913  |   |                      |   | 756     |                           |  |   | (13,669      | ) |  |              |        |      |  |   |        |  
|Other current assets and liabilities                                                               |  |                                             | 11,360  |   |                      |   | (7,286  | )                         |  |   | 10,500       |   |  |              |        |      |  |   | 14,574  |  
|Other non-current assets and liabilities, net                                                      |  |                                             | (20,624 | ) |                      |   | 1,800   |                           |  |   | 3,387        |   |  |              |        |      |  |   | (15,437 | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                             | (54,306 | ) |                      |   | 18,979  |                           |  |   | 8,024        |   |  |              |        |      |  |   | (27,303 | )
|                                                                                                   |  |                                             |         |   |                     
|Cash Flows from Investing Activities:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Acquisitions, net of cash acquired                                                                 |  |                                             | (57,048 | ) |                      |   | (225    | )                         |  |   |             |   |  |              |        |      |  |   | (57,273 | )
|Net proceeds on sale of businesses                                                                 |  |                                             |        |   |                      |   | 371     |                           |  |   | 240          |   |  |              |        |      |  |   | 611     |  
|Purchases of property, plant and equipment                                                         |  |                                             | (2,154  | ) |                      |   | (16,036 | )                         |  |   | (9,580       | ) |  |              |        |      |  |   | (27,770 | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash used in investing activities of continuing operations                                     |  |                                             | (59,202 | ) |                      |   | (15,890 | )                         |  |   | (9,340       | ) |  |              |        |      |  |   | (84,432 | )
|                                                                                                   |  |                                             |         |   |                     
|Cash Flows from Financing Activities:                                                              |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net borrowings (repayments) under revolving line of credit and other                               |  |                                             | 74,200  |   |                      |   | (1,039  | )                         |  |   | 4,015        |   |  |              |        |      |  |   | 77,176  |  
|Financing costs                                                                                    |  |                                             | (325    | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (325    | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                             | 73,875  |   |                      |   | (1,039  | )                         |  |   | 4,015        |   |  |              |        |      |  |   | 76,851  |  
|                                                                                                   |  |                                             |         |   |                     
|Effect of exchange rate changes on cash                                                            |  |                                             |        |   |                      |   |        |                           |  |   | (757         | ) |  |              |        |      |  |   | (757    | )
|                                                                                                   |  |                                             |         |   |                     
|Cash flows of discontinued operations                                                              |  |                                             |        |   |                      |   | (769    | )                         |  |   | 132          |   |  |              |        |      |  |   | (637    | )
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net (decrease) increase in cash and cash equivalents                                               |  |                                             | (39,633 | ) |                      |   | 1,281   |                           |  |   | 2,074        |   |  |              |        |      |  |   | (36,278 | )
|Cash and cash equivalents at beginning of year                                                     |  |                                             | 40,740  |   |                      |   | 689     |                           |  |   | 21,116       |   |  |              |        |      |  |   | 62,545  |  
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                                           | 1,107   |   |                      | $ | 1,970   |                           |  | $ | 23,190       |   |  | $            |        |      |  | $ | 26,267  |  
|                                                                                                   |  |                                             |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  

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



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|        |  |                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 2. |  | REMY INTERNATIONAL, INC. AND SUBSIDIARIES                                                                                                                                                            
|        | 
|        |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AMOUNTS IN MILLIONS, EXCEPT AS
INDICATED For the three and nine month periods ended September 30, 2006 and 2005

Introduction

The following managements discussion and analysis of financial condition and results of operations should be read in conjunction with Remy International, Inc.s (the Company, we,
us or our) Annual Report on Form 10-K for the year ended December 31, 2005, 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 5 to our financial statements in Item 1). The
operating results of UPC for the period March 18 through September 30, 2005, are included in our condensed consolidated statements of operations and cash flows for the nine months ended September, 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.

General

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

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



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

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

Our operating results for 2005 were significantly below 2004. While annual net sales
increased to $1,229.0 million in 2005 from $1,051.2 million in 2004, gross margin percentage decreased to approximately 12% in 2005. This decrease in gross margin percentage, coupled with impairment and restructuring charges in 2005 led to an
operating loss of $10.7 million and a net loss (from continuing operations) of $96.6 million for the year ended December 31, 2005. The decrease in gross margin percentage was driven by decreasing sales prices, commodity price increases, start
up and launch costs in transferring certain manufacturing and remanufacturing production to Mexico and unfavorable foreign currency exchange fluctuations (primarily in the US dollar vs. the Korean Won).

Our operating results for the nine months ended September 30, 2006 improved as compared to the same period of 2005. Net sales increased to $1,078.5
million in the nine months ended September, 2006, from $909.9 million in the same period of 2005. Net loss for the nine months ended September 30, 2006, decreased to $48.8 million as compared to a loss of $52.3 million for the same period of
2005.

For the full year of 2005, we used $46.9 million of cash for operating activities and $41.4 million of cash for capital
expenditures. In December 2005, we obtained an additional $80.0 million term loan. For the nine months ended September 30, 2006, cash provided by operating activities was $19.3 million compared with $27.3 million of cash used in operating
activities in the same period of 2005. Cash required to service our substantial indebtedness places significant demands on our liquidity.

In order to improve our 2006 cash flow from operations as well as our overall liquidity, we have taken specific actions to improve our margins and overall cost structure. These actions include certain customer price increases, supplier
price concessions, and headcount reductions. Further, we plan to complete the integration of the acquisition of UPC in 2007.

During the
nine months ended September 30, 2006, the Company experienced operating results at a level less than anticipated, but higher than the comparable prior year period. The Company performs its annual impairment test for goodwill in the fourth
quarter each year, which requires us to re-evaluate certain assumptions in determining fair value, including assumptions about the future cash flows of our businesses.

Our $145.0 million, 85/8% Senior Notes are due December 15, 2007. In
anticipation of this due date and in consideration of our substantial indebtedness, we are exploring various strategic alternatives, including, but not limited to, refinancing some or all of our debt. In addition, the Board of Directors has
authorized management to explore restructuring alternatives including the engagement of investment bankers to assist us in analyzing the disposition and use of proceeds from certain non-core businesses.



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We believe that the actions discussed above provide the foundation for improved operating performance in 2006 and future
periods and that our expected future operating results and liquidity are sufficient to satisfy our operating and liquidity requirements during 2006. We are prepared to take actions to maintain sufficient liquidity in the event of any unforeseen
downturns or other circumstances. For more information see our 2005 Form 10-K.

Results of Operations

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005



|                       |  |      |       |      |   |          |  |          |      |  |      |  
|---------------------- |  | ---- | ----- | ---- | - | -------- |  | -------- | ---- |  | ---- | -
|Product Categories     |  | 2006 |       | 2005 |   | Increase |  | % Change |     
|Automotive OEM         |  | $    | 92.7  |      | $ | 80.6     |  | $        | 12.1 |  | 15.0 | %
|Heavy duty OEM         |  |      | 55.5  |      |   | 50.4     |  |          | 5.1  |  | 10.1 |  
|Electrical aftermarket |  |      | 140.4 |      |   | 138.6    |  |          | 1.8  |  | 1.2  |  
|Powertrain             |  |      | 51.6  |      |   | 34.0     |  |          | 17.6 |  | 51.7 |  
|Core services          |  |      | 14.5  |      |   | 12.4     |  |          | 2.1  |  | 16.9 |  
|                       |  |      |       |      |   |          |  |          |      |  |      |  
|Total Net Sales        |  | $    | 354.7 |      | $ | 316.0    |  | $        | 38.7 |  | 12.2 | %
|                       |  |      |       |      |   |          |  |          |      |  |      |  

Net Sales

Net sales to Original Equipment Manufacturers, which we refer to as OEMs, increased quarter over quarter in part due to the North American industry practice of passing on the costs of fluctuations from the contractual
price of copper and aluminum to certain of our customers. Automotive OEM also increased due to the continued ramp up of the alternator business. Heavy-duty OEM sales increased primarily due to volume. Electrical aftermarket sales remained in line
with the third quarter of 2005. Powertrain sales increased primarily due to strong sales of parts and diesel engines, and marginally by increases in locomotive sales. Third party sales in the core services business increased primarily relating to
product mix and general market conditions.

Gross Profit

Gross profit of $30.1 million in the third quarter of 2006 decreased $14.4 million, or 32.3%, compared with the third quarter of 2005, and as a percentage of net sales was 8.5% in 2006 compared with 14.1% in 2005. During the third quarter
of 2006, the Company experienced an unusual increase in warranty returns for a limited class of products primarily made in prior years. Accordingly, the Company revised its estimate and recorded an increase to its warranty obligation of $8.8 million
(OEM $6.7 million and Electrical Aftermarket $2.1 million). The Company believes that the product issues which caused this high level of claims have since been corrected.

OEM gross profit decreased $10.1 million primarily due to an increase in warranty expense, depreciation expense, absorbed commodity costs, unfavorable currency impact of certain raw materials and higher depreciation
expense. In addition, the increase in revenue due to the ramp of the alternator business was at lower margins. Electrical aftermarket gross profit decreased $7.4 million, due to an increase in warranty expense, the unfavorable impact of pricing
pressures, commodity pricing, and



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##### Table of Contents

higher freight which more than offset the rationalization savings from the Unit Parts Acquisition. Powertrain gross
profit increased $2.6 million as a result of higher sales of diesel engines and parts. Gross profit on core services increased $0.6 million due to product mix and higher material prices.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, which we
refer to as SG&A, of $30.6 million in the third quarter of 2006 decreased $10.3 million, or 25.3%, from $40.9 million in the third quarter of 2005. As a percentage of net sales, SG&A expenses were 8.6% in the third quarter of 2006 compared
with 13.0% in the third quarter of 2005. For the third quarter of 2006, the impact of the Companys hedge and currency translations was a $0.9 million gain as compared to a $1.4 million loss in the third quarter of 2005, or an approximate $2.3
million favorable impact. Developmental work in our new Hybrid technology has been absorbed by the Company during 2006, and in all previous periods. A reimbursement of approximately $2.6 million for a portion of this developmental work was received
in the third quarter of 2006. The decrease in SG&A expenses also reflects the effect of recent restructuring actions and efforts to reduce spending.

Restructuring Charge

A restructuring charge of $2.5 million in the third quarter of 2006 consisted of an elimination of a
layer of senior management in Indiana and Mississippi, U.S.A., and restructuring of our aftermarket operations in Europe. The elimination of the layer of senior management was $1.9 million and the work force reduction in Europe for a total of
approximately 51 employees was $0.3 million. The other costs consisted of $0.3 million exit costs primarily associated with facilities consolidation in Europe.

A restructuring charge of $2.1 million in the third quarter of 2005 consisted of: (i) a reduction in force at our headquarters in Anderson, Indiana, which was initiated in the third quarter of 2005; (ii) the
2003 closure of our starter and alternator manufacturing operations in Anderson, Indiana; and (iii) the consolidation of certain operations in Europe. This charge consisted of employee termination benefits, including early retirement, totaling
$1.6 million and other costs of $0.5 million.

Operating Income

In the third quarter of 2006, the Company had an operating loss of $3.0 million as compared to operating income of $1.5 million in the same period of 2005, and reflects the net sales, gross profit, SG&A expense
and restructuring charge factors discussed above.

Interest Expense

Interest expense was $21.5 million in the third quarter of 2006 compared to $18.0 million in the third quarter of 2005, an increase of $3.5 million. This increase is primarily related to additional borrowings under
our senior credit facility, the impact of interest rate increases on our floating rate obligations including the $125.0 million Second Priority Senior Secured Floating Rate Notes and the increased amortization of deferred financing costs.



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Income Taxes

Income tax expense of $1.0 million in the third quarter of 2006 consisted of a $0.5 million provision for U.S. federal and state deferred income taxes, a reduction in domestic current state and local taxes of $0.1 million and taxes in
various foreign jurisdictions of $0.6 million, net of $1.1 million reversal of tax contingency. In the third quarter of 2006, we resolved a bi-lateral advanced pricing agreement (APA) between Remy Korea Ltd., and Remy International Inc.,
and accordingly reversed the $1.1 million tax contingency. Income tax expense of $10.8 million in the third quarter of 2005 included a $6.7 million increase to the deferred tax valuation allowance and provisions for foreign taxes of $4.1 million.

Minority Interest

Minority interest
in income of subsidiaries of $1.2 million in the third quarter of 2006 consisted of minority shareholders interest 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. The minority interest in income of these same subsidiaries for the comparable period of 2005 is $0.6 million.

Income from Unconsolidated Subsidiaries

The loss from unconsolidated subsidiaries of approximately $3.8 million in the
third quarter of 2006 relates to an impairment charge of our investment in Sahney Paris Rhone Ltd., which we refer to as SPR. Income of $0.03 for the comparable period of 2005 relates to our share of income recorded by SPR.

Discontinued Operations

The net income from
discontinued operations of $0.1 million in the third quarter of 2006 is comprised primarily of a gain relative to the sale of Tractech, Inc., which we refer to as Tractech, and Kraftube, Inc., which we refer to as Kraftube, in 2003. The net loss
from discontinued operations of $.1 million in the third quarter of 2005 includes a $.2 million operating loss recorded by our remanufactured transmission, and contract and retail gas engine businesses offset by a $0.1 million gain relative to the
sale of Tractech and Kraftube, in 2003.

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

Net Sales



|                       |  |      |         |      |   |          |  |          |       |  |      |  
|---------------------- |  | ---- | ------- | ---- | - | -------- |  | -------- | ----- |  | ---- | -
|Product Categories     |  | 2006 |         | 2005 |   | Increase |  | % Change |      
|Automotive OEM         |  | $    | 299.8   |      | $ | 232.7    |  | $        | 67.1  |  | 28.8 | %
|Heavy duty OEM         |  |      | 162.2   |      |   | 151.6    |  |          | 10.6  |  | 6.9  |  
|Electrical aftermarket |  |      | 418.4   |      |   | 376.8    |  |          | 41.6  |  | 11.0 |  
|Powertrain             |  |      | 150.5   |      |   | 105.6    |  |          | 44.9  |  | 42.5 |  
|Core services          |  |      | 47.6    |      |   | 43.2     |  |          | 4.4   |  | 10.1 |  
|                       |  |      |         |      |   |          |  |          |       |  |      |  
|Total Net Sales        |  | $    | 1,078.5 |      | $ | 909.9    |  | $        | 168.6 |  | 18.5 | %
|                       |  |      |         |      |   |          |  |          |       |  |      |  



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Automotive OEM net sales increased due primarily to the ramp up of the alternator business and the impact
of new business awards received in 2004. Heavy-duty OEM sales increased primarily due to increased volume and mix. Net OEM sales year-over-year also increased due to the North American industry practice of passing on the costs of fluctuations from
the contractual price of copper and aluminum to certain of our customers. Electrical aftermarket sales increased primarily due to the acquisition of Unit Parts Company in March 2005 offset by softer market conditions. Powertrain sales increased due
to higher diesel engine and parts sales, slightly offset by lower locomotive product volume. Third party sales in the core services business increased due to product mix and general market conditions.

Gross Profit

Gross profit of $129.9 million in the first nine months
of 2006 increased $9.6 million, or 7.9% compared with the same period of 2005, and as a percentage of net sales was 12.0% in 2006 compared with 13.2% in 2005. During the third quarter of 2006, the Company experienced an unusual increase in warranty
returns for certain heavy duty products primarily made in prior years. Accordingly, the Company revised its estimate and recorded an increase to its warranty obligation of $8.8 million (OEM $6.7 million and Electrical Aftermarket $2.1 million). The
Company believes that the product issues which caused this high level of claims have since been corrected.

OEM gross profit decreased by
$2.9 million due to increased warranty expense, commodity costs absorbed, and higher fuel costs. In addition, the increase in revenues due to alternator business ramp up was at lower margins. OEM gross profit for 2005 was also negatively impacted by
significant startup and integration costs associated with initial sourcing of components from Korean suppliers to our Mexican operations during the third quarter of 2005. Electrical aftermarket gross profit increased $5.5 million, primarily due to
the net of increased volume resulting from the UPC acquisition in March, 2005, offset by the increase in warranty expense. Additionally, 2005 Electrical aftermarket gross profit was negatively impacted by a charge of $6.0 million recorded in the
second quarter of 2005 relative to a likely underpayment of U.S. import duties on remanufactured starters and alternators imported into the U.S. in the years 2000 to 2004. Powertrain gross profit increased $7.1 million resulting from increased
diesel engine and parts volume, offset partially by the impact of lower locomotive product volumes. Gross profit on core services was relatively unchanged.

Selling, General and Administrative Expenses

SG&A expenses of $97.9 million in the first nine months of 2006 decreased
$6.6 million, or 6.3%, from $104.5 million in the first nine months of 2005. As a percentage of net sales, SG&A expenses were 9.1% in the first nine months of 2006 compared with 11.5% in the same period of 2005, or a decrease of 2.4%. The
decrease in SG&A expenses reflects costs savings associated with restructuring activities undertaken and focus on reduced spending.

Restructuring
Charges

A restructuring charge of $6.4 million in the first nine months of 2006 consisted of $4.3 million of exit costs and $2.1
million for employee termination costs relative to the:



| |  |  | Elimination of a layer of senior management in Indiana and Mississippi, U.S.A.,
| | - |  | -------------------------------------------------------------------------------



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| |  |  | Restructuring of aftermarket operations in Europe which included consolidation of operations in Belgium from three to two facilities, and a reduction in work force including early
retirements and involuntary terminations in the United Kingdom, Belgium, and Hungary for a total reduction in workforce of approximately 51 employees,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | And closure of two distribution centers in its core service operations.
| | - |  | -----------------------------------------------------------------------

In the first nine months of 2005, we recorded a net restructuring charge of $2.6 million relative to: (i) the 2003 closure of our starter and alternator manufacturing operations in Anderson, Indiana;
(ii) the closure and consolidation of our electrical aftermarket remanufacturing and distribution facilities in Reed City, Michigan; (iii) the consolidation of certain operations in Europe; (iv) a reduction in force subsequent to the
ramp up of the insourcing activities mentioned above and continued implementation of lean manufacturing initiatives at our OE operations in Mexico; and (v) the consolidation of our alternator and starter remanufacturing operations in
Mississippi. This net charge consisted of employee termination benefits totaling $3.0 million, other costs of $0.7 million, 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.

Operating Income

Operating income of $25.6 million and $13.2 million in the first nine months of 2006 and 2005, respectively, reflects the net sales, gross profit,
SG&A expense and restructuring charge factors discussed above.

Interest Expense

Interest expense of $62.9 million, in the first nine months of 2006, increased $12.0 million from $50.9 million in the comparable period of 2005. The
increase is primarily related to additional borrowings under our senior credit facility, the impact of interest rate increases on our floating rate obligations including the $125.0 million Second Priority Senior Secured Floating Rate Notes, the
imputed interest on our customer obligations and the increased amortization of deferred financing costs.

Income Taxes

Income tax expense of $4.4 million in the first nine months of 2006 consisted of $1.6 million provision for U.S. federal and state deferred income taxes,
domestic current state and local taxes of $0.3 million and taxes in various foreign jurisdictions of $2.5 million, net of reversal of $1.1 million tax contingency. In the third quarter of 2006, we resolved a bi-lateral advanced pricing agreement
(APA) between Remy Korea Ltd., and Remy International Inc., and accordingly reversed the $1.1 million tax contingency. Income tax expense of $12.4 million in the first nine months of 2005 included a $6.7 million increase to the deferred
tax valuation allowance for unreserved domestic income tax assets, provisions for domestic state and local taxes of $0.4 million and taxes in various foreign jurisdictions totaling $5.3 million. In 2003, we established a valuation allowance for
substantially all domestic U.S. deferred tax assets. In 2005, we recorded a valuation allowance for the remaining unreserved domestic deferred tax assets. Accordingly, we recorded a valuation allowance related to the domestic net operating loss
generated in the nine months ended September 30, 2006.



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Minority Interest

Minority interest in income of subsidiaries of $3.9 million in the first nine months of 2006 consisted of minority shareholders interests in the earnings of our joint venture with International Truck and Engine
Corporation and earnings of Hubei. The minority interest in income of these same subsidiaries for the comparable period of third quarter of 2005 was $2.7 million.

Income from Unconsolidated Subsidiaries

The loss from unconsolidated subsidiaries of approximately $3.6 million for
the nine months ended September 30, 2006 primarily relates to an impairment charge of $3.8 million on our investment in Sahney Paris Rhone Ltd., which we refer to as SPR. Income of $0.2 for the comparable period of 2005 relates to our share of
income recorded by SPR.

Discontinued Operations

For the nine months ended September 30, 2006, we recorded a gain on disposal of $0.3 million relative to the sale of Automatic Transmission International A/S in 2005, Tractech, Inc. and Kraftube, Inc. in 2003.
Additional gains may be recognized relative to the sale of Tractech, Inc. and Krafttube, Inc. based on the financial performance of these businesses in 2006 through 2008.

The loss from discontinued operations of $0.5 million in the first nine months of 2005 consisted of operating results recorded by our remanufactured transmission and contract and retail gas engine businesses. In the
second quarter of 2005, we completed the sale of our automatic transmission remanufacturing business, AMT. The estimated loss on the sale of this business of $2.2 million recorded in 2004 was reduced by $0.4 million in the second quarter of 2005 as
a result of the sale. We recorded an additional gain of $0.4 million in the first nine months of 2005 relative to the sale of Tractech and Kraftube in 2003.

Liquidity and Capital Resources

Our short-term liquidity needs include required debt service (including capital lease
payments), normal daily operating expenses, working capital requirements, the payment of customer obligations and the funding of capital expenditures and restructuring actions. Long-term liquidity requirements consist primarily of principal payments
of long-term debt and may be affected by payments for contingent earn-out arrangements relative to the acquisition of UPC. These contingent earn-out payments are based on incremental financial performance objectives in excess of the current
performance of the combined Electrical Aftermarket business and are to be paid over a four-year period. The first measurement year of the earn-out did not result in the recording of any liability and the amount of future 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 11 to our consolidated financial statements under Item 8 of our 2005 Form 10-K.



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##### Table of Contents

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. At September 30, 2006, the borrowings under the revolving credit facility were comprised of $40 million at a LIBOR rate of 7.33%, $2.4 million at a prime rate of 8.25% and letters of credit totaled $8.5
million. Based on the collateral supporting the senior credit facility at September 30, 2006, $93.3 million was available, net of letters of credit. At September 30, 2006, borrowings outstanding under the term loan of the Senior Credit
Facility were $80 million, reflected on the condensed consolidated balance sheet net of the unamortized portion of the original issue discount of $1.7 million. The interest rate on borrowings outstanding under the term loan portion of the credit
facility at September 30, 2006 was approximately 11.40%.

We participate in programs that accelerate the collection of accounts
receivable. Under these programs, we sell the accounts of certain aftermarket customers to banks, on a non-recourse basis, at a discount. At September 30, 2006 and December 31, 2005, the increase in receivables in the U.S. that would occur
if these programs were discontinued would be approximately $40.8 million and $47.0 million, respectively. These calculations are based upon payment terms agreed to with a customer if these programs were discontinued. Additionally, at
September 30, 2006 and December 31, 2005, we had approximately $10.9 million and $11.0 million, respectively, factored in Europe. In December 2005, a non recourse factoring program specific to one of our customers was terminated.

The Company had approximately $47 million and $37 million in accounts receivable from General Motors Corporation at September 30,
2006, and December 31, 2005, respectively. This represents approximately 23% and 20% of total trade accounts receivable, net at September 30, 2006 and December 31, 2005.

As of September 30, 2006 we had current assets of $544.9 million and current liabilities of $437.0 million, or a working capital surplus of $107.9
million. As of December 31, 2005 we had current assets of $487.2 million and current liabilities of $358.5 million, or a working capital surplus of $128.7 million.

During the nine months ended September 30, 2006, the Company experienced operating results at a level less than anticipated, but higher than the comparable prior year period. The Company performs its annual
impairment test for assets in the fourth quarter each year, which requires us to re-evaluate certain assumptions in determining fair value, including assumptions about the future cash flows of our businesses.

We believe that cash generated from operations, together with the amounts available under the senior credit facilities and other borrowings, will be
adequate to meet our debt service, capital expenditure, restructuring and working capital requirements for 2006.

On a net loss of $48.8
million, cash provided by operating activities during the first nine months of 2006 totaled $19.3 million. These operating cash flows included a net increase in working capital (including trade accounts receivable, payable, inventories, and other
current assets and liabilities) of $34.2 million from year end 2005. Accounts receivable increased $17.0 million and accounts payable increased $32.1 million in the first nine months of 2006 due primarily to support higher sales. In



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comparison, inventories increased by $10.8 million in the first nine months of 2006 in spite of higher sales volume as a
result of increased focus on supply chain management. The net increase in other current assets and liabilities of $30.1 million primarily reflects the increase in accrued interest of $12.3 million, due to increased use of credit facilities, timing
of interest payments and an increase in the companys accrued warranty liability of $12.1 million. Cash restructuring payments of $12.0 million in the first nine months of 2006 consisted primarily of $5.6 million for the settlement of the UAW
matter and other employee termination payments. Depreciation and amortization and non-cash interest expense was $31.4 million. All other items totaled $14.4 million.

Cash used in operating activities of continuing operations of $27.3 million in the first nine months of 2005 reflected a $6.6 million increase 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 $4.2 million. Accounts receivable increased $14.8 million in the first nine months of 2005 due primarily to stronger heavy duty OEM,
diesel engine and locomotive sales. Inventories decreased $5.7 million in the first nine months of 2005 due primarily to strong heavy duty OEM shipments, partially offset by lower electrical aftermarket sales. Accounts payable increased $1.2 million
from year end 2004. The net change in other current assets and liabilities of $14.6 million reflected timing of interest payments and the accrual of $6.0 million of duty expense in the second quarter of 2005 relative to possible underpayment of U.S.
duties on remanufactured starters and alternators imported into the U.S. in the years 2000 to 2004, partially offset by the payment of customer obligations. Customer obligation payments in the first nine months of 2006 and 2005 totaled approximately
$14.0 and $15.0 million, respectively. Cash restructuring payments of $4.2 million in the first nine months of 2005 consisted of $3.0 million of employee termination benefits relative to the 2003, 2004 and 2005 restructuring actions and $1.2 million
of other items. All other non-cash and reconciling items totaled $29.7 million.

Cash used for investing activities totaled $19.9 million
for the nine month period ended September 30, 2006. This includes $18.1 million for the purchase of property, plant and equipment, $2.1 million for the acquisition of the remaining assets relating to the acquisition of Delphi Corporations
light vehicle alternator business, offset by $0.3 million from the net proceeds on sale of businesses and assets. Cash used for investing activities totaled $84.4 million for the nine month period ended September 30, 2005. This includes $27.7
million for the purchase of property, plant and equipment, $57.3 million primarily for the acquisition Unit Parts Company, offset by $0.6 million from the net proceeds on sale of businesses and assets. Capital expenditures in both 2006 and 2005 were
primarily for production, engineering and distribution equipment and include investments associated with the launch of new products.

Cash
provided by financing activities from continuing operations of $7.1 million and $76.9 million in the nine months ended September 30, 2006 and 2005, respectively, consisted primarily of borrowings under our senior credit facility.

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 13 to the Condensed Consolidated Financial Statements in Item 1 of Part I.



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##### Table of Contents

Contractual Obligations and Contingent Liabilities and Commitments

Our contractual obligations as of September 30, 2006 are provided in the following table (dollars in millions):



|                                       |  |                        |     |                |   |    |            |  |   |            |     |           |   |    |  |   |    
|-------------------------------------- |  | ---------------------- | --- | -------------- | - | -- | ---------- |  | - | ---------- | --- | --------- | - | -- |  | - | ---
|                                       |  | Payments Due by Period
|Contractual Obligations                |  | Total                  |     | Balanceof 2006 |   |    | 2007 -2009 |  |   | 2010 -2011 |     | After2011
|Long-Term Debt(1)                      |  | $                      | 744 |                | $ | 6  | (2)        |  | $ | 585        | (2) |           | $ | 1  |  | $ | 152
|Capital Lease Obligations              |  |                        | 8   |                |   |   |            |  |   | 1          |     |           |   | 1  |  |   | 6  
|Customer Obligations(3)                |  |                        | 60  |                |   | 9  |            |  |   | 30         |     |           |   | 13 |  |   | 8  
|Pension Funding(4)                     |  |                        | 3   |                |   |   |            |  |   | 3          |     |           |   |   |  |   |   
|Other Post Retirement Benefits Funding |  |                        | 11  |                |   | 1  |            |  |   | 3          |     |           |   | 2  |  |   | 5  
|Operating Leases                       |  |                        | 41  |                |   | 2  |            |  |   | 22         |     |           |   | 8  |  |   | 9  
|Employee Termination Benefits          |  |                        | 7   |                |   | 6  |            |  |   | 1          |     |           |   |   |  |   |   
|Other                                  |  |                        | 4   |                |   | 1  |            |  |   | 3          |     |           |   |   |  |   |   
|                                       |  |                        |     |                |   |    |            |  |   |            |     |           |   |    |  |   |    
|Total Contractual Cash Obligations     |  | $                      | 878 |                | $ | 25 |            |  | $ | 648        |     |           | $ | 25 |  | $ | 180
|                                       |  |                        |     |                |   |    |            |  |   |            |     |           |   |    |  |   |    

---

|(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 for the balance of 2006 and $19 million for 2007 related to foreign revolving credit agreements which normally will be renewed in 2006 and 2007 with maturity
dates of one year or less.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Customer obligations consist of $18 million of current liabilities and $39 million of non current liabilities.
|--- | --------------------------------------------------------------------------------------------------------------

|(4) | Amounts beyond 2007 are not currently estimable. In the second quarter of 2006, we filed for a pension funding waiver for our 2006 contributions. For further information see Note 9
to our consolidated financial statements under Item 1 of this Form 10-Q. Amount presented represents minimum estimated funding requirement if the funding waiver is approved for 2007.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the contractual obligations disclosed above, we have a variety of other contractual agreements related to the procurement of materials and
other commitments. With respect to these agreements, we are not subject to any contracts that commit us to significant non-cancelable commitments. With respect to agreements related to the procurement of inventory used in our manufacturing and
remanufacturing processes, we had approximately $70 million to $90 million of open purchase orders at September 30, 2006.

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.

Foreign Operations

Approximately 21% of our net sales, in the nine months ending September 30, 2006, 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.



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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, 2005, 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:



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



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



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



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



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



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



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



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



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



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



| |  |  | customs duties claims;
| | - |  | ----------------------



| |  |  | costs and risks relative to enterprise resource planning implementations;
| | - |  | -------------------------------------------------------------------------



| |  |  | costs related to re-sourcing and outsourcing products;
| | - |  | ------------------------------------------------------



| |  |  | bankruptcy filings, financial uncertainties and labor disruptions affecting suppliers and customers;
| | - |  | ----------------------------------------------------------------------------------------------------



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



| |  |  | additional financing requirements and ability to make required interest payments;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | the incremental liquidity provided by the term loan, subject to borrowing base and other limitations on our ability to borrow under our revolving credit facilities or otherwise;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dispositions;
| | - |  | -------------



| |  |  | the effect of commodity, raw material prices and energy costs;
| | - |  | --------------------------------------------------------------



| |  |  | the impact of supply chain cost management initiatives;
| | - |  | -------------------------------------------------------



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| |  |  | litigation uncertainty and warranty claims; and
| | - |  | -----------------------------------------------



| |  |  | the effect of economic conditions and other uncertainties detailed from time to time in our filings with the SEC.
| | - |  | -----------------------------------------------------------------------------------------------------------------

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.

Factors that May Affect Future Results

We believe that results for the remainder of 2006 will
continue to be negatively impacted by year over year softness in the North American car and truck market, pricing pressures, higher commodity costs, including but not limited to copper and aluminum, fuel costs, interest costs, adverse currency
fluctuations and investments in engineering and systems.



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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2006, 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, 2005.

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 September 30, 2006
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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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.

HCSPay
Litigation

On January 16, 2006, we initiated litigation in the Circuit Court of Oakland County, Michigan against Hennessey
Capital, LLC; HCSPay, LLC; and SurGen, LLC (we refer to the preceding three entities collectively as Hennessey) and against Surge Capital; Lancelot Investors Fund LP; Lancelot Investment Management, LLC; AGM II, LLC; and John Maselli (we
refer to the preceding five entities collectively as Surge). This litigation seeks the return of approximately $6.1 million that we believe is owed to us under a factoring agreement that we entered into with Hennessey plus punitive
damages and costs. We allege claims against Hennessey for breach of contract and breach of fiduciary duty. We allege claims against Surge for conversion, unjust enrichment, declaratory judgment, and constructive trust and seek the return of our
funds plus punitive damages and costs. In response to our Complaint, the Surge entities moved for summary disposition, asserting that they were within their rights to sweep the account pursuant to their control agreement with HCSPay. On
June 14, 2006, the Court denied the Surge entities motion. Surge has not yet filed an answer. On June 13, 2006, certain of the Hennessey entities filed cross-claims under tort and contract theories against Surge. Hennessey also
asserts that only HCSPay  the entity that signed the factoring agreement  can be liable to us. The parties are proceeding with discovery. This matter is ongoing, and we are pursuing our claims vigorously. At September 30, 2006,
we had $6.1 million recorded as other receivable related to this matter.

UAW Litigation

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



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$5.3 million to the SUB plan in return for a release of all claims alleged in the lawsuit, including any further
obligations to fund the SUB plan. We paid the $5.3 million and associated payroll taxes of $0.3 million in first quarter of 2006.

Prison Labor Matter

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

Franklin Power Products Facility

In
September 2000, one of Franklin Power Products, Inc.s Indiana facilities received a Finding of Violation and Order for Compliance (the Order) from the EPA requiring the facility to correct violations of its wastewater discharge
permits. Franklin Power Products, Inc. installed wastewater treatment equipment and is in compliance with the terms of the Order and has eliminated the discharge. In July 2004, we and Franklin Power Products, Inc. entered into an agreement with the
U.S. Department of Justice on behalf of the EPA, which tolled the statute of limitations on the EPAs potential claim for penalties. Since that time, we have been cooperating with the EPA by providing additional information and have entered
into settlement negotiations with the EPA and the Department of Justice. On April 12, 2006, we and the EPA reached a settlement for $0.9 million and entered into a consent decree to resolve this matter. The accompanying condensed consolidated
financial statements reflect a liability of approximately $0.9 million related to this issue. In July 2006 we paid the $0.9 million.



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Item 1A. Risk Factors

For information regarding risk factors, refer to Part I, Item A as presented in the
2005 Annual Report on Form 10-K. There has been no material changes in the Companys risk factors during the nine months ended September 30, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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



|     |  |                                                                                                                                                                           
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification by John H. Weber, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                       
|     | 
|31.2 |  | Certification by Kerry A. Shiba, Senior Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|32.1 |  | Certification by John H. Weber, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        
|     | 
|32.2 |  | Certification by Kerry A. Shiba, Senior Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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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: November 10, 2006 |  | By:                      |  | /s/ Kerry A. Shiba                     
|                        |  |                          |  | Kerry A. Shiba,                        
|                        |  |                          |  | Senior Vice President and              
|                        |  |                          |  | Chief Financial Officer                
|                        |  |                         
|Date: November 10, 2006 |  | By:                      |  | /s/ Amitabh Rai                        
|                        |  |                          |  | Amitabh Rai,                           
|                        |  |                          |  | Vice President and Corporate Controller
|                        |  |                          |  | Principal Accounting Officer           



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EXHIBIT INDEX



|            |  |                                                                                                                                                                    
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                        
|31.1        |  | Certification by John H. Weber, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|31.2        |  | Certification by Kerry A. Shiba, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|            | 
|32.1        |  | Certification by John H. Weber, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 
|            | 
|32.2        |  | Certification by Kerry A. Shiba, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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