---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



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



FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004



or



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



FOR THE TRANSITION PERIOD FROM
 TO
.



COMMISSION FILE NO. 1-13683



REMY INTERNATIONAL, INC.

(Exact name
of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)



DELCO REMY INTERNATIONAL, INC.

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



INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.



Yes x    No ̈



INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).



Yes ̈No x



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



|                       |  |                                   
|---------------------- |  | ----------------------------------
|                       |  | Outstanding as of November 1, 2004
|Common Stock  Class B |  | 2,503,024.48                      



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Remy International, Inc.
and Subsidiaries



INDEX





|              |  |                                                                                       |  |     
|------------- |  | ------------------------------------------------------------------------------------- |  | ----
|              |  |                                                                                       |  | Page
|PART I        |  | FINANCIAL INFORMATION                                                                 |  |     
|              |  |                                                                                      
|Item 1        |  | Financial Statements                                                                  |  |     
|              |  |                                                                                      
|              |  | Condensed Consolidated Balance Sheets                                                 |  | 3   
|              |  |                                                                                      
|              |  | Condensed Consolidated Statements of Operations                                       |  | 4   
|              |  |                                                                                      
|              |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5   
|              |  |                                                                                      
|              |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|              |  |                                                                                      
|Item 2        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 27  
|              |  |                                                                                      
|Item 3        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 37  
|              |  |                                                                                      
|Item 4        |  | Controls and Procedures                                                               |  | 37  
|              |  |                                                                                      
|PART II       |  | OTHER INFORMATION                                                                     |  |     
|              |  |                                                                                      
|Item 1        |  | Legal Proceedings                                                                     |  | 38  
|              |  |                                                                                      
|Item 2        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 39  
|              |  |                                                                                      
|Item 3        |  | Defaults Upon Senior Securities                                                       |  | 39  
|              |  |                                                                                      
|Item 4        |  | Submission of Matters to a Vote of Security Holders                                   |  | 40  
|              |  |                                                                                      
|Item 5        |  | Other Information                                                                     |  | 40  
|              |  |                                                                                      
|Item 6        |  | Exhibits                                                                              |  | 40  
|              | 
|SIGNATURES    |  | 41                                                                                   
|              | 
|EXHIBIT INDEX |  | 42                                                                                   



2



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PART I FINANCIAL
INFORMATION



|Item 1. | Financial Statements
|------- | --------------------



Remy International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets



|                                                |  |                    |          |   |                   |   |          |  
|----------------------------------------------- |  | ------------------ | -------- | - | ----------------- | - | -------- | -
|IN THOUSANDS, At                                |  | September 30, 2004 |          |   | December 31, 2003 |  
|                                                |  | (unaudited)        |          |   |                   |  
|Assets:                                         |  |                    |          |   |                   |   |          |  
|Current assets:                                 |  |                    |          |   |                   |   |          |  
|Cash and cash equivalents                       |  | $                  | 72,987   |   |                   | $ | 21,207   |  
|Trade accounts receivable, net                  |  |                    | 155,912  |   |                   |   | 143,439  |  
|Other receivables                               |  |                    | 19,870   |   |                   |   | 14,806   |  
|Inventories                                     |  |                    | 214,466  |   |                   |   | 198,400  |  
|Assets of discontinued operations               |  |                    | 1,283    |   |                   |   | 67,397   |  
|Other current assets                            |  |                    | 14,955   |   |                   |   | 13,712   |  
|                                                |  |                    |          |   |                   |   |          |  
|Total current assets                            |  |                    | 479,473  |   |                   |   | 458,961  |  
|Property, plant and equipment                   |  |                    | 310,124  |   |                   |   | 292,332  |  
|Less accumulated depreciation                   |  |                    | 182,556  |   |                   |   | 167,529  |  
|                                                |  |                    |          |   |                   |   |          |  
|Property, plant and equipment, net              |  |                    | 127,568  |   |                   |   | 124,803  |  
|Deferred financing costs, net                   |  |                    | 16,082   |   |                   |   | 13,968   |  
|Goodwill, net                                   |  |                    | 106,364  |   |                   |   | 100,862  |  
|Investments in joint ventures                   |  |                    | 5,594    |   |                   |   | 5,721    |  
|Other assets                                    |  |                    | 17,847   |   |                   |   | 19,661   |  
|                                                |  |                    |          |   |                   |   |          |  
|Total assets                                    |  | $                  | 752,928  |   |                   | $ | 723,976  |  
|                                                |  |                    |          |   |                   |   |          |  
|Liabilities and Stockholders Deficit:          |  |                    |          |   |                   |   |          |  
|Current liabilities:                            |  |                    |          |   |                   |   |          |  
|Accounts payable                                |  | $                  | 155,211  |   |                   | $ | 154,350  |  
|Accrued interest                                |  |                    | 18,876   |   |                   |   | 9,837    |  
|Accrued restructuring                           |  |                    | 6,074    |   |                   |   | 10,402   |  
|Liabilities of discontinued operations          |  |                    | 3,467    |   |                   |   | 11,453   |  
|Other liabilities and accrued expenses          |  |                    | 91,932   |   |                   |   | 121,499  |  
|Current maturities of long-term debt            |  |                    | 26,015   |   |                   |   | 31,397   |  
|                                                |  |                    |          |   |                   |   |          |  
|Total current liabilities                       |  |                    | 301,575  |   |                   |   | 338,938  |  
|Long-term debt, net of current portion (Note 9) |  |                    | 612,136  |   |                   |   | 593,003  |  
|Deferred income taxes                           |  |                    | 490      |   |                   |   | 644      |  
|Post-retirement benefits other than pensions    |  |                    | 16,813   |   |                   |   | 16,431   |  
|Accrued pension benefits                        |  |                    | 12,467   |   |                   |   | 13,073   |  
|Accrued restructuring                           |  |                    | 6,582    |   |                   |   | 8,801    |  
|Other non-current liabilities                   |  |                    | 6,530    |   |                   |   | 6,918    |  
|Commitments and contingencies                   |  |                    |          |   |                   |   |          |  
|Minority interest                               |  |                    | 9,839    |   |                   |   | 15,193   |  
|Redeemable preferred stock                      |  |                    |         |   |                   |   | 306,969  |  
|Stockholders deficit:                          |  |                    |          |   |                   |   |          |  
|Common stock:                                   |  |                    |          |   |                   |   |          |  
|Class A shares                                  |  |                    |         |   |                   |   |         |  
|Class B shares                                  |  |                    | 3        |   |                   |   | 3        |  
|Class C shares                                  |  |                    |         |   |                   |   |         |  
|Paid-in capital                                 |  |                    | 334,336  |   |                   |   |         |  
|Retained deficit                                |  |                    | (533,717 | ) |                   |   | (560,193 | )
|Accumulated other comprehensive loss            |  |                    | (14,126  | ) |                   |   | (15,804  | )
|                                                |  |                    |          |   |                   |   |          |  
|Total stockholders deficit                     |  |                    | (213,504 | ) |                   |   | (575,994 | )
|                                                |  |                    |          |   |                   |   |          |  
|Total liabilities and stockholders deficit     |  | $                  | 752,928  |   |                   | $ | 723,976  |  
|                                                |  |                    |          |   |                   |   |          |  



See notes to the condensed
consolidated financial statements.



3



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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,                                                                        |  | 2004         |         |   | 2003        |   |         | 2004 |  | 2003 |        
|Net sales                                                                                                                            |  | $            | 254,271 |   |             | $ | 246,677 |      |  | $    | 795,331 |  | $ | 728,698 |  
|Cost of goods sold                                                                                                                   |  |              | 204,239 |   |             |   | 199,015 |      |  |      | 640,736 |  |   | 592,815 |  
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Gross profit                                                                                                                         |  |              | 50,032  |   |             |   | 47,662  |      |  |      | 154,595 |  |   | 135,883 |  
|Selling, general and administrative expenses                                                                                         |  |              | 27,731  |   |             |   | 23,947  |      |  |      | 83,974  |  |   | 74,551  |  
|Restructuring charges                                                                                                                |  |              | 142     |   |             |   | 2,663   |      |  |      | 1,516   |  |   | 47,263  |  
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Operating income                                                                                                                     |  |              | 22,159  |   |             |   | 21,052  |      |  |      | 69,105  |  |   | 14,069  |  
|Interest expense, net                                                                                                                |  |              | 14,208  |   |             |   | 13,845  |      |  |      | 44,378  |  |   | 41,426  |  
|Loss on early extinguishment of debt (Note 9)                                                                                        |  |              |        |   |             |   |        |      |  |      | 7,939   |  |   |        |  
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest and loss (income) from unconsolidated joint
ventures |  |              | 7,951   |   |             |   | 7,207   |      |  |      | 16,788  |  |   | (27,357 | )
|Income tax expense                                                                                                                   |  |              | 3,364   |   |             |   | 2,085   |      |  |      | 4,448   |  |   | 11,494  |  
|Minority interest                                                                                                                    |  |              | 769     |   |             |   | 1,466   |      |  |      | 2,139   |  |   | 2,225   |  
|Loss (income) from unconsolidated joint ventures                                                                                     |  |              | (67     | ) |             |   | 182     |      |  |      | 701     |  |   | 5,909   |  
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Net income (loss) from continuing operations                                                                                         |  |              | 3,885   |   |             |   | 3,474   |      |  |      | 9,500   |  |   | (46,985 | )
|Discontinued operations:                                                                                                             |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Income (loss) from discontinued operations, net of tax                                                                               |  |              | (25     | ) |             |   | (833    | )    |  |      | 966     |  |   | (3,881  | )
|Gain on disposal of discontinued operations, net of tax                                                                              |  |              | 43,162  |   |             |   |        |      |  |      | 43,377  |  |   | 2,417   |  
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Net income (loss) from discontinued operations, net of tax                                                                           |  |              | 43,137  |   |             |   | (833    | )    |  |      | 44,343  |  |   | (1,464  | )
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Net income (loss)                                                                                                                    |  |              | 47,022  |   |             |   | 2,641   |      |  |      | 53,843  |  |   | (48,449 | )
|Accretion for redemption of preferred stock                                                                                          |  |              | 9,459   |   |             |   | 8,477   |      |  |      | 27,367  |  |   | 24,418  |  
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  
|Net income (loss) attributable to common stockholders                                                                                |  | $            | 37,563  |   |             | $ | (5,836  | )    |  | $    | 26,476  |  | $ | (72,867 | )
|                                                                                                                                     |  |              |         |   |             |   |         |      |  |      |         |  |   |         |  



See notes to the condensed
consolidated financial statements.



4



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Remy International, Inc.
and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                            |  |      |          |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | -
|IN THOUSANDS, For the nine months ended September 30,                                       |  | 2004 |          |   | 2003 |  
|Cash Flows from Operating Activities:                                                       |  |      |          |   |      |   |         |  
|Net income (loss) attributable to common stockholders                                       |  | $    | 26,476   |   |      | $ | (72,867 | )
|Adjustments to reconcile net income (loss) to net cash used in operating activities:        |  |      |          |   |      |   |         |  
|Loss (income) from discontinued operations                                                  |  |      | (966     | ) |      |   | 3,881   |  
|Gain on disposal of discontinued operations                                                 |  |      | (43,377  | ) |      |   | (2,417  | )
|Depreciation                                                                                |  |      | 14,618   |   |      |   | 15,455  |  
|Amortization                                                                                |  |      | 2,023    |   |      |   | 1,091   |  
|Non-cash interest expense                                                                   |  |      | 2,939    |   |      |   | 3,770   |  
|Loss on early extinguishment of debt (Note 9)                                               |  |      | 7,939    |   |      |   |        |  
|Accretion for redemption of preferred stock                                                 |  |      | 27,367   |   |      |   | 24,418  |  
|Minority interest                                                                           |  |      | 2,139    |   |      |   | 2,225   |  
|Loss from unconsolidated joint ventures                                                     |  |      | 701      |   |      |   | 5,909   |  
|Deferred income taxes                                                                       |  |      | (145     | ) |      |   | 3,737   |  
|Post-retirement benefits other than pensions                                                |  |      | 382      |   |      |   | (5,840  | )
|Accrued pension benefits                                                                    |  |      | (606     | ) |      |   | 1,516   |  
|Restructuring charges                                                                       |  |      | 1,516    |   |      |   | 47,263  |  
|Cash payments for restructuring charges                                                     |  |      | (7,798   | ) |      |   | (14,392 | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges: |  |      |          |   |      |   |         |  
|Accounts receivable                                                                         |  |      | (12,345  | ) |      |   | (21,007 | )
|Inventories                                                                                 |  |      | (16,086  | ) |      |   | (23,596 | )
|Accounts payable                                                                            |  |      | (252     | ) |      |   | 3,648   |  
|Other current assets and liabilities                                                        |  |      | (15,621  | ) |      |   | 15,413  |  
|Other non-current assets and liabilities, net                                               |  |      | (4,836   | ) |      |   | (1,446  | )
|                                                                                            |  |      |          |   |      |   |         |  
|Net cash used in operating activities of continuing operations                              |  |      | (15,932  | ) |      |   | (13,239 | )
|Cash Flows from Investing Activities:                                                       |  |      |          |   |      |   |         |  
|Acquisitions, net of cash acquired                                                          |  |      | (24,751  | ) |      |   | (9,546  | )
|Net proceeds on sale of businesses                                                          |  |      | 102,987  |   |      |   | 27,876  |  
|Purchases of property, plant and equipment                                                  |  |      | (15,429  | ) |      |   | (11,986 | )
|                                                                                            |  |      |          |   |      |   |         |  
|Net cash provided by investing activities of continuing operations                          |  |      | 62,807   |   |      |   | 6,344   |  
|Cash Flows from Financing Activities:                                                       |  |      |          |   |      |   |         |  
|Proceeds from issuance of long-term debt                                                    |  |      | 275,000  |   |      |   | 6,521   |  
|Retirement of long-term debt                                                                |  |      | (200,000 | ) |      |   |        |  
|Net (repayments) borrowings under revolving line of credit and other                        |  |      | (56,464  | ) |      |   | 4,621   |  
|Financing costs                                                                             |  |      | (12,456  | ) |      |   |        |  
|Distributions to minority interests                                                         |  |      | (1,010   | ) |      |   |        |  
|                                                                                            |  |      |          |   |      |   |         |  
|Net cash provided by financing activities of continuing operations                          |  |      | 5,070    |   |      |   | 11,142  |  
|Effect of exchange rate changes on cash                                                     |  |      | 335      |   |      |   | 341     |  
|Cash flows of discontinued operations                                                       |  |      | (500     | ) |      |   | (4,975  | )
|                                                                                            |  |      |          |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                        |  |      | 51,780   |   |      |   | (387    | )
|Cash and cash equivalents at beginning of year                                              |  |      | 21,207   |   |      |   | 12,315  |  
|                                                                                            |  |      |          |   |      |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $    | 72,987   |   |      | $ | 11,928  |  
|                                                                                            |  |      |          |   |      |   |         |  



See notes to the condensed
consolidated financial statements.



5



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REMY INTERNATIONAL, INC.
AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS AND AS INDICATED



For the three and nine month periods ended September 30, 2004 and 2003



(Unaudited)



Introduction



In July 2004, the Board of
Directors of Delco Remy International, Inc. approved changing the name of the Company from Delco Remy International, Inc. to Remy International, Inc. The name change became effective on August 1, 2004. The Company will continue to market certain
starters and heavy-duty alternators for original equipment and aftermarket customers under the Delco Remy brand name, which is licensed to the Company by General Motors.The costs incurred through September 30, 2004 related to the name change
were not material to the Companys consolidated financial position or results of operations.



1. Basis of Presentation



The accompanying unaudited, condensed consolidated financial statements in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Companys Annual Report on Form
10-K for the year ended December 31, 2003. 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. The Company reclassified operating
results and cash flows in 2003 to reflect the classification of the Companys transmission remanufacturing businesses, Williams Technologies, Inc. (Williams), JAX Reman, L.L.C. (JAX) and AutoMatic Transmission
International A/S (AMT), as discontinued operations. The Company also reclassified the balance sheet at December 31, 2003 to reflect the classification of these businesses as discontinued operations. For more information on this matter
refer to Note 4 and Note 7.



Operating results for the
three-month and nine-month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for the full year. The balance sheet at December 31, 2003 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, 2003. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2003.



6



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2. Additional Balance Sheet Information



Inventories



The components of inventory were as follows at:



|                |  |                    |         |                  |   |        
|--------------- |  | ------------------ | ------- | ---------------- | - | -------
|                |  | September 30, 2004 |         | December 31,2003
|Raw material    |  | $                  | 110,514 |                  | $ | 108,274
|Work-in-process |  |                    | 7,244   |                  |   | 7,696  
|Finished goods  |  |                    | 96,708  |                  |   | 82,430 
|                |  |                    |         |                  |   |        
|Total           |  | $                  | 214,466 |                  | $ | 198,400
|                |  |                    |         |                  |   |        



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. Changes to the Companys warranty liability, excluding discontinued operations, are summarized as follows:



|                                         |  |                    |         |   |                  |   |         |  
|---------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | -
|                                         |  | September 30, 2004 |         |   | December 31,2003 |  
|Balance at beginning of year             |  | $                  | 20,472  |   |                  | $ | 15,260  |  
|Provision and other                      |  |                    | 29,897  |   |                  |   | 53,593  |  
|Payments and charges against the accrual |  |                    | (33,760 | ) |                  |   | (48,381 | )
|                                         |  |                    |         |   |                  |   |         |  
|Balance at end of period                 |  | $                  | 16,609  |   |                  | $ | 20,472  |  
|                                         |  |                    |         |   |                  |   |         |  



3. Acquisitions



2004 Acquisitions



In the second quarter of 2004, the Company made cash earn-out payments totaling $13,454 relative to the 2000 acquisition of
M&M Knopf Auto Parts, Inc. (Knopf). These payments were based on the achievement of certain earnings goals by Knopf during the period August 2000 to December 2003. In December 2003, $13,500 was accrued and recorded as an adjustment
to the purchase price of Knopf, resulting in an increase in goodwill.



During the second quarter of 2004, the Company made a final cash payment of $4,786 on notes issued in 2002 in connection with the Companys acquisition of the remaining shares from the minority shareholders of Remy Korea Limited
(formerly known as (fka) Delco Remy Korea Limited), which was acquired in 1999.



The Company made cash payments totaling $1,023 during the second quarter of 2004 relative to the acquisition of Delphi Corporations (Delphi) light vehicle alternator business.



7



---

During the second quarter of 2004, in connection with settlement of the arbitration between certain of
the Companys affiliates and its former partner at its operations in Mexico (see Note 13), the Company recorded the purchase of the remaining shares of the Mexico joint venture from the minority shareholders. The net purchase portion of the
arbitration award of $5,488 in cash was paid in the third quarter of 2004 and resulted in a $5,101 increase in goodwill.



2003 Acquisitions



During the nine months ended September 30, 2003, the Company completed the acquisition of 51% of Hubei Delphi Automotive Generators Company, Ltd.
(Hubei), a manufacturer of automotive and heavy duty generators for the original equipment market and aftermarket based in China, for $3,600 in cash. Net assets acquired were $8,100 ($3,800 net of minority interest), including cash of
$3,600.



The Company also made payments of $459 on notes issued
in connection with the acquisition of certain parts of the Delphi light vehicle alternator business in the fourth quarter of 2002.



During the nine months ended September 30, 2003, the Company made payments totaling $3,064 under contractual put agreements to purchase additional shares
from the minority shareholders of World Wide Automotive, L.L.C. (World Wide) (fka World Wide Automotive, Inc.), which was acquired in 1997. These payments increased the Companys ownership percentage of World Wide from 94.0% to
97.2%. The Company purchased the remaining minority shareholders interest in World Wide during the fourth quarter of 2003.



The Company made payments totaling $3,375 during the nine months ended September 30, 2003 under contractual put agreements to purchase additional shares
from the minority shareholder of Power Investments, Inc. (Power), which was acquired in 1996. These payments increased the Companys ownership percentage of Power from 93.4% to 97.7%. The Company purchased the remaining minority
shareholders interest in Power during the fourth quarter of 2003.



During the nine months ended September 30, 2003, the Company made a payment of $2,648 on notes issued in 2002 in connection with the acquisition of the remaining shares from the minority shareholders of Remy Korea.



4. Business Divestiture



On September 1, 2004 the Company completed a stock sale of its two wholly-owned subsidiaries, Williams and JAX, to
Caterpillar, Inc. (CAT) for $105,000. The Company realized cash proceeds of $102,665 and recorded an estimated gain of $44,215, net of income taxes and deal-related costs and subject to future adjustment. The historical results for these
companies are treated as discontinued operations beginning in the third quarter of 2004 and all prior periods have been reclassified accordingly. For more information on discontinued operations see Note 7 below.



5. Corporate Reorganization



Effective September 30, 2004, the stockholders of the Company formed a new
holding company, Remy Worldwide Holdings, Inc. (Remy Holdings), to own all of the outstanding stock of Remy International, Inc. The Companys stockholders exchanged all of their stock for identical shares



8



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in Remy Holdings with the same number and class of shares and percentage ownership of Remy Holdings and the same relative rights and preferences in the
equity value of Remy Holdings, as they previously held in the Company. As a result, the Company is now a wholly-owned subsidiary of Remy Holdings and the stockholders of the Company became stockholders of Remy Holdings. The Company will continue to
be the issuer of its outstanding notes and the reporting company with the Securities and Exchange Commission.



In conjunction with the formation of the new holding company, all of the outstanding shares of the Companys Series A Preferred Stock were cancelled.
The cancellation is reflected in the condensed consolidated balance sheet as a reclassification of the Preferred Stock to Paid-in Capital, which increased stockholders equity by $334,336 and was the amount attributable to the outstanding
Series A Preferred Stock as of September 30, 2004. Since the Companys Preferred Stock was cancelled, the accretion of Preferred Stock dividends will no longer be reflected in the Companys financial statements, effective October 1, 2004.



As a result of the reorganization the Companys Class A
and Class C Common Stock were converted into the same number of shares of Class B Common Stock. Accordingly, as of September 30, 2004, the Company had an aggregate of 2,503,024.48 shares of Class B Common Stock outstanding, consisting of 1,000.00
shares of converted Class A Common Stock, 16,687.00 shares of converted Class C Common Stock, and 2,485,337.48 shares of Class B Common Stock previously outstanding.



6. Accounts Receivable Programs



The Company participates in two programs that accelerate the collection of accounts receivable. Under one program, the Company sells the accounts of
certain of its aftermarket customers to banks, on a non-recourse basis, at a discount. At September 30, 2004 and 2003, the amount of receivables under this program was approximately $29,700 and $23,700, respectively. The second program is an early
pay plan under which a third party acts as paying agent for one of the Companys customers. The accounts are paid, at a discounted rate, in five to seven days after shipment instead of the regular terms. This program is also without recourse.
The amount covered by this plan at September 30, 2004 and 2003 was approximately $11,700 and $13,700, respectively.



7. Discontinued Operations



In the third quarter of 2004, the Company completed the sale of its wholly-owned remanufactured transmission subsidiaries, Williams and JAX, to CAT for
$105,000 in cash. The Company realized cash proceeds of $102,665 and recorded an estimated gain of $44,215, net of income taxes and deal-related costs and subject to future adjustment. In the third quarter the Company also committed to a plan to
dispose of its automatic transmission remanufacturing business, AMT, based in Soborg, Denmark. An estimated loss of $1,800 was recorded in connection with this action. As a result of the sale of Williams and JAX and the plan of disposition for AMT,
the operating results, balance sheets and cash flows of these businesses, comprising the Companys remanufactured transmission business, were classified as discontinued operations effective in the third quarter of 2004. All prior periods have
been reclassified.



9



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During the first quarter of 2003, the Company successfully completed the sale of Tractech, Inc. and
Kraftube, Inc. In connection with the sale, the Company recorded an estimated gain on the sale of $2,417 in the first quarter of 2003, subject to adjustment based on the financial performance of these businesses in 2004 through 2008. In the third
quarter we recorded an additional gain of $107 and for the nine months ended September 30, 2004 a total of $323 has been recorded. The operating results, balance sheets and cash flows of these businesses were classified as discontinued operations
effective in the first quarter of 2004.



In the first quarter
of 2003, the Company completed plans to exit its contract remanufacturing operation for gas engines in Beaumont, Texas. The operating results, balance sheets and cash flows of this business were also classified as discontinued operations effective
in the first quarter of 2003.



In the second quarter of 2002,
the Company completed plans to exit its retail aftermarket gas engine business. In connection with the discontinuance of the business, a charge of $28,248 was recorded in 2002 to write down the relevant assets to their estimated realizable value. An
additional charge of $2,824 was recorded in 2002 for the estimated cost of employee termination benefits and closure of facilities. In the third quarter of 2004, the Company reduced its estimated loss on the disposal of this business by $639.



The Company currently expects to make additional total cash
payments relative to its discontinued operations, which have been fully accrued, of approximately $3,500 in last three months of 2004.



Selected financial information for discontinued operations for the three months and nine months ended September 30 is as follows:



|                         |  |              |        |   |             |   |        |      |  |      |        |  |   |        |  
|------------------------ |  | ------------ | ------ | - | ----------- | - | ------ | ---- |  | ---- | ------ |  | - | ------ | -
|                         |  | Three Months |        |   | Nine Months |  
|                         |  | 2004         |        |   | 2003        |   |        | 2004 |  | 2003 |       
|Net sales                |  | $            | 15,009 |   |             | $ | 16,907 |      |  | $    | 62,730 |  | $ | 73,238 |  
|Interest expense         |  |              | 1,070  |   |             |   | 1,673  |      |  |      | 4,316  |  |   | 6,163  |  
|Income (loss) before tax |  |              | 3      |   |             |   | (960   | )    |  |      | 1,057  |  |   | (3,253 | )
|Net income (loss)        |  | $            | (25    | ) |             | $ | (833   | )    |  | $    | 966    |  | $ | (3,881 | )



8. 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).



Continuing Operations



In the first quarter of 2004, the Company completed plans for the closure and consolidation of certain manufacturing and distribution facilities in
Mexico.



10



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In 2003, the Company completed plans for the following restructuring actions and transfers of production
to lower-cost facilities:



| | 1. | Closure of its starter and alternator manufacturing operations in Anderson, Indiana.
| | -- | ------------------------------------------------------------------------------------



| | 2. | Consolidation of its alternator and starter remanufacturing operations in Mississippi.
| | -- | --------------------------------------------------------------------------------------



| | 3. | Closure of its aftermarket remanufacturing and distribution facilities in Reed City, Michigan.
| | -- | ----------------------------------------------------------------------------------------------



A total charge of $1,516 was recorded in the first nine months of 2004 relative to the 2004 and 2003 actions. This charge
consisted of $717 for the cost of voluntary and involuntary employee separation programs and other miscellaneous costs of $799.



For the nine months ended September 30, 2003, the Company recorded a net restructuring charge of $47,263 relative to the restructuring actions listed
above. A total charge of $48,968 was recorded for the full year 2003 for the estimated cost of the 2003 actions. This charge consisted of $14,381 for the estimated cost of various voluntary and involuntary employee separation programs associated
with the resulting workforce reductions of approximately 710 employees; $29,233 for the impairment of fixed assets and capital leases; $9,066 for the impairment of operating leases; a post-employment benefit curtailment gain of $7,216; a pension
plan curtailment charge of $1,835; and other miscellaneous costs of $1,669.



Relative to the employee termination programs established in 2003 and 2004, $1,057, $420 and $56 were paid in the first, second and third quarters of 2004, respectively, $8,405 was paid in 2003 and $3,926 and $1,234
are expected to be paid in the last three months of 2004 and in 2005, respectively. The Company currently expects to record additional charges of approximately $500 in connection with these actions in the last three months of 2004.



In 2002, the Company recorded a net restructuring credit of $4,375 consisting
of a $4,916 post-employment benefit curtailment gain and a $541 pension curtailment charge related to the closure and realignment of certain manufacturing operations announced in 2001 as discussed below.



In 2001, the Company recorded a restructuring charge of $30,098 in
conjunction with plans for the closure and realignment of certain manufacturing facilities and administrative functions in the U.S., Canada and Europe. This charge consisted of $23,328 for the estimated cost of various voluntary and involuntary
employee separation programs associated with workforce reductions of approximately 800 production and administrative employees and asset impairment and other miscellaneous costs totaling $6,770. Relative to the employee termination programs
established in 2001, $4,737 was paid in the first quarter of 2004, $4,802 was paid in 2003, $12,709 was paid in 2002 and $1,080 was paid in 2001.



The following table summarizes the activity in the restructuring accrual of continuing operations for the nine months ended September 30, 2004:



|                              |  |                      |        |   |                       |   |        |       |  |   |        |  
|----------------------------- |  | -------------------- | ------ | - | --------------------- | - | ------ | ----- |  | - | ------ | -
|                              |  | Termination Benefits |        |   | Exit/Impairment Costs |   |        | Total | 
|Reserve at December 31, 2003  |  | $                    | 10,713 |   |                       | $ | 8,490  |       |  | $ | 19,203 |  
|Provision                     |  |                      | 717    |   |                       |   | 799    |       |  |   | 1,516  |  
|Payments                      |  |                      | (6,270 | ) |                       |   | (1,528 | )     |  |   | (7,798 | )
|Other                         |  |                      | 16     |   |                       |   | (281   | )     |  |   | (265   | )
|                              |  |                      |        |   |                       |   |        |       |  |   |        |  
|Reserve at September 30, 2004 |  | $                    | 5,176  |   |                       | $ | 7,480  |       |  | $ | 12,656 |  
|                              |  |                      |        |   |                       |   |        |       |  |   |        |  



11



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Discontinued Operations



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



In 2003, the Company
completed plans for the closure of its aftermarket transmission remanufacturing facility in Jacksonville, Florida.



In the first nine months of 2004, the Company recorded restructuring charges in its discontinued operations of $421, consisting of $346 of employee
termination benefit costs and $75 of other costs.



In 2003, the
company recorded restructuring charges in its discontinued operations of $929, consisting of $646 of employee termination benefit costs and $283 of asset impairment and other costs.



Relative to the termination charges in 2003 and 2004, $222 was paid in 2003, $706 was paid in the first nine months of 2004
and $64 is expected to be paid in the last three months of 2004.



In 2002, the Company recorded restructuring charges in its discontinued operations of $2,824, consisting of $1,053 of employee termination benefits and $1,771 of asset impairment and other costs. Relative to the employee termination
programs established in 2002, $736 and $317 were paid in 2003 and 2002, respectively.



In 2001, the Company recorded restructuring charges in its discontinued operations of $9,251, consisting of $3,399 of employee termination benefits and $5,852 of asset impairment and other costs. Cash payments for
termination programs established in 2001 of $199, $2,225 and $975 were made in 2003, 2002 and 2001, respectively.



The following table summarizes the activity in the restructuring accrual of discontinued operations for the nine months ended September 30, 2004:



|                              |  |                      |      |   |                       |   |      |       |  |   |      |  
|----------------------------- |  | -------------------- | ---- | - | --------------------- | - | ---- | ----- |  | - | ---- | -
|                              |  | Termination Benefits |      |   | Exit/Impairment Costs |   |      | Total | 
|Reserve at December 31, 2003  |  | $                    | 424  |   |                       | $ | 358  |       |  | $ | 782  |  
|Provision                     |  |                      | 346  |   |                       |   | 75   |       |  |   | 421  |  
|Payments                      |  |                      | (706 | ) |                       |   | (230 | )     |  |   | (936 | )
|Other                         |  |                      |     |   |                       |   | (88  | )     |  |   | (88  | )
|                              |  |                      |      |   |                       |   |      |       |  |   |      |  
|Reserve at September 30, 2004 |  | $                    | 64   |   |                       | $ | 115  |       |  | $ | 179  |  
|                              |  |                      |      |   |                       |   |      |       |  |   |      |  



9. Long-Term Debt



On September 1, 2004, the Company amended its senior credit facility to
change certain definitions and to adjust certain financial covenants to reflect the sale of Williams and JAX. The revised covenant calculation for Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was lowered from
$108,000 to $99,000 for the rolling twelve-month period ending December 31, 2004, reflecting the sale of the transmission business.



On April 23, 2004, the Company issued $125,000 principal amount of Second Priority Senior Secured Floating Rate Notes due 2009 (the Floating Rate
Notes), bearing an interest rate of LIBOR plus 4.00%, and $150,000 principal amount of 9 3/8% Senior Subordinated Notes due 2012 (the 9 3/8%



12



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Senior Subordinated Notes). The net proceeds from the issuance of these notes were used to pay down existing indebtedness under the Companys
senior credit facilities, including repayment of the $60,000 term loan and relevant prepayment premium, and to finance the redemption of the Companys outstanding 10 5/8% senior subordinated notes due 2006 issued on August 1, 1996, including
the call premium and accrued interest. The 10 5/8% notes were called for redemption in their entirety on April 23, 2004 at a redemption price of 101.771% of their face amount plus accrued but unpaid interest up to, but not including, the redemption
date of May 24, 2004.



The Floating Rate Notes mature on April
15, 2009. Interest is due each January 15, April 15, July 15 and October 15 commencing July 15, 2004. The Floating Rate Notes are guaranteed by substantially all of the Companys domestic subsidiaries (the Guarantors). The Floating
Rate Notes and the related guarantees are senior obligations secured by a second-priority lien, subject to certain exceptions and permitted liens, on all of the Companys and the Guarantors existing and future property and assets that
secure the Companys obligations under its existing credit facilities. In the event of enforcement of the lien securing the Floating Rate Notes and the related guarantees, the proceeds thereof will first be applied to repay obligations secured
by the first-priority liens, including the Companys obligations under its senior credit facilities.



The 9 3/8% Senior Subordinated Notes mature on April 15, 2012. Interest is due each April 15 and October 15, commencing October 15, 2004. The 9 3/8%
Senior Subordinated Notes are guaranteed by the Guarantors on a senior subordinated basis and, with the related guarantees, are unsecured senior subordinated obligations, ranking junior to all the Companys senior debt, including borrowings
under its credit facilities, the Floating Rate Notes and the Companys outstanding 8 5/8% Senior Notes due in 2007.



In connection with the above offering, the Company amended its senior credit facilities to reflect the extinguishment of the $60,000 term loan, provide
for borrowings of up to $120,000 under its asset based revolving credit facility, and extend the maturity date from March 31, 2006 to June 30, 2007.



In the second quarter of 2004, in connection with the above debt redemption, repayments and amendment, the Company recorded a loss on early extinguishment
of debt of $7,939. This charge consisted of: (i) call premium of $2,479 and the write off of deferred financing costs of $1,391 on redemption of the 10 5/8% Senior Subordinated Notes; (ii) prepayment penalty of $1,800 and the write off of deferred
financing costs of $743 on repayment of the term loan; and (iii) write off of deferred financing costs of $1,226 and an amendment fee of $300 on the amendment and pay down of the senior credit facility. Also during the second quarter of 2004, the
Company recorded additional interest for the period between the call and redemption dates of $1,281 relative to redemption of the 10 5/8% Senior Subordinated Notes.



Required principal payments of long-term debt and capitalized leases are as follows:



|                          |  |   |        
|------------------------- |  | - | -------
|Last three months of 2004 |  | $ | 2,482  
|2005                      |  |   | 26,052 
|2006                      |  |   | 5,043  
|2007                      |  |   | 149,978
|2008                      |  |   | 5,277  
|Thereafter                |  |   | 449,319
|                          |  |   |        
|Total principal payments  |  | $ | 638,151
|                          |  |   |        



13



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10. Accumulated Other Comprehensive Income (Loss)



The Companys other comprehensive income (loss) consists of unrealized net gains and losses on the translation of the
assets and liabilities of its foreign operations, currency instruments and minimum pension liability adjustments. The before tax income (loss), related income tax effect and accumulated balance for the first, second and third quarters of 2004 are as
follows:



|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  
|--------------------------------- |  | ------------------------------------ | ------ | - | ----------------------------------------------- | - | ----- | ---------------------------------- |  | - | ----------------------------------- | - |  | - | ------- | -
|                                  |  | ForeignCurrencyTranslationAdjustment |        |   | Unrealized Gains(Losses) onCurrency Instruments |   |       | MinimumPensionLiabilityAdjustments |  |   | AccumulatedOther Comprehensive Loss |  
|Balances at December 31, 2003     |  | $                                    | (7,876 | ) |                                                 | $ | (356  | )                                  |  | $ | (7,572                              | ) |  | $ | (15,804 | )
|Before tax income                 |  |                                      | 796    |   |                                                 |   | 2,555 |                                    |  |   |                                    |   |  |   | 3,351   |  
|Income tax effect                 |  |                                      |       |   |                                                 |   | 766   |                                    |  |   |                                    |   |  |   | 766     |  
|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  
|Other comprehensive income        |  |                                      | 796    |   |                                                 |   | 1,789 |                                    |  |   |                                    |   |  |   | 2,585   |  
|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  
|Balances at March 31, 2004        |  |                                      | (7,080 | ) |                                                 |   | 1,433 |                                    |  |   | (7,572                              | ) |  |   | (13,219 | )
|Before tax loss                   |  |                                      | (1,182 | ) |                                                 |   | (485  | )                                  |  |   |                                    |   |  |   | (1,667  | )
|Income tax effect                 |  |                                      |       |   |                                                 |   | (145  | )                                  |  |   |                                    |   |  |   | (145    | )
|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  
|Other comprehensive loss          |  |                                      | (1,182 | ) |                                                 |   | (340  | )                                  |  |   |                                    |   |  |   | (1,522  | )
|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  
|Balances at June 30, 2004         |  |                                      | (8,262 | ) |                                                 |   | 1,093 |                                    |  |   | (7,572                              | ) |  |   | (14,741 | )
|Before tax income (loss)          |  |                                      | 907    |   |                                                 |   | (417  | )                                  |  |   |                                    |   |  |   | 490     |  
|Income tax effect                 |  |                                      |       |   |                                                 |   | (125  | )                                  |  |   |                                    |   |  |   | (125    | )
|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  
|Other comprehensive income (loss) |  |                                      | 907    |   |                                                 |   | (292  | )                                  |  |   |                                    |   |  |   | 615     |  
|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  
|Balances at September 30, 2004    |  | $                                    | (7,355 | ) |                                                 | $ | 801   |                                    |  | $ | (7,572                              | ) |  | $ | (14,126 | )
|                                  |  |                                      |        |   |                                                 |   |       |                                    |  |   |                                     |   |  |   |         |  



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



|                                      |  |   |         |  
|------------------------------------- |  | - | ------- | -
|Three months ended September 30, 2004 |  | $ | 47,637  |  
|Three months ended September 30, 2003 |  |   | 2,891   |  
|Nine months ended September 30, 2004  |  |   | 55,521  |  
|Nine months ended September 30, 2003  |  |   | (47,062 | )



11. Employee Benefit Plans



Agreements with GM



In connection with the Companys separation from General Motors
Corporation (GM), the Company and GM agreed to allocate the responsibility for employee pension benefits and post-retirement health care and life insurance on a pro-rata basis between Remy Inc. (RI) (fka Delco Remy America,
Inc.), a wholly-owned subsidiary and GM. The allocation is primarily determined upon years of service with RI and aggregate years of service with RI and GM. Effective August 1, 1994, RI established hourly (collectively bargained union employees) and
salaried pension and post-retirement health care and life insurance plans which are similar to the plans previously offered by GM.



14



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Pension and Post-Retirement Health Care and Life Insurance Plans



RI has defined benefit pension plans covering substantially all of its
employees. The plan covering salaried employees provides benefits that are based upon years of service and final estimated average compensation. Pursuant to the March 31, 2003 Plant Shut-Down Agreement, there are no remaining active hourly
employees. Benefits for former hourly employees are based on stated amounts for each year of service. RIs funding policy is to contribute amounts to provide the plans with sufficient assets to meet future benefit payment requirements
consistent with actuarial determinations of the funding requirements of federal laws. Plan assets are primarily invested in mutual funds, which invest in both debt and equity instruments.



RI maintains hourly and salaried benefit plans that provide post-retirement health care and life insurance to retirees and
eligible dependents. RI retains the right to modify or terminate the plans providing these benefits. The salaried plan has cost sharing features such as deductibles and co-payments. Salaried employees hired January 1, 1993 and after are not eligible
for the above-described post-retirement benefits. It is RIs policy to fund these benefits as claims are incurred.



The Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law on December 8, 2003. The enactment of this Act is not
expected to have a significant effect on the Companys plan. The APBO and net periodic postretirement benefit costs do not reflect any effect of the Act. The effects of the Act shall be incorporated in the next measurement of plan obligations
as required by SFAS No. 106.



The components of expense for the
three-month and nine-month periods ended September 30, 2004 and 2003 for the plans are as follows:



Pension Benefits



|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|---------------------------------------------------- |  | ------------ | ---- | - | ----------- | - | ---- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                     |  | Three Months |      |   | Nine Months |  
|Components of expense                                |  | 2004         |      |   | 2003        |   |      | 2004 |  |   | 2003   |  
|Service costs                                        |  | $            | 385  |   |             | $ | 380  |      |  | $ | 1,327  |   |  | $ | 1,140  |  
|Interest costs                                       |  |              | 589  |   |             |   | 551  |      |  |   | 1,754  |   |  |   | 1,653  |  
|Expected return on plan assets                       |  |              | (406 | ) |             |   | (390 | )    |  |   | (1,302 | ) |  |   | (1,172 | )
|Amortization of prior service cost                   |  |              | 24   |   |             |   | 24   |      |  |   | 72     |   |  |   | 72     |  
|Recognized net actuarial loss                        |  |              | 84   |   |             |   | 76   |      |  |   | 279    |   |  |   | 230    |  
|Curtailments                                         |  |              |     |   |             |   |     |      |  |   |       |   |  |   | 1,835  |  
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|Net periodic pension cost                            |  | $            | 676  |   |             | $ | 641  |      |  | $ | 2,130  |   |  | $ | 3,758  |  
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|                                                     |  |              |      |  
|Post-Retirement Health Care and Life Insurance
Plans |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|                                                     |  |             
|                                                     |  | Three Months |      |   | Nine Months |  
|Components of expense                                |  | 2004         |      |   | 2003        |   |      | 2004 |  |   | 2003   |  
|Service costs                                        |  | $            | 118  |   |             | $ | 93   |      |  | $ | 354    |   |  | $ | 281    |  
|Interest costs                                       |  |              | 294  |   |             |   | 290  |      |  |   | 882    |   |  |   | 870    |  
|Expected return on plan assets                       |  |              |     |   |             |   |     |      |  |   |       |   |  |   |       |  
|Amortization of prior service cost                   |  |              |     |   |             |   |     |      |  |   |       |   |  |   |       |  
|Recognized net actuarial loss                        |  |              | 36   |   |             |   | 18   |      |  |   | 107    |   |  |   | 54     |  
|Curtailments                                         |  |              |     |   |             |   |     |      |  |   |       |   |  |   | (7,216 | )
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  
|Net periodic pension cost                            |  | $            | 448  |   |             | $ | 401  |      |  | $ | 1,343  |   |  | $ | (6,011 | )
|                                                     |  |              |      |   |             |   |      |      |  |   |        |   |  |   |        |  



15



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Cash Flows



The Company contributed $2,978 in the first nine months of 2004 and plans to contribute $3,753 to its pension plans for all of 2004. The post-retirement
health care plan is funded as benefits are paid.



12. Income Taxes



Income tax expense on continuing operations of $4,448 for
the nine months ended September 30, 2004 consisted of provisions for federal alternative minimum tax of $260, domestic state and local taxes of $637 and taxes in various foreign jurisdictions of $3,551. In accordance with SFAS No. 109, Accounting
for Income Taxes, the Company established a valuation allowance for domestic U.S. deferred tax assets in 2003, which resulted in no domestic U.S. tax provision on 2004 domestic income. Income tax expense on continuing operations of $11,494 for the
nine months ended September 30, 2003 consisted of provisions in foreign jurisdictions of $8,539 and $2,955 of withholding tax on intercompany dividends.



13. 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 will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.



Remy Mexico, S. De R.L. De C.V. Arbitration



Remy Mexico Holdings, S. de R.L. de C.V. (RMH), an indirect
subsidiary, and GCID Autopartes, S.A. de C.V. (GCID), were parties to a series of agreements, including a partnership agreement. The partnership agreement created Remy Mexico, S. de R.L. de C.V. (formerly Delco Remy Mexico, S. de R.L. de
C.V.) (RM), which operated certain manufacturing facilities in Mexico. GCID was the minority partner with a 24% ownership interest. An affiliate of the Company and RMH, Remy Componentes, S. de R.L. de C.V. (RC) and RM, were
parties to a services agreement with an affiliate of GCID relating to the partnership, which, among other things, required the payment of fees in connection with the provision of employees to the partnership. That agreement terminated as of April 3,
2004. Another affiliate of GCID was the partnerships landlord until April 30, 2004.



RMH and GCID signed a letter of intent on or about May 3, 2000, whereby GCID agreed to terminate certain of the agreements with RMH and to sell its partnership interest to RMH in exchange for a $13 million termination
payment by RMH to GCID, but the transaction was never finalized. In June 2001, GCID declared RMH in default under the partnership agreement, alleging that RMH had failed to conduct the business of the partnership in accordance with that agreement.
In August 2001, GCID instituted an arbitration proceeding before the American Arbitration Association against RMH and later added RC and a wholly-owned subsidiary, Remy, Inc. (formerly Delco Remy America, Inc.), who together with RMH and RC are
referred to as the named parties. GCID and its affiliates sought damages for the alleged (i) breaches of the partnership agreement, including a requirement under the partnership that RMH buy out GCIDs partnership interest; (ii) breaches of
fiduciary duty; (iii) breaches of various other contracts between and among the various parties; and (iv) tortious



16



---

interference with contractual relations. RM terminated the lease agreement as of September 27, 2003. RM and RC relocated all operations to another facility
in San Luis Potosi, Mexico as of April 30, 2004. In accordance with an interim award from the arbitration panel on March 10, 2004, RM and RC hired the employees previously provided by GCIDs affiliate under the services agreement as of April 3,
2004.



The arbitration panel issued its final award on June 25,
2004. In accordance with the final award, on July 6, 2004 GCID transferred its interest in RM to RMH and RMH, RM and RC paid GCID and its affiliates approximately $17,300 for GCIDs minority interest, the award for past services fees for the
period of 1997 through 2004, and other claims, including interest. RMH, RM and RC also paid approximately $1,800 in VAT as a result of these payments.



UAW Litigation



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



Remy Reman Facilities



The Remy Reman facilities in Mississippi identified certain possible violations of state air laws and notified the state environmental agency under the
state voluntary audit disclosure rules. The Mississippi Department of Environmental Quality issued Notices of Violation regarding two of the facilities and the subsidiaries have agreed to either pay approximately $60 in penalties and spend
approximately $110 in supplemental environmental projects (SEPs) or to pay approximately $170 in penalties if no SEPs are completed.



Franklin Power Products, Inc.



In September 2000, one of Franklin Power Products, Inc.s Indiana facilities received a Finding of Violation and Order for Compliance from the EPA
requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. has installed wastewater treatment



17



---

equipment, 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 a Tolling Agreement with the U.S. Department of Justice on behalf of the EPA. Since that time, the Company has been cooperating with the EPA by providing additional requested information.



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



Presented below is condensed consolidating financial information for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at
September 30, 2004 and December 31, 2003 and for the three-month and the nine-month periods ended September 30, 2004 and 2003.



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



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



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



18



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Balance Sheet

(Unaudited)



|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------ | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, At September 30, 2004                  |  | RemyInternational,Inc. (ParentCompanyOnly) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Assets:                                              |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                          | 52,817   |   |                      | $ | 186     |                           |  | $ | 19,984       |   |  | $            |         |      |  | $ | 72,987   |  
|Trade accounts receivable, net                       |  |                                            |         |   |                      |   | 112,947 |                           |  |   | 42,965       |   |  |              |         |      |  |   | 155,912  |  
|Other receivables                                    |  |                                            | 2,306    |   |                      |   | 3,546   |                           |  |   | 14,018       |   |  |              |         |      |  |   | 19,870   |  
|Inventories                                          |  |                                            |         |   |                      |   | 151,565 |                           |  |   | 64,258       |   |  |              | (1,357   | )(c) |  |   | 214,466  |  
|Assets of discontinued operations                    |  |                                            |         |   |                      |   | 563     |                           |  |   | 720          |   |  |              |         |      |  |   | 1,283    |  
|Other currents assets                                |  |                                            | 3,506    |   |                      |   | 1,922   |                           |  |   | 9,527        |   |  |              |         |      |  |   | 14,955   |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current assets                                 |  |                                            | 58,629   |   |                      |   | 270,729 |                           |  |   | 151,472      |   |  |              | (1,357   | )    |  |   | 479,473  |  
|Property, plant and equipment                        |  |                                            | 869      |   |                      |   | 179,918 |                           |  |   | 129,337      |   |  |              |         |      |  |   | 310,124  |  
|Less accumulated depreciation                        |  |                                            | 68       |   |                      |   | 132,775 |                           |  |   | 49,713       |   |  |              |         |      |  |   | 182,556  |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Property, plant and equipment, net                   |  |                                            | 801      |   |                      |   | 47,143  |                           |  |   | 79,624       |   |  |              |         |      |  |   | 127,568  |  
|Deferred financing costs, net                        |  |                                            | 16,082   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 16,082   |  
|Goodwill, net                                        |  |                                            |         |   |                      |   | 94,255  |                           |  |   | 12,109       |   |  |              |         |      |  |   | 106,364  |  
|Investments in subsidiaries and joint ventures       |  |                                            | 373,537  |   |                      |   |        |                           |  |   |             |   |  |              | (367,943 | )(a) |  |   | 5,594    |  
|Other assets                                         |  |                                            | 2,799    |   |                      |   | 6,398   |                           |  |   | 8,650        |   |  |              |         |      |  |   | 17,847   |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total assets                                         |  | $                                          | 451,848  |   |                      | $ | 418,525 |                           |  | $ | 251,855      |   |  | $            | (369,300 | )    |  | $ | 752,928  |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Liabilities and Stockholders (Deficit) Equity:      |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                          | 998      |   |                      | $ | 104,226 |                           |  | $ | 49,987       |   |  | $            |         |      |  | $ | 155,211  |  
|Intercompany accounts                                |  |                                            | 7,788    |   |                      |   | (27,856 | )                         |  |   | 20,669       |   |  |              | (601     | )(c) |  |   |         |  
|Accrued interest                                     |  |                                            | 18,771   |   |                      |   |        |                           |  |   | 105          |   |  |              |         |      |  |   | 18,876   |  
|Accrued restructuring                                |  |                                            |         |   |                      |   | 5,669   |                           |  |   | 405          |   |  |              |         |      |  |   | 6,074    |  
|Liabilities of discontinued operations               |  |                                            |         |   |                      |   | 1,077   |                           |  |   | 2,390        |   |  |              |         |      |  |   | 3,467    |  
|Other liabilities and accrued expenses               |  |                                            | 14,973   |   |                      |   | 60,027  |                           |  |   | 16,932       |   |  |              |         |      |  |   | 91,932   |  
|Current maturities of long-term debt                 |  |                                            |         |   |                      |   | 1,357   |                           |  |   | 24,658       |   |  |              |         |      |  |   | 26,015   |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current liabilities                            |  |                                            | 42,530   |   |                      |   | 144,500 |                           |  |   | 115,146      |   |  |              | (601     | )    |  |   | 301,575  |  
|Long-term debt, net of current portion (Note 9)      |  |                                            | 583,803  |   |                      |   | 15,648  |                           |  |   | 12,685       |   |  |              |         |      |  |   | 612,136  |  
|Deferred income taxes                                |  |                                            | 1,065    |   |                      |   | (13     | )                         |  |   | (562         | ) |  |              |         |      |  |   | 490      |  
|Post-retirement benefits other than pensions         |  |                                            | 16,813   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 16,813   |  
|Accrued pension benefits                             |  |                                            | 12,467   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 12,467   |  
|Accrued restructuring                                |  |                                            |         |   |                      |   | 6,582   |                           |  |   |             |   |  |              |         |      |  |   | 6,582    |  
|Other non-current liabilities                        |  |                                            | 2,155    |   |                      |   | 2,575   |                           |  |   | 1,800        |   |  |              |         |      |  |   | 6,530    |  
|Minority interest                                    |  |                                            |         |   |                      |   | 1,466   |                           |  |   | 8,373        |   |  |              |         |      |  |   | 9,839    |  
|Stockholders (deficit) equity:                      |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class B Shares                                       |  |                                            | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Paid-in capital                                      |  |                                            | 334,336  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 334,336  |  
|Subsidiary investment                                |  |                                            |         |   |                      |   | 239,015 |                           |  |   | 110,441      |   |  |              | (349,456 | )(a) |  |   |         |  
|Retained (deficit) earnings                          |  |                                            | (533,717 | ) |                      |   | 9,234   |                           |  |   | 10,009       |   |  |              | (19,243  | )(b) |  |   | (533,717 | )
|Accumulated other comprehensive loss                 |  |                                            | (7,607   | ) |                      |   | (482    | )                         |  |   | (6,037       | ) |  |              |         |      |  |   | (14,126  | )
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total stockholders (deficit) equity                 |  |                                            | (206,985 | ) |                      |   | 247,767 |                           |  |   | 114,413      |   |  |              | (368,699 | )    |  |   | (213,504 | )
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total liabilities and stockholders (deficit) equity |  | $                                          | 451,848  |   |                      | $ | 418,525 |                           |  | $ | 251,855      |   |  | $            | (369,300 | )    |  | $ | 752,928  |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  



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



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



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



19



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Balance Sheet



|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------------------ | -------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------- | -
|IN THOUSANDS, At December 31, 2003                   |  | RemyInternational,Inc. (ParentCompanyOnly) |          |   | SubsidiaryGuarantors |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Assets:                                              |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current assets:                                      |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Cash and cash equivalents                            |  | $                                          | 1        |   |                      | $ | 249     |                           |  | $ | 20,957       |   |  | $            |         |      |  | $ | 21,207   |  
|Trade accounts receivable, net                       |  |                                            |         |   |                      |   | 106,532 |                           |  |   | 36,907       |   |  |              |         |      |  |   | 143,439  |  
|Other receivables                                    |  |                                            |         |   |                      |   | 4,359   |                           |  |   | 10,447       |   |  |              |         |      |  |   | 14,806   |  
|Inventories                                          |  |                                            |         |   |                      |   | 130,893 |                           |  |   | 68,776       |   |  |              | (1,269   | )(c) |  |   | 198,400  |  
|Assets of discontinued operations                    |  |                                            |         |   |                      |   | 67,151  |                           |  |   | 246          |   |  |              |         |      |  |   | 67,397   |  
|Other currents assets                                |  |                                            | 5,529    |   |                      |   | 1,702   |                           |  |   | 6,481        |   |  |              |         |      |  |   | 13,712   |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current assets                                 |  |                                            | 5,530    |   |                      |   | 310,886 |                           |  |   | 143,814      |   |  |              | (1,269   | )    |  |   | 458,961  |  
|Property, plant and equipment                        |  |                                            | 57       |   |                      |   | 172,683 |                           |  |   | 119,592      |   |  |              |         |      |  |   | 292,332  |  
|Less accumulated depreciation                        |  |                                            | 47       |   |                      |   | 126,077 |                           |  |   | 41,405       |   |  |              |         |      |  |   | 167,529  |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Property, plant and equipment, net                   |  |                                            | 10       |   |                      |   | 46,606  |                           |  |   | 78,187       |   |  |              |         |      |  |   | 124,803  |  
|Deferred financing costs, net                        |  |                                            | 13,968   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 13,968   |  
|Goodwill, net                                        |  |                                            |         |   |                      |   | 93,854  |                           |  |   | 7,008        |   |  |              |         |      |  |   | 100,862  |  
|Investments in subsidiaries and joint ventures       |  |                                            | 348,934  |   |                      |   |        |                           |  |   |             |   |  |              | (343,213 | )(a) |  |   | 5,721    |  
|Other assets                                         |  |                                            | 5,326    |   |                      |   | 5,658   |                           |  |   | 8,677        |   |  |              |         |      |  |   | 19,661   |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total assets                                         |  | $                                          | 373,768  |   |                      | $ | 457,004 |                           |  | $ | 237,686      |   |  | $            | (344,482 | )    |  | $ | 723,976  |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Liabilities and Stockholders (Deficit) Equity:      |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Current liabilities:                                 |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Accounts payable                                     |  | $                                          | 2,771    |   |                      | $ | 74,028  |                           |  | $ | 77,551       |   |  | $            |         |      |  | $ | 154,350  |  
|Intercompany accounts                                |  |                                            | 12,526   |   |                      |   | 30,737  |                           |  |   | (42,662      | ) |  |              | (601     | )(c) |  |   |         |  
|Accrued interest                                     |  |                                            | 9,750    |   |                      |   |        |                           |  |   | 87           |   |  |              |         |      |  |   | 9,837    |  
|Accrued restructuring                                |  |                                            |         |   |                      |   | 9,787   |                           |  |   | 615          |   |  |              |         |      |  |   | 10,402   |  
|Liabilities of discontinued operations               |  |                                            |         |   |                      |   | 10,154  |                           |  |   | 1,299        |   |  |              |         |      |  |   | 11,453   |  
|Other liabilities and accrued expenses               |  |                                            | 15,325   |   |                      |   | 89,117  |                           |  |   | 17,057       |   |  |              |         |      |  |   | 121,499  |  
|Current maturities of long-term debt                 |  |                                            | 684      |   |                      |   | 1,170   |                           |  |   | 29,543       |   |  |              |         |      |  |   | 31,397   |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total current liabilities                            |  |                                            | 41,056   |   |                      |   | 214,993 |                           |  |   | 83,490       |   |  |              | (601     | )    |  |   | 338,938  |  
|Long-term debt, net of current portion (Note 9)      |  |                                            | 560,214  |   |                      |   | 16,692  |                           |  |   | 16,097       |   |  |              |         |      |  |   | 593,003  |  
|Deferred income taxes                                |  |                                            |         |   |                      |   | (974    | )                         |  |   | 1,618        |   |  |              |         |      |  |   | 644      |  
|Post-retirement benefits other than pensions         |  |                                            | 16,431   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 16,431   |  
|Accrued pension benefits                             |  |                                            | 13,073   |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 13,073   |  
|Accrued restructuring                                |  |                                            |         |   |                      |   | 8,801   |                           |  |   |             |   |  |              |         |      |  |   | 8,801    |  
|Other non-current liabilities                        |  |                                            | 3,788    |   |                      |   | 1,804   |                           |  |   | 1,326        |   |  |              |         |      |  |   | 6,918    |  
|Minority interest                                    |  |                                            |         |   |                      |   | 11      |                           |  |   | 15,182       |   |  |              |         |      |  |   | 15,193   |  
|Redeemable preferred stock                           |  |                                            | 306,969  |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 306,969  |  
|Stockholders (deficit) equity:                      |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Common stock:                                        |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Class A Shares                                       |  |                                            |         |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   |         |  
|Class B Shares                                       |  |                                            | 3        |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   | 3        |  
|Class C Shares                                       |  |                                            |         |   |                      |   |        |                           |  |   |             |   |  |              |         |      |  |   |         |  
|Subsidiary investment                                |  |                                            |         |   |                      |   | 286,316 |                           |  |   | 113,750      |   |  |              | (400,066 | )(a) |  |   |         |  
|Retained (deficit) earnings                          |  |                                            | (560,193 | ) |                      |   | (69,137 | )                         |  |   | 12,952       |   |  |              | 56,185   | (b)  |  |   | (560,193 | )
|Accumulated other comprehensive loss                 |  |                                            | (7,573   | ) |                      |   | (1,502  | )                         |  |   | (6,729       | ) |  |              |         |      |  |   | (15,804  | )
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total stockholders (deficit) equity                 |  |                                            | (567,763 | ) |                      |   | 215,677 |                           |  |   | 119,973      |   |  |              | (343,881 | )    |  |   | (575,994 | )
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  
|Total liabilities and stockholders (deficit) equity |  | $                                          | 373,768  |   |                      | $ | 457,004 |                           |  | $ | 237,686      |   |  | $            | (344,482 | )    |  | $ | 723,976  |  
|                                                     |  |                                            |          |   |                      |   |         |                           |  |   |              |   |  |              |          |      |  |   |          |  



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



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



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



20



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | --------------------- | - | ------- | --------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|IN THOUSANDS, For the three months ended September 30, 2004                                                                                                       |  | Remy International, Inc. (Parent CompanyOnly) |         |   | Subsidiary Guarantors |   |         | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                                                                                                                         |  | $                                             |        |   |                       | $ | 233,008 |                             |  | $ | 106,763      |   |  | $            | (85,500 | )(a) |  | $ | 254,271 |  
|Cost of goods sold                                                                                                                                                |  |                                               |        |   |                       |   | 195,316 |                             |  |   | 94,423       |   |  |              | (85,500 | )(a) |  |   | 204,239 |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Gross profit                                                                                                                                                      |  |                                               |        |   |                       |   | 37,692  |                             |  |   | 12,340       |   |  |              |        |      |  |   | 50,032  |  
|Selling, general and administrative expenses                                                                                                                      |  |                                               | 5,104   |   |                       |   | 17,200  |                             |  |   | 5,427        |   |  |              |        |      |  |   | 27,731  |  
|Restructuring charges (credits)                                                                                                                                   |  |                                               | 109     |   |                       |   | 43      |                             |  |   | (10          | ) |  |              |        |      |  |   | 142     |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Operating (loss) income                                                                                                                                           |  |                                               | (5,213  | ) |                       |   | 20,449  |                             |  |   | 6,923        |   |  |              |        |      |  |   | 22,159  |  
|Interest expense, net                                                                                                                                             |  |                                               | 13,177  |   |                       |   | 602     |                             |  |   | 429          |   |  |              |        |      |  |   | 14,208  |  
|Loss on early extinguishment of debt (Note 9)                                                                                                                     |  |                                               |        |   |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   |        |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest, income from unconsolidated joint ventures and equity in
earnings of subsidiaries |  |                                               | (18,390 | ) |                       |   | 19,847  |                             |  |   | 6,494        |   |  |              |        |      |  |   | 7,951   |  
|Income tax expense                                                                                                                                                |  |                                               | 912     |   |                       |   | 83      |                             |  |   | 2,369        |   |  |              |        |      |  |   | 3,364   |  
|Minority interest                                                                                                                                                 |  |                                               |        |   |                       |   | 608     |                             |  |   | 161          |   |  |              |        |      |  |   | 769     |  
|Income from unconsolidated joint ventures                                                                                                                         |  |                                               |        |   |                       |   |        |                             |  |   | (67          | ) |  |              |        |      |  |   | (67     | )
|Equity in earnings of subsidiaries                                                                                                                                |  |                                               | (22,109 | ) |                       |   |        |                             |  |   |             |   |  |              | 22,109  | (b)  |  |   |        |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Net income (loss) from continuing operations                                                                                                                      |  |                                               | 2,807   |   |                       |   | 19,156  |                             |  |   | 4,031        |   |  |              | (22,109 | )    |  |   | 3,885   |  
|Discontinued operations:                                                                                                                                          |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from discontinued operations, net of tax                                                                                                            |  |                                               |        |   |                       |   | (348    | )                           |  |   | 323          |   |  |              |        |      |  |   | (25     | )
|Gain (loss) on disposal of discontinued operations, net of tax                                                                                                    |  |                                               | 44,215  |   |                       |   | 747     |                             |  |   | (1,800       | ) |  |              |        |      |  |   | 43,162  |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Net income (loss) from discontinued operations, net of tax                                                                                                        |  |                                               | 44,215  |   |                       |   | 399     |                             |  |   | (1,477       | ) |  |              |        |      |  |   | 43,137  |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Net income                                                                                                                                                        |  |                                               | 47,022  |   |                       |   | 19,555  |                             |  |   | 2,554        |   |  |              | (22,109 | )    |  |   | 47,022  |  
|Accretion for redemption of preferred stock                                                                                                                       |  |                                               | 9,459   |   |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | 9,459   |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  
|Net income attributable to common stockholders                                                                                                                    |  | $                                             | 37,563  |   |                       | $ | 19,555  |                             |  | $ | 2,554        |   |  | $            | (22,109 | )    |  | $ | 37,563  |  
|                                                                                                                                                                  |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |         |  



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



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



21



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | - | ------- | --------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ------- | -
|IN THOUSANDS, For the three months ended September 30, 2003                                                                                                     |  | Remy International, Inc. (Parent Company Only) |         |   | Subsidiary Guarantors |   |         | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net sales                                                                                                                                                       |  | $                                              |        |   |                       | $ | 245,315 |                             |  | $ | 125,325      |   |  | $            | (123,963 | )(a) |  | $ | 246,677 |  
|Cost of goods sold                                                                                                                                              |  |                                                |        |   |                       |   | 207,162 |                             |  |   | 115,816      |   |  |              | (123,963 | )(a) |  |   | 199,015 |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Gross profit                                                                                                                                                    |  |                                                |        |   |                       |   | 38,153  |                             |  |   | 9,509        |   |  |              |         |      |  |   | 47,662  |  
|Selling, general and administrative expenses                                                                                                                    |  |                                                | 2,495   |   |                       |   | 16,542  |                             |  |   | 4,910        |   |  |              |         |      |  |   | 23,947  |  
|Restructuring charges                                                                                                                                           |  |                                                |        |   |                       |   | 2,029   |                             |  |   | 634          |   |  |              |         |      |  |   | 2,663   |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Operating (loss) income                                                                                                                                         |  |                                                | (2,495  | ) |                       |   | 19,582  |                             |  |   | 3,965        |   |  |              |         |      |  |   | 21,052  |  
|Interest expense, net                                                                                                                                           |  |                                                | 12,685  |   |                       |   | 670     |                             |  |   | 490          |   |  |              |         |      |  |   | 13,845  |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest, loss from unconsolidated joint ventures and equity in
earnings of subsidiaries |  |                                                | (15,180 | ) |                       |   | 18,912  |                             |  |   | 3,475        |   |  |              |         |      |  |   | 7,207   |  
|Income tax (benefit) expense                                                                                                                                    |  |                                                | (2,909  | ) |                       |   | 4,355   |                             |  |   | 639          |   |  |              |         |      |  |   | 2,085   |  
|Minority interest                                                                                                                                               |  |                                                |        |   |                       |   | 803     |                             |  |   | 663          |   |  |              |         |      |  |   | 1,466   |  
|Loss from unconsolidated joint ventures                                                                                                                         |  |                                                |        |   |                       |   |        |                             |  |   | 182          |   |  |              |         |      |  |   | 182     |  
|Equity in earnings of subsidiaries                                                                                                                              |  |                                                | (14,912 | ) |                       |   |        |                             |  |   |             |   |  |              | 14,912   | (b)  |  |   |        |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net income from continuing operations                                                                                                                           |  |                                                | 2,641   |   |                       |   | 13,754  |                             |  |   | 1,991        |   |  |              | (14,912  | )    |  |   | 3,474   |  
|Discontinued operations:                                                                                                                                        |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Loss from discontinued operations, net of tax                                                                                                                   |  |                                                |        |   |                       |   | (416    | )                           |  |   | (417         | ) |  |              |         |      |  |   | (833    | )
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net loss from discontinued operations, net of tax                                                                                                               |  |                                                |        |   |                       |   | (416    | )                           |  |   | (417         | ) |  |              |         |      |  |   | (833    | )
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net income                                                                                                                                                      |  |                                                | 2,641   |   |                       |   | 13,338  |                             |  |   | 1,574        |   |  |              | (14,912  | )    |  |   | 2,641   |  
|Accretion for redemption of preferred stock                                                                                                                     |  |                                                | 8,477   |   |                       |   |        |                             |  |   |             |   |  |              |         |      |  |   | 8,477   |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                                                                                           |  | $                                              | (5,836  | ) |                       | $ | 13,338  |                             |  | $ | 1,574        |   |  | $            | (14,912  | )    |  | $ | (5,836  | )
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  



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



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



22



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | - | --------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------
|IN THOUSANDS, For the nine months ended September 30, 2004                                                                                                      |  | Remy International, Inc. (Parent Company Only) |         |   | Subsidiary Guarantors |   | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated
|Net sales                                                                                                                                                       |  | $                                              |        |   |                       | $ | 739,700                     |  | $ | 332,709      |   |  | $            | (277,078 | )(a) |  | $ | 795,331
|Cost of goods sold                                                                                                                                              |  |                                                |        |   |                       |   | 606,422                     |  |   | 311,392      |   |  |              | (277,078 | )(a) |  |   | 640,736
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Gross profit                                                                                                                                                    |  |                                                |        |   |                       |   | 133,278                     |  |   | 21,317       |   |  |              |         |      |  |   | 154,595
|Selling, general and administrative expenses                                                                                                                    |  |                                                | 14,948  |   |                       |   | 51,805                      |  |   | 17,221       |   |  |              |         |      |  |   | 83,974 
|Restructuring charges                                                                                                                                           |  |                                                | 110     |   |                       |   | 1,116                       |  |   | 290          |   |  |              |         |      |  |   | 1,516  
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Operating (loss) income                                                                                                                                         |  |                                                | (15,058 | ) |                       |   | 80,357                      |  |   | 3,806        |   |  |              |         |      |  |   | 69,105 
|Interest expense, net                                                                                                                                           |  |                                                | 40,907  |   |                       |   | 1,859                       |  |   | 1,612        |   |  |              |         |      |  |   | 44,378 
|Loss on early extinguishment of debt (Note9)                                                                                                                    |  |                                                | 7,939   |   |                       |   |                            |  |   |             |   |  |              |         |      |  |   | 7,939  
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Income (loss) from continuing operations before income taxes, minority interest, loss from unconsolidated joint ventures and equity in
earnings of subsidiaries |  |                                                | (63,904 | ) |                       |   | 78,498                      |  |   | 2,194        |   |  |              |         |      |  |   | 16,788 
|Income tax expense                                                                                                                                              |  |                                                | 1,896   |   |                       |   | 1,314                       |  |   | 1,238        |   |  |              |         |      |  |   | 4,448  
|Minority interest                                                                                                                                               |  |                                                |        |   |                       |   | 1,484                       |  |   | 655          |   |  |              |         |      |  |   | 2,139  
|Loss from unconsolidated joint ventures                                                                                                                         |  |                                                |        |   |                       |   |                            |  |   | 701          |   |  |              |         |      |  |   | 701    
|Equity in earnings of subsidiaries                                                                                                                              |  |                                                | (75,428 | ) |                       |   |                            |  |   |             |   |  |              | 75,428   | (b)  |  |   |       
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Net income (loss) from continuing operations                                                                                                                    |  |                                                | 9,628   |   |                       |   | 75,700                      |  |   | (400         | ) |  |              | (75,428  | )    |  |   | 9,500  
|Discontinued operations:                                                                                                                                        |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Income (loss) from discontinued operations, net of tax                                                                                                          |  |                                                |        |   |                       |   | 1,709                       |  |   | (743         | ) |  |              |         |      |  |   | 966    
|Gain (loss) on disposal of discontinued operations, net of tax                                                                                                  |  |                                                | 44,215  |   |                       |   | 962                         |  |   | (1,800       | ) |  |              |         |      |  |   | 43,377 
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Net income (loss) from discontinued operations, net of tax                                                                                                      |  |                                                | 44,215  |   |                       |   | 2,671                       |  |   | (2,543       | ) |  |              |         |      |  |   | 44,343 
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Net income (loss)                                                                                                                                               |  |                                                | 53,843  |   |                       |   | 78,371                      |  |   | (2,943       | ) |  |              | (75,428  | )    |  |   | 53,843 
|Accretion for redemption of preferred stock                                                                                                                     |  |                                                | 27,367  |   |                       |   |                            |  |   |             |   |  |              |         |      |  |   | 27,367 
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        
|Net income (loss) attributable to common stockholders                                                                                                           |  | $                                              | 26,476  |   |                       | $ | 78,371                      |  | $ | (2,943       | ) |  | $            | (75,428  | )    |  | $ | 26,476 
|                                                                                                                                                                |  |                                                |         |   |                       |   |                             |  |   |              |   |  |              |          |      |  |   |        



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



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



23



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

(Unaudited)



|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | - | ------- | --------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | ------- | -
|IN THOUSANDS, For the nine months ended September 30, 2003                                                                                                      |  | Remy International, Inc. (Parent Company Only) |         |   | Subsidiary Guarantors |   |         | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net sales                                                                                                                                                       |  | $                                              |        |   |                       | $ | 745,469 |                             |  | $ | 385,074      |   |  | $            | (401,845 | )(a) |  | $ | 728,698 |  
|Cost of goods sold                                                                                                                                              |  |                                                |        |   |                       |   | 648,268 |                             |  |   | 346,392      |   |  |              | (401,845 | )(a) |  |   | 592,815 |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Gross profit                                                                                                                                                    |  |                                                |        |   |                       |   | 97,201  |                             |  |   | 38,682       |   |  |              |         |      |  |   | 135,883 |  
|Selling, general and administrative expenses                                                                                                                    |  |                                                | 10,109  |   |                       |   | 50,524  |                             |  |   | 13,918       |   |  |              |         |      |  |   | 74,551  |  
|Restructuring charges                                                                                                                                           |  |                                                |        |   |                       |   | 46,629  |                             |  |   | 634          |   |  |              |         |      |  |   | 47,263  |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Operating (loss) income                                                                                                                                         |  |                                                | (10,109 | ) |                       |   | 48      |                             |  |   | 24,130       |   |  |              |         |      |  |   | 14,069  |  
|Interest expense, net                                                                                                                                           |  |                                                | 37,882  |   |                       |   | 2,167   |                             |  |   | 1,377        |   |  |              |         |      |  |   | 41,426  |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Income (loss) from continuing operations before income taxes, minority interest, loss from unconsolidated joint ventures and equity in
earnings of subsidiaries |  |                                                | (47,991 | ) |                       |   | (2,119  | )                           |  |   | 22,753       |   |  |              |         |      |  |   | (27,357 | )
|Income tax expense (benefit)                                                                                                                                    |  |                                                | 14,592  |   |                       |   | (11,393 | )                           |  |   | 8,295        |   |  |              |         |      |  |   | 11,494  |  
|Minority interest                                                                                                                                               |  |                                                |        |   |                       |   | 449     |                             |  |   | 1,776        |   |  |              |         |      |  |   | 2,225   |  
|Loss from unconsolidated joint ventures                                                                                                                         |  |                                                |        |   |                       |   |        |                             |  |   | 5,909        |   |  |              |         |      |  |   | 5,909   |  
|Equity in earnings of subsidiaries                                                                                                                              |  |                                                | (14,134 | ) |                       |   |        |                             |  |   |             |   |  |              | 14,134   | (b)  |  |   |        |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income from continuing operations                                                                                                                    |  |                                                | (48,449 | ) |                       |   | 8,825   |                             |  |   | 6,773        |   |  |              | (14,134  | )    |  |   | (46,985 | )
|Discontinued operations:                                                                                                                                        |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Loss from discontinued operations, net of tax                                                                                                                   |  |                                                |        |   |                       |   | (2,831  | )                           |  |   | (1,050       | ) |  |              |         |      |  |   | (3,881  | )
|Gain on disposal of discontinued operations, net of tax                                                                                                         |  |                                                |        |   |                       |   | 2,417   |                             |  |   |             |   |  |              |         |      |  |   | 2,417   |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net loss from discontinued operations, net of tax                                                                                                               |  |                                                |        |   |                       |   | (414    | )                           |  |   | (1,050       | ) |  |              |         |      |  |   | (1,464  | )
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income                                                                                                                                               |  |                                                | (48,449 | ) |                       |   | 8,411   |                             |  |   | 5,723        |   |  |              | (14,134  | )    |  |   | (48,449 | )
|Accretion for redemption of preferred stock                                                                                                                     |  |                                                | 24,418  |   |                       |   |        |                             |  |   |             |   |  |              |         |      |  |   | 24,418  |  
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                                                                                           |  | $                                              | (72,867 | ) |                       | $ | 8,411   |                             |  | $ | 5,723        |   |  | $            | (14,134  | )    |  | $ | (72,867 | )
|                                                                                                                                                                |  |                                                |         |   |                       |   |         |                             |  |   |              |   |  |              |          |      |  |   |         |  



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



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



24



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows

(Unaudited)



|                                                                                                   |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | -------- | - | --------------------- | - | ------- | --------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | -------- | -
|IN THOUSANDS, For the nine months ended September 30, 2004                                         |  | Remy International, Inc. (Parent CompanyOnly) |          |   | Subsidiary Guarantors |   |         | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash Flows from Operating Activities:                                                              |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Net income (loss) attributable to common stockholders                                              |  | $                                             | 26,476   |   |                       | $ | 78,371  |                             |  | $ | (2,943       | ) |  | $            | (75,428 | )(a) |  | $ | 26,476   |  
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Loss (income) from discontinued operations                                                         |  |                                               |         |   |                       |   | (1,709  | )                           |  |   | 743          |   |  |              |        |      |  |   | (966     | )
|Loss (gain) on disposal of discontinued operations                                                 |  |                                               | (44,215  | ) |                       |   | (962    | )                           |  |   | 1,800        |   |  |              |        |      |  |   | (43,377  | )
|Depreciation                                                                                       |  |                                               | 20       |   |                       |   | 7,110   |                             |  |   | 7,488        |   |  |              |        |      |  |   | 14,618   |  
|Amortization                                                                                       |  |                                               | 747      |   |                       |   | 775     |                             |  |   | 501          |   |  |              |        |      |  |   | 2,023    |  
|Non-cash interest expense                                                                          |  |                                               | 2,939    |   |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | 2,939    |  
|Loss on early extinguishment of debt (Note 9)                                                      |  |                                               | 7,939    |   |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | 7,939    |  
|Accretion for redemption of preferred stock                                                        |  |                                               | 27,367   |   |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | 27,367   |  
|Minority interest                                                                                  |  |                                               |         |   |                       |   | 1,484   |                             |  |   | 655          |   |  |              |        |      |  |   | 2,139    |  
|Loss from unconsolidated joint ventures                                                            |  |                                               |         |   |                       |   |        |                             |  |   | 701          |   |  |              |        |      |  |   | 701      |  
|Equity in earnings of subsidiaries                                                                 |  |                                               | (75,428  | ) |                       |   |        |                             |  |   |             |   |  |              | 75,428  | (a)  |  |   |         |  
|Deferred income taxes                                                                              |  |                                               | 1,066    |   |                       |   | 973     |                             |  |   | (2,184       | ) |  |              |        |      |  |   | (145     | )
|Post retirement benefits other than pensions                                                       |  |                                               | 382      |   |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | 382      |  
|Accrued pension benefits                                                                           |  |                                               | (606     | ) |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | (606     | )
|Restructuring charges                                                                              |  |                                               | 110      |   |                       |   | 1,116   |                             |  |   | 290          |   |  |              |        |      |  |   | 1,516    |  
|Cash payments for restructuring charges                                                            |  |                                               |         |   |                       |   | (7,276  | )                           |  |   | (522         | ) |  |              |        |      |  |   | (7,798   | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges:        |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Accounts receivable                                                                                |  |                                               |         |   |                       |   | (6,414  | )                           |  |   | (5,931       | ) |  |              |        |      |  |   | (12,345  | )
|Inventories                                                                                        |  |                                               |         |   |                       |   | (20,584 | )                           |  |   | 4,498        |   |  |              |        |      |  |   | (16,086  | )
|Accounts payable                                                                                   |  |                                               | (1,774   | ) |                       |   | 30,200  |                             |  |   | (28,678      | ) |  |              |        |      |  |   | (252     | )
|Other current assets and liabilities                                                               |  |                                               | 13,864   |   |                       |   | (13,326 | )                           |  |   | (16,159      | ) |  |              |        |      |  |   | (15,621  | )
|Other non-current assets and liabilities, net                                                      |  |                                               | (12,882  | ) |                       |   | (48,685 | )                           |  |   | 56,731       |   |  |              |        |      |  |   | (4,836   | )
|                                                                                                   |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Net cash (used in) provided by operating activities of continuing operations                       |  |                                               | (53,995  | ) |                       |   | 21,073  |                             |  |   | 16,990       |   |  |              |        |      |  |   | (15,932  | )
|Cash Flows from Investing Activities:                                                              |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Acquisitions, net of cash acquired                                                                 |  |                                               | (5,488   | ) |                       |   | (13,669 | )                           |  |   | (5,594       | ) |  |              |        |      |  |   | (24,751  | )
|Net proceeds on sale of businesses                                                                 |  |                                               | 102,663  |   |                       |   | 324     |                             |  |   |             |   |  |              |        |      |  |   | 102,987  |  
|Purchases of property, plant and equipment                                                         |  |                                               | (812     | ) |                       |   | (8,010  | )                           |  |   | (6,607       | ) |  |              |        |      |  |   | (15,429  | )
|                                                                                                   |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Net cash provided by (used in) investing activities of continuing operations                       |  |                                               | 96,363   |   |                       |   | (21,355 | )                           |  |   | (12,201      | ) |  |              |        |      |  |   | 62,807   |  
|Cash Flows from Financing Activities:                                                              |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Proceeds from issuance of long-term debt                                                           |  |                                               | 275,000  |   |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | 275,000  |  
|Retirement of long-term debt                                                                       |  |                                               | (200,000 | ) |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | (200,000 | )
|Net repayments under revolving line of credit and other                                            |  |                                               | (52,096  | ) |                       |   | (858    | )                           |  |   | (3,510       | ) |  |              |        |      |  |   | (56,464  | )
|Financing costs                                                                                    |  |                                               | (12,456  | ) |                       |   |        |                             |  |   |             |   |  |              |        |      |  |   | (12,456  | )
|Distributions to minority interests                                                                |  |                                               |         |   |                       |   |        |                             |  |   | (1,010       | ) |  |              |        |      |  |   | (1,010   | )
|                                                                                                   |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Net cash provided by (used in) financing activities of continuing operations                       |  |                                               | 10,448   |   |                       |   | (858    | )                           |  |   | (4,520       | ) |  |              |        |      |  |   | 5,070    |  
|Effect of exchange rate changes on cash                                                            |  |                                               |         |   |                       |   |        |                             |  |   | 335          |   |  |              |        |      |  |   | 335      |  
|Cash flows of discontinued operations                                                              |  |                                               |         |   |                       |   | 1,077   |                             |  |   | (1,577       | ) |  |              |        |      |  |   | (500     | )
|                                                                                                   |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                                               | 52,816   |   |                       |   | (63     | )                           |  |   | (973         | ) |  |              |        |      |  |   | 51,780   |  
|Cash and cash equivalents at beginning of year                                                     |  |                                               | 1        |   |                       |   | 249     |                             |  |   | 20,957       |   |  |              |        |      |  |   | 21,207   |  
|                                                                                                   |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  
|Cash and cash equivalents at end of period                                                         |  | $                                             | 52,817   |   |                       | $ | 186     |                             |  | $ | 19,984       |   |  | $            |        |      |  | $ | 72,987   |  
|                                                                                                   |  |                                               |          |   |                       |   |         |                             |  |   |              |   |  |              |         |      |  |   |          |  



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



25



---



REMY INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows

(Unaudited)



|                                                                                                   |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | --------------------- | - | ------- | --------------------------- |  | - | ------------ | - |  | ------------ | ------ | ---- |  | - | ------- | -
|IN THOUSANDS, For the nine months ended September 30, 2003                                         |  | Remy International, Inc. (Parent CompanyOnly) |         |   | Subsidiary Guarantors |   |         | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Cash Flows from Operating Activities:                                                              |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Net (loss) income attributable to common stockholders                                              |  | $                                             | (78,260 | ) |                       | $ | 8,411   |                             |  | $ | 5,723        |   |  | $            | (8,741 | )(a) |  | $ | (72,867 | )
|Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Loss from discontinued operations                                                                  |  |                                               |        |   |                       |   | 2,831   |                             |  |   | 1,050        |   |  |              |       |      |  |   | 3,881   |  
|Gain on disposal of discontinued operations                                                        |  |                                               |        |   |                       |   | (2,417  | )                           |  |   |             |   |  |              |       |      |  |   | (2,417  | )
|Depreciation                                                                                       |  |                                               | 8       |   |                       |   | 8,748   |                             |  |   | 6,699        |   |  |              |       |      |  |   | 15,455  |  
|Amortization                                                                                       |  |                                               | 747     |   |                       |   | 74      |                             |  |   | 270          |   |  |              |       |      |  |   | 1,091   |  
|Non-cash interest expense                                                                          |  |                                               | 3,770   |   |                       |   |        |                             |  |   |             |   |  |              |       |      |  |   | 3,770   |  
|Accretion for redemption of preferred stock                                                        |  |                                               | 24,418  |   |                       |   |        |                             |  |   |             |   |  |              |       |      |  |   | 24,418  |  
|Minority interest                                                                                  |  |                                               |        |   |                       |   | 449     |                             |  |   | 1,776        |   |  |              |       |      |  |   | 2,225   |  
|Loss from unconsolidated joint ventures                                                            |  |                                               |        |   |                       |   |        |                             |  |   | 5,909        |   |  |              |       |      |  |   | 5,909   |  
|Equity in earnings of subsidiaries                                                                 |  |                                               | (8,741  | ) |                       |   |        |                             |  |   |             |   |  |              | 8,741  | (a)  |  |   |        |  
|Deferred income taxes                                                                              |  |                                               | 1,938   |   |                       |   |        |                             |  |   | 1,799        |   |  |              |       |      |  |   | 3,737   |  
|Post retirement benefits other than pensions                                                       |  |                                               |        |   |                       |   | (5,840  | )                           |  |   |             |   |  |              |       |      |  |   | (5,840  | )
|Accrued pension benefits                                                                           |  |                                               | (454    | ) |                       |   | 1,970   |                             |  |   |             |   |  |              |       |      |  |   | 1,516   |  
|Restructuring charges                                                                              |  |                                               |        |   |                       |   | 46,629  |                             |  |   | 634          |   |  |              |       |      |  |   | 47,263  |  
|Cash payments for restructuring charges                                                            |  |                                               |        |   |                       |   | (13,847 | )                           |  |   | (545         | ) |  |              |       |      |  |   | (14,392 | )
|Changes in operating assets and liabilities, net of acquisitions and restructuring charges:        |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Accounts receivable                                                                                |  |                                               |        |   |                       |   | (20,776 | )                           |  |   | (231         | ) |  |              |       |      |  |   | (21,007 | )
|Inventories                                                                                        |  |                                               |        |   |                       |   | (7,880  | )                           |  |   | (15,716      | ) |  |              |       |      |  |   | (23,596 | )
|Accounts payable                                                                                   |  |                                               | 768     |   |                       |   | (6,853  | )                           |  |   | 9,733        |   |  |              |       |      |  |   | 3,648   |  
|Other current assets and liabilities                                                               |  |                                               | 13,728  |   |                       |   | 1,852   |                             |  |   | (167         | ) |  |              |       |      |  |   | 15,413  |  
|Other non-current assets and liabilities, net                                                      |  |                                               | 42,665  |   |                       |   | (25,317 | )                           |  |   | (18,794      | ) |  |              |       |      |  |   | (1,446  | )
|                                                                                                   |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Net cash provided by (used in) operating activities of continuing operations                       |  |                                               | 587     |   |                       |   | (11,966 | )                           |  |   | (1,860       | ) |  |              |       |      |  |   | (13,239 | )
|Cash Flows from Investing Activities:                                                              |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Acquisitions, net of cash acquired                                                                 |  |                                               |        |   |                       |   | (6,439  | )                           |  |   | (3,107       | ) |  |              |       |      |  |   | (9,546  | )
|Net proceeds on sale of businesses                                                                 |  |                                               |        |   |                       |   | 27,876  |                             |  |   |             |   |  |              |       |      |  |   | 27,876  |  
|Purchases of property, plant and equipment                                                         |  |                                               |        |   |                       |   | (5,144  | )                           |  |   | (6,842       | ) |  |              |       |      |  |   | (11,986 | )
|                                                                                                   |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Net cash provided by (used in) investing activities of continuing operations                       |  |                                               |        |   |                       |   | 16,293  |                             |  |   | (9,949       | ) |  |              |       |      |  |   | 6,344   |  
|Cash Flows from Financing Activities:                                                              |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Proceeds from issuance of long-term debt                                                           |  |                                               |        |   |                       |   |        |                             |  |   | 6,521        |   |  |              |       |      |  |   | 6,521   |  
|Net borrowings (repayments) under revolving line of credit and other                               |  |                                               | (291    | ) |                       |   | (723    | )                           |  |   | 5,635        |   |  |              |       |      |  |   | 4,621   |  
|                                                                                                   |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Net cash (used in) provided by financing activities of continuing operations                       |  |                                               | (291    | ) |                       |   | (723    | )                           |  |   | 12,156       |   |  |              |       |      |  |   | 11,142  |  
|Effect of exchange rate changes on cash                                                            |  |                                               |        |   |                       |   |        |                             |  |   | 341          |   |  |              |       |      |  |   | 341     |  
|Cash flows of discontinued operations                                                              |  |                                               |        |   |                       |   | (3,681  | )                           |  |   | (1,294       | ) |  |              |       |      |  |   | (4,975  | )
|                                                                                                   |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                                               | 296     |   |                       |   | (77     | )                           |  |   | (606         | ) |  |              |       |      |  |   | (387    | )
|Cash and cash equivalents at beginning of year                                                     |  |                                               | 1       |   |                       |   | 156     |                             |  |   | 12,158       |   |  |              |       |      |  |   | 12,315  |  
|                                                                                                   |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                                             | 297     |   |                       | $ | 79      |                             |  | $ | 11,552       |   |  | $            |       |      |  | $ | 11,928  |  
|                                                                                                   |  |                                               |         |   |                       |   |         |                             |  |   |              |   |  |              |        |      |  |   |         |  



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



26



---



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



MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the three and nine month periods ended September 30, 2004 and 2003



Introduction



The following managements discussion and analysis of financial
condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2003, including the financial statements and accompanying notes. In the third quarter of 2004, we completed the
sale of our wholly-owned remanufactured transmission subsidiaries, Williams and JAX, to Caterpillar, Inc. (CAT) for $105.0 million in cash. We realized net cash proceeds of $102.7 million and recorded an estimated gain of $44.2 million
net of income taxes and deal-related costs and subject to future adjustment. In the third quarter we also committed to a plan to dispose of our automatic transmission remanufacturing business, AMT, based in Soborg, Denmark. An estimated loss of $1.8
million was recorded in connection with this action. As a result of the sale and plan of disposition, the operating results, balance sheets and cash flows of these businesses, comprising our remanufactured transmission business, were classified as
discontinued operations effective in the third quarter of 2004. All prior periods have been restated. Results of operations and cash flows for 2004 and 2003 also reflect the classification of our retail gas engine business, contract remanufacturing
gas engine business, Tractech, Inc. and Kraftube, Inc., which we refer to as Tractech and Kraftube, respectively, as discontinued operations.



In July 2004, the Board of Directors of Delco Remy International, Inc. approved changing the name of our company from Delco Remy International, Inc. to
Remy International, Inc. The name change became effective on August 1, 2004. We will continue to market certain starters and heavy-duty alternators for original equipment and aftermarket customers under the Delco Remy brand name, which is licensed
to the Company by General Motors.The costs incurred through September 30, 2004 related to the name change were not material to our consolidated financial position or results of operations.



Results of Operations



Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003



Net Sales



Net sales of $254.3 million in the third quarter of 2004 increased $7.6 million, or 3.1%, compared with the third quarter of
2003. Sales to automotive original equipment manufacturers, which we refer to as OEMs, increased $9.9 million due to higher alternator volume, including new business awards, partially offset by price reductions. Heavy duty OEM sales increased $10.2
million due to continued strong industry demand from Class 5 - 8 customers. Electrical aftermarket sales decreased $19.8 million due primarily to lower retail sales as a result of general market conditions, including the negative effect on demand of
a mild summer, and the loss of business at a U.S. retail customer, partially offset by higher volume from General Motors Service Parts Organization, which we refer to as GM SPO. Powertrain sales increased $6.1 million due to higher remanufactured
diesel engines, parts and locomotive products volume reflecting strong demand from all major customers. Third party sales in the core services business increased $1.2 million.



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Gross Profit



Gross profit of $50.0 million in the third quarter of 2004 increased $2.4 million, or 5.0%, compared with the third quarter of 2003, and as a percentage
of net sales improved to 19.7% in the third quarter of 2004 from 19.3% in the third quarter of 2003. Automotive OEM gross profit decreased $1.9 million due to costs associated with new alternator product lines, higher material costs and price
reductions, partially offset by higher sales volume and the benefits of restructuring and cost reduction actions. Heavy duty OEM gross profit increased $6.5 million due to sales volume growth and the benefits of restructuring and cost reduction
actions, partially offset by higher material costs. Higher material costs reflect increased prices for copper, aluminum and steel. Electrical aftermarket gross profit decreased $2.7 million due to lower sales, largely offset by cost benefits
associated with restructuring actions and improved material and warranty costs. Powertrain gross profit increased $1.1 million due primarily to higher sales and cost benefits associated with restructuring actions and improved factory efficiencies.
Gross profit on core services decreased $0.6 million. Freight surcharges reflecting escalating fuel oil prices during the third quarter of 2004 negatively affected profitability in all product categories.



Selling, General and Administrative Expenses



Selling, general and administrative expenses, which we refer to as SG&A,
of $27.7 million in the third quarter of 2004 increased $3.8 million, or 15.8%, from $23.9 million in the third quarter of 2003. As a percentage of net sales, SG&A was 10.9% in the third quarter of 2004 compared with 9.7% in the third quarter of
2003. The year over year increase in SG&A reflects higher expenditures on product engineering, systems and marketing expenses, in part related to new alternator product lines and new sales awards.



Restructuring Charges



In the third quarter of 2004, we recorded a restructuring charge of $0.1 million consisting primarily of employee
termination benefit costs relative to the actions discussed below under results of operations for the nine months ended September 30, 2003. A restructuring charge of $2.7 million in the third quarter of 2003 consisted of employee termination benefit
and other costs relative to the above referenced actions of $1.8 million and $0.9 million, respectively.



Operating Income



Operating income of $22.2 million in the third quarter of 2004 increased $1.1 million, or 5.3%, from $21.1 million in the third quarter of 2003 and, as a percentage of sales, was 8.7% in 2004 and 8.5% in 2003. This year over year
improvement reflects the net sales, gross profit, SG&A and restructuring charge factors discussed above.



Interest Expense



Interest expense, net, of $14.2 million in the third quarter of 2004 increased $0.4 million from $13.8 million in the comparable period of 2003. Interest expense associated with the Second Priority Senior Secured Floating Rate Notes issued
in April 2004 was offset by lower interest expense on our



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senior credit facility. Our senior credit facility was paid down on September 1, 2004 with proceeds received from the sale of Williams and JAX.



Income Taxes



Income tax expense of $3.4 million in the third quarter of 2004 consisted of taxes in various foreign jurisdictions totaling
$3.1 million and provisions for domestic federal alternative minimum and state income taxes of $0.3 million. In accordance with SFAS No. 109, Accounting for Income Taxes, which we refer to as SFAS 109, we established a valuation allowance for
domestic U.S. deferred tax assets in 2003, which resulted in no domestic U.S. tax provision on 2004 domestic income. Income tax expense of $2.1 million in the third quarter of 2003 consisted entirely of taxes in foreign jurisdictions.



Minority Interest



Minority interest in income of subsidiaries of $0.8 million in the third quarter of 2004 consisted of minority
shareholders interests in the earnings of Hubei Delphi Automotive Generators Company, which we refer to as Hubei, and our joint venture with International Truck and Engine Corporation. Minority interest in the third quarter of 2003 of $1.5
million included minority shareholders interests in the earnings of Hubei, World Wide Automotive, L.L.C., which we refer to as World Wide, Power Investments, Inc., which we refer to as Power, and Remy Mexico, S. de R.L. de C.V. (fka Delco Remy
Mexico, S. de R.L. de C.V.), which we refer to as RM. We purchased the remaining minority shareholders interest in World Wide and Power under contractual put agreements during the fourth quarter of 2003, and the remaining interest in RM
effective in the second quarter of 2004 after finalization of the Mexican Arbitration.



Loss (Income) From Unconsolidated Joint Ventures



The income from unconsolidated joint ventures of $0.1 million in the third quarter of 2004 consisted of earnings recorded by Sahney Paris, Rhone, Ltd., which we refer to as SPR, partially offset by the losses recognized related to the
capital contributions we made into iPower Technologies, L.L.C., which we refer to as iPower, during the third quarter. The loss of $0.2 million in the third quarter of 2003 consisted of losses recorded by Hitachi Remy Automotive GmbH, which we refer
to as Hitachi, and iPower, partially offset by earnings recorded by SPR.



Discontinued Operations



The loss from
discontinued operations of $25 thousand in the third quarter of 2004 consisted primarily of net losses recorded by the discontinued transmission remanufacturing business. The loss of $0.8 million reported in the third quarter of 2003 consisted of
net losses recorded by the transmission and gas engine remanufacturing businesses.



In the third quarter of 2004, we recorded an estimated net gain on the sale of Williams and JAX of $44.2 million and an estimated loss of $1.8 million on the planned disposition of AMT. An additional gain of $0.1
million on the sale of Tractech and Kraftube and a $0.6 million reduction of the loss on the discontinuance of our retail aftermarket gas engine business were also recorded in the third quarter of 2004.



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Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003



Net Sales



Net sales of $795.3 million in the first nine months of 2004 increased $66.6 million, or 9.1%, compared with the first nine
months of 2003. Sales to automotive OEMs, increased $34.1 million due to higher alternator volume, including new business awards, partially offset by price reductions. Heavy duty OEM sales increased $29.5 million due to strong industry demand from
Class 5  8 customers. Electrical aftermarket sales decreased $11.3 million due primarily to lower retail sales as a result of general market conditions during the second and third quarters of 2004, including the negative effect on demand of a
mild summer, and the loss of business at a U.S. retail customer, partially offset by customer inventory update and refresh orders and strong business conditions during the first quarter of 2004 and higher volume from GM SPO. Powertrain sales
increased $16.2 million due to higher remanufactured diesel engines, parts and locomotive products volume reflecting strong demand from all major customers. Third party sales in the core services business decreased $1.9 million.



Gross Profit



Gross profit of $154.6 million in the first nine months of 2004 increased $18.7 million, or 13.8%, compared with the first
nine months of 2003, and as a percentage of net sales improved to 19.4% in the first nine months of 2004 from 18.6% in the first nine months of 2003. Automotive OEM gross profit decreased $6.4 million due to costs associated with new alternator
product lines, higher material costs and price reductions, partially offset by higher sales volume and the benefits of restructuring and cost reduction actions. Heavy duty OEM gross profit increased $12.2 million due to sales volume growth and the
benefits of restructuring and cost reduction actions, partially offset by higher material costs. Higher material costs reflect increased prices for copper, aluminum and steel. Electrical aftermarket gross profit increased $7.5 million due to cost
benefits associated with restructuring actions and improved material and warranty costs, partially offset by lower sales. Powertrain gross profit increased $6.6 million due primarily to higher sales and cost benefits associated with restructuring
actions and improved factory efficiencies. Gross profit on core services decreased $1.2 million. Freight surcharges reflecting escalating fuel oil prices, primarily during the third quarter of 2004, negatively affected profitability in all product
categories.



Selling, General and Administrative Expenses



SG&A of $84.0 million in the first nine months of 2004 increased $9.4
million, or 12.6%, from $74.6 million in the first nine months of 2003. As a percentage of net sales, SG&A was 10.6% in the first nine months of 2004 compared with 10.2% in the first nine months of 2003. The year over year increase in SG&A
reflects higher expenditures on product engineering, systems and marketing expenses, in part related to new alternator product lines and new sales awards.



Restructuring Charges



Restructuring charges of $1.5 million in the first nine months of 2004 consisted of employee termination benefit costs of $0.7 million and other costs of
$0.8 million relative to the actions discussed below.



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In the first nine months of 2003, we recorded a net restructuring charge of $47.3 million related
primarily to: (i) the closure of our starter and alternator manufacturing operations in Anderson, Indiana; (ii) the closure of our electrical aftermarket remanufacturing and distribution facilities in Reed City, Michigan; and (iii) the consolidation
of our alternator and starter remanufacturing operations in Mississippi. The majority of the 2003 charge related to the closure of the manufacturing facilities in Anderson, Indiana and consisted of employee termination benefits associated with the
aforementioned actions totaling approximately $14.8 million, a pension and post-employment benefit plan net curtailment gain of $5.4 million, the write down of certain fixed assets and accrual of certain contract termination costs totaling $37.3
million and other miscellaneous costs of $0.6 million.



Operating Income



Operating income of $69.1 million in the first nine
months of 2004 compares with operating income of $14.1 million in the first nine months of 2003 and reflects the net sales, gross profit, SG&A and restructuring charge factors discussed above.



Interest Expense



Interest expense, net, of $44.4 million in the first nine months of 2004 increased $3.0 million from $41.4 million in the
comparable period of 2003. This increase reflects additional interest for the period between the call and redemption dates of $1.3 million relative to redemption of the 10 5/8% Senior Subordinated Notes recorded in the second quarter of 2004 and
interest expense associated with the Second Priority Senior Secured Floating Rate Notes issued in April 2004, partially offset by lower interest expense on our senior credit facility during the third quarter of 2004. Our senior credit facility was
paid down on September 1, 2004 with proceeds received from the sale of Williams and JAX.



Loss on Early Extinguishment of Debt



In connection with our refinancing actions during the second quarter of 2004, we recorded a loss on the early extinguishment of debt totaling $7.9 million. This loss consisted of: (i) a call premium of $2.5 million
and write off of deferred financing costs of $1.4 million on redemption of the 10 5/8% Senior Subordinated Notes; (ii) a prepayment penalty of $1.8 million and the write off of deferred financing costs of $0.7 million on repayment of the term loan;
and (iii) a write off of deferred financing costs of $1.2 million and an amendment fee of $0.3 million on the pay down and amendment of the senior credit facility.



Income Taxes



Income tax expense of $4.4 million in the first nine months of 2004 consisted of taxes in various foreign jurisdictions totaling $3.5 million, Federal
alternative minimum tax of $0.3 million and provisions for domestic state and local taxes of $0.6 million. In accordance with SFAS No. 109, we established a valuation allowance for domestic U.S. deferred tax assets in 2003, which resulted in no
domestic U.S. tax provision on 2004 domestic income. Income tax expense of $11.5 million in the first nine months of 2003 consisted of taxes in foreign jurisdictions of $8.6 million and $2.9 million of withholding tax on intercompany dividends that
were declared in the first quarter of 2003. The reduction in foreign taxes in 2004 compared with 2003 reflects a change in the mix of earnings and deductibility of certain items in the jurisdictions in which we conduct business.



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Minority Interest



Minority interest in income of subsidiaries of $2.1 million in the first nine months of 2004 consisted of minority shareholders interests in the
earnings of Hubei, RM and our joint venture with International Truck and Engine Corporation. Minority interest in the first nine months of 2003 of $2.2 million included minority shareholders interests in the earnings of Hubei, World Wide,
Power, RM and our joint venture with International Truck and Engine Corporation. We purchased the remaining minority shareholders interest in World Wide and Power under contractual put agreements during the fourth quarter of 2003, and the
remaining interest in RM effective in the second quarter of 2004 after finalization of the Mexican Arbitration.



Loss (Income) From Unconsolidated Joint Ventures



The loss from unconsolidated joint ventures of $0.7 million in the first nine months of 2004 consisted of losses recognized related to the capital
contributions we made into iPower and losses recorded by Hitachi, partially offset by earnings recorded by SPR. The loss of $5.9 million in the first nine months of 2003 consisted of the losses recorded on our investment in iPower and losses
recorded by Hitachi, partially offset by earnings recorded by SPR.



Discontinued Operations



Income from
discontinued operations of $1.0 million in the first nine months of 2004 consisted primarily of earnings recorded by the discontinued transmission remanufacturing business. The loss of $3.9 million reported in the first nine months of 2003 consisted
of net losses recorded by the retail and contract remanufacturing gas engine businesses, Tractech and Kraftube, partially offset by earnings of the transmission remanufacturing business.



In the first nine months of 2004, we recorded an estimated net gain on the sale of Williams and JAX of $44.2 million and an
estimated loss of $1.8 million on the planned disposition of AMT. An additional gain of $0.4 million on the sale of Tractech and Kraftube and a $0.6 million reduction of the loss on the discontinuance of our retail aftermarket gas engine business
were also recorded in the first nine months of 2004. In the first nine months of 2003 we recorded an estimated gain of $2.4 million on the sale of Tractech and Kraftube.



Liquidity and Capital Resources



On April 23, 2004, we issued $125.0 million of Second Priority Senior Secured Floating Rate Notes due 2009, bearing an interest rate of LIBOR plus 4.00%,
and $150.0 million of 9 3/8% Senior Subordinated Notes due 2012. The net proceeds from the issuance of these notes were used to pay down existing indebtedness under our senior credit facilities, including repayment of the $60.0 million term loan and
relevant prepayment premium, and to finance the redemption of our outstanding 10 5/8% Senior Subordinated Notes Due 2006 issued on August 1, 1996, including the call premium and accrued interest. The 10 5/8% notes were called for redemption in their
entirety on April 23, 2004 at a redemption price of 101.771% of their face amount plus accrued but unpaid interest up to, but not including, the redemption date of May 24, 2004.



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In connection with issuing the new notes in April 2004, we amended our senior credit facilities to
reflect the extinguishment of the $60.0 million term loan, provide for borrowings of up to $120.0 million under our asset based revolving credit facility, and extend the maturity date from March 31, 2006 to June 30, 2007.



We believe that the financing actions taken in April 2004 will contribute to
increased liquidity and an overall lower cost of capital.



On
September 1, 2004, we completed the sale of our wholly-owned remanufactured transmission subsidiaries, Williams and JAX, for $105.0 million. Under the terms of our senior credit facility and indentures, within one year from the completion of the
sale of Williams and JAX, we are required, at our election, to use the proceeds of the sale to (a) repay senior indebtedness, (b) purchase additional assets or, in the event that we dont do either of the above, to make an offer to our
noteholders to repurchase outstanding notes. A portion of the cash proceeds of $102.7 million, net of deal-related costs, was used to pay down outstanding borrowings under our senior credit facility.



Our short-term liquidity needs include required debt service (including
capital lease payments), day-to-day operating expenses, working capital requirements and the funding of capital expenditures, acquisition payments for previously completed acquisitions and restructuring actions. In the fourth quarter of 2004, we
will be required to make payments in connection with the previous acquisition of Delphi Corporations light vehicle alternator business. We expect that the net amount of these additional payments will be in the range of $2.0 million to $3.0
million. Long-term liquidity requirements include principal payments of long-term debt and payments in connection with the acquisition of Delphi Corporations light vehicle alternator business totaling approximately $6.0 million in 2005 through
2006. Our contractual obligations are provided in the table under the section Contractual Obligations and Contingent Liabilities and Commitments appearing below. Our principal payments on long-term lease obligations are presented in Note
9 to our consolidated financial statements under Item 8 of our 2003 Form 10-K.



Our principal sources of cash to fund our short-term liquidity needs consist of cash generated by operations and borrowings under our senior credit facility. The senior credit facility is collateralized by liens on
substantially all of our assets and substantially all of the assets of our domestic and certain of our foreign subsidiaries and by the capital stock of such subsidiaries. At September 30, 2004, the rate for the revolving credit facility was 5.0%,
borrowings were $14.0 thousand, and letters of credit totaled $6.5 million. Based on the collateral supporting the senior credit facility at September 30, 2004, $113.5 million was available, net of letters of credit.



We participate in two programs that accelerate the collection of accounts
receivable. Under one program, we sell the accounts of certain of our aftermarket customers to banks, on a non-recourse basis, at a discount. At September 30, 2004, the amount of receivables under this program was approximately $29.7 million. The
second program is an early pay plan under which a third party acts as paying agent for one of our customers. The accounts are paid, at a discounted rate, in five to seven days after shipment instead of the regular terms. This program is also without
recourse. The amount covered by this plan at September 30, 2004 was approximately $11.7 million.



We believe that cash generated from operations, together with the amounts available under the senior credit facility and other borrowings, will be
adequate to meet our debt service, capital



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expenditure, prior acquisition payment, restructuring and working capital requirements for at least the next twelve months, although no assurance can be
given in this regard. We also continue to explore additional financing options, both in the U.S. and abroad, in an effort to further enhance liquidity.



Cash used in operating activities of continuing operations of $15.9 million in the first nine months of 2004 compares with $13.2 million used in the first
nine months of 2003. Cash used in the first nine months of 2004 reflected net income from continuing operations, excluding non-cash and other reconciling items, of $36.2 million, a $30.7 million increase in net working capital, cash restructuring
payments of $7.8 million and payments totaling $13.6 million (including VAT of $1.8 million) made in connection with settlement of the services agreement component of the arbitration with the former minority shareholders of RM. The arbitration
payment of $13.6 million is reflected in the $15.6 million reduction in other current assets and liabilities. Accounts receivable increased $12.3 million in the first nine months of 2004 due primarily to stronger first and second quarter shipments,
partially offset by an increase in accelerated collections under the receivables programs discussed above. Inventories increased $16.1 million in the first nine months of 2004 due to: (i) builds in support of anticipated higher future heavy duty
original equipment sales; (ii) builds for the launch of an additional remanufactured diesel engine; and (iii) lower than expected electrical aftermarket sales during the second and third quarters. Cash restructuring payments of $7.8 million in the
first nine months of 2004 consisted of $4.7 million and $1.6 million of employee termination benefits relative to the 2001 and 2003 restructuring actions, respectively, and $1.5 million of other items.



Cash used in operating activities of continuing operations in the first nine
months of 2003 of $13.2 million reflected net income from continuing operations, excluding non-cash and other reconciling items, of $26.7 million, a $25.5 million increase in net working capital and cash restructuring payments of $14.4 million.
Accounts receivable increased $21.0 million from 2002 year end due to seasonal factors in the business and increased sales to customers with longer terms. Inventories increased $23.6 million in the first nine months of 2003 due to increases to
support the global capacity initiative and restructuring actions and to meet seasonal demand in the electrical aftermarket. The $15.4 million increase in other net current liabilities reflected higher accrued wages and benefits, interest and general
accruals. Cash restructuring payments of $14.4 million in the first nine months of 2003 consisted of $4.6 million and $7.9 million of employee termination benefits relative to the 2001 and 2003 restructuring actions, respectively, and $1.9 million
of other items.



Cash provided by investing activities of
continuing operations of $62.8 million in the first nine months of 2004 compares with cash provided of $6.3 million in the first nine months of 2003. Acquisition payments in the first nine months of 2004 consisted of earn-out payments relative to
the 2000 acquisition of M&M Knopf Auto Parts, Inc. ($13.4 million), the final cash payment on notes issued in 2002 in connection with the acquisition of the remaining shares from the minority shareholders of Remy Korea Limited (fka Delco Remy
Korea Limited) ($4.9 million), purchase of the remaining shares from the minority shareholders of the Mexico joint venture ($5.5 million) and the acquisition of Delphi Corporations light vehicle alternator business ($1.0 million). Acquisition
payments in the first nine months of 2003 consisted of the purchase, under contractual put agreements, of increased ownership percentages in World Wide ($3.1 million) and Power ($3.4 million), payments on notes issued in 2002 in connection with the
acquisition of the remaining shares from the minority shareholders of Remy Korea Limited ($2.6 million) and payments on notes relative to the acquisition of certain parts of the Delphi Corporation alternator business in the fourth quarter of 2002
($0.4 million). In addition, we acquired 51% of Hubei in the first quarter of 2003 for $3.6 million in cash.



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Cash of $3.6 million was included in the opening balance sheet for this acquisition. In the third quarter of 2004 we recorded proceeds on the sale of
Williams and JAX of $102.7 million, net of taxes and deal-related costs. We recorded proceeds on the sale of Tractech and Kraftube in the first quarter of 2003 of $27.9 million, net of expenses. An additional $0.3 million was received in the first
nine months of 2004 for such sales. Capital expenditures in both 2004 and 2003 were primarily for production, engineering and distribution equipment.



Cash provided by financing activities of continuing operations of $5.1 million in the first nine months of 2004 consisted of proceeds from the issuance of
long-term debt, payments for the retirement of long-term debt, the payment of financing costs in connection with our refinancing in the second quarter and the pay down of our senior credit facility with proceeds from the sale of Williams and JAX.
Also during the first nine months of 2004, $1.0 million in cash dividends were paid to the minority shareholders of Hubei. In the first nine months of 2003, we recorded net cash proceeds of $6.5 million relative to a sale-leaseback financing
transaction in connection with our Mexico operations.



Contingencies



We are 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 this Part I.



Contractual Obligations and Contingent Liabilities and Commitments



Our contractual obligations as of September 30, 2004 are provided in the following table (dollars in millions):



|                                       |  |                        |     |                         |   |           |  |           |     |            |   |     |  |   |    
|-------------------------------------- |  | ---------------------- | --- | ----------------------- | - | --------- |  | --------- | --- | ---------- | - | --- |  | - | ---
|                                       |  | Payments Due by Period
|Contractual Obligations                |  | Total                  |     | Last ThreeMonths of2004 |   | 2005-2007 |  | 2008-2009 |     | After 2009
|Long-Term Debt(1)                      |  | $                      | 622 |                         | $ | 2         |  | $         | 175 |            | $ | 295 |  | $ | 150
|Capital Lease Obligations              |  |                        | 17  |                         |   | 1         |  |           | 6   |            |   | 5   |  |   | 5  
|Operating Leases                       |  |                        | 29  |                         |   | 2         |  |           | 16  |            |   | 6   |  |   | 5  
|Pension Funding(2)                     |  |                        | 1   |                         |   | 1         |  |           |    |            |   |    |  |   |   
|Other Post Retirement Benefits Funding |  |                        | 11  |                         |   | 1         |  |           | 3   |            |   | 1   |  |   | 6  
|Acquisition Payments(3)                |  |                        | 9   |                         |   | 3         |  |           | 6   |            |   |    |  |   |   
|Employee Termination Benefits          |  |                        | 5   |                         |   | 4         |  |           | 1   |            |   |    |  |   |   
|Other                                  |  |                        | 4   |                         |   |          |  |           | 2   |            |   |    |  |   | 2  
|                                       |  |                        |     |                         |   |           |  |           |     |            |   |     |  |   |    
|Total Contractual Cash Obligations     |  | $                      | 698 |                         | $ | 14        |  | $         | 209 |            | $ | 307 |  | $ | 168
|                                       |  |                        |     |                         |   |           |  |           |     |            |   |     |  |   |    



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



|(2) | Amounts beyond 2004 are not currently estimable.
|--- | ------------------------------------------------



|(3) | Includes payments in connection with the acquisition of Delphi Corporations light
vehicle alternator business.
|--- | ---------------------------------------------------------------------------------------------------------------



With respect to
capital expenditures, we expect spending in the last three months of 2004 to approximate $8.0 million.



In addition to the contractual obligations disclosed above, we also have a variety of other contractual agreements related to the procurement of materials
and other commitments. With respect



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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 $65.0 to $70.0 million of open purchase orders at September 30, 2004.



Seasonality



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



Foreign Operations



Approximately 22% of our net sales in the nine months ending September 30,
2004 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.



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, 2003, 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:



| |  | the cyclical nature of demand in our business and downturns in the automotive industry;
| | - | ---------------------------------------------------------------------------------------



| |  | the demand for our products;
| | - | ----------------------------



| |  | our reliance upon a major customer;
| | - | -----------------------------------



| |  | risks associated with our estimated costs;
| | - | ------------------------------------------



| |  | consolidation among automotive parts customers and suppliers;
| | - | -------------------------------------------------------------



| |  | indirect control of us by a limited number of persons;
| | - | ------------------------------------------------------



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| |  | risks associated with integration of our acquisitions into our business;
| | - | ------------------------------------------------------------------------



| |  | the effectiveness of our lean manufacturing and other cost saving plans;
| | - | ------------------------------------------------------------------------



| |  | risks associated with international operations, including unfavorable political, regulatory, labor and tax conditions in other countries;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | risks associated with the change of the Companys name;
| | - | -------------------------------------------------------



| |  | technological trends and innovations and associated costs;
| | - | ----------------------------------------------------------



| |  | our dependence on the availability and price of raw materials and component parts;
| | - | ----------------------------------------------------------------------------------



| |  | effects of fluctuations in foreign exchange rates;
| | - | --------------------------------------------------



| |  | litigation risks;
| | - | -----------------



| |  | risks associated with product liability and warranty and recall claims; and
| | - | ---------------------------------------------------------------------------



| |  | risks associated with environmental and health and safety liabilities and requirements.
| | - | ---------------------------------------------------------------------------------------



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



In connection with the restructuring actions initiated in the first quarter
of 2003, we currently expect to record additional restructuring charges of approximately $0.5 million during the last three months of 2004. These actions may also impact other operating expenses during 2004. We expect to begin realizing the full
benefits of these actions near the end of 2004.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------



As of September 30, 2004, 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, 2003.



|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 there have been no significant changes during the quarter ended September 30, 2004 that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37



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PART II OTHER INFORMATION



AMOUNTS IN DOLLARS, EXCEPT AS INDICATED



|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.



Remy Mexico, S. De R.L. De C.V. Arbitration



Remy Mexico Holdings, S. de R.L. de C.V., which we refer to as RMH, our indirect subsidiary, and GCID Autopartes, S.A. de C.V., which we refer to as GCID, were parties to a series of agreements, including a partnership agreement. The
partnership agreement created Remy Mexico, S. de R.L. de C.V. (formerly Delco Remy Mexico, S. de R.L. de C.V.) (RM), which operates certain manufacturing facilities in Mexico. GCID was the minority partner with a 24% ownership interest.
An affiliate of ours and RMH, Remy Componentes, S. de R.L. de C.V., which we refer to as RC and RM, were parties to a services agreement with an affiliate of GCID relating to the partnership, which, among other things, required the payment of fees
in connection with the provision of employees to the partnership. That agreement terminated as of April 3, 2004. Another affiliate of GCID was the partnerships landlord until April 30, 2004.



RMH and GCID signed a letter of intent on or about May 3, 2000, whereby GCID
agreed to terminate certain of the agreements with RMH and to sell its partnership interest to RMH in exchange for a $13 million termination payment by RMH to GCID, but the transaction was never finalized. In June 2001, GCID declared RMH in default
under the partnership agreement, alleging that RMH had failed to conduct the business of the partnership in accordance with that agreement. In August 2001, GCID instituted an arbitration proceeding before the American Arbitration Association against
RMH and later added RC and our wholly-owned subsidiary, Remy, Inc. (formerly Delco Remy America, Inc.), who together with RMH and RC are referred to as the named parties. GCID and its affiliates sought damages for the alleged (i) breaches of the
partnership agreement, including a requirement under the partnership that RMH buy out GCIDs partnership interest; (ii) breaches of fiduciary duty; (iii) breaches of various other contracts between and among the various parties and (iv)
tortious interference with contractual relations. RM terminated the lease agreement as of September 27, 2003. RM and RC relocated all operations to another facility in San Luis Potosi, Mexico as of April 30, 2004. In accordance with an interim award
from the arbitration panel on March 10, 2004, RM and RC hired the employees previously provided by GCIDs affiliate under the services agreement as of April 3, 2004.



The arbitration panel issued its final award on June 25, 2004. In accordance with the final award, on July 6, 2004 GCID
transferred its interest in RM to RMH and RMH, RM and RC paid GCID and its affiliates approximately $17.3 million for GCIDs minority interest, the award for past services fees for the period of 1997 through 2004, and other claims, including
interest. RMH, RM and RC also paid approximately $1.8 million in VAT as a result of these payments.



38



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UAW Litigation



On April 16, 2003, the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America, which we refer to as the UAW and
its Local Union 662 filed suit against us and Remy, Inc. (formerly Delco Remy America, Inc.), which we refer to as 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, which we refer to as the SUB plan. The plaintiffs allege that the SUB plan provides 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 seek to enforce
terminated provisions of a health care program which the plaintiffs allege provides the terminated employees with 25 months of continued hospital, surgical, medical, hearing aid, prescription drug, mental health, substance abuse and vision insurance
coverage. The terminated employees were represented by the UAW and its Local Union 662 under various agreements, which expired on March 31, 2003. The lawsuit was filed shortly after the UAW membership failed to ratify RIs last, best and final
offer for a Shutdown Agreement. The UAW filed an amended complaint on July 8, 2003 to which we filed an answer on July 24, 2003. The magistrate has approved a case management plan, and the trial is currently expected to begin in January 2005. We
deny the material allegations of the complaint, deny any wrongdoing and intend to defend ourselves vigorously, but are unable to predict whether the proceedings will have a material adverse effect on us.



Remy Reman Facilities



The Remy Reman facilities in Mississippi identified certain possible violations of state air laws and notified the state
environmental agency under the state voluntary audit disclosure rules. The Mississippi Department of Environmental Quality issued Notices of Violation regarding two of the facilities and the subsidiaries have agreed to either pay approximately $0.06
million in penalties and spend approximately $0.1 million in supplemental environmental projects (SEPs) or to pay approximately $0.17 million in penalties if no SEPs are completed.



Franklin Power Products, Inc.



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



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



None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------



Not applicable.



39



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



None.



|Item 5. | Other Information
|------- | -----------------



| | a. | The Companys independent auditor, Ernst & Young LLP (E&Y), has recently advised the Audit Committee of Remy International, Incs. (RII)
Board of Directors that it has identified potential independence issues related to providing prohibited services in China. As it relates to RII, these services involve performing certain non-audit work by E&Ys China member firm
(E&Y China) for one Chinese subsidiary of the Company. During 2003, E&Y China assisted this subsidiary in preparing and filing certain individual tax returns for one RII employee located in China. In connection with the
performance of the tax return preparation services, E&Y China held tax funds totaling approximately $28,000 from September of 2003 to January of 2004, which were to be used to make applicable tax payments to the Chinese tax authorities in such
periods. All services ceased in January 2004, and E&Y China returned excess funds in their control totaling approximately $24 in 2004. E&Y China received fees for these tax return preparation and payment services of approximately $1,996 in
2003.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



RIIs Audit Committee and E&Y
have discussed E&Ys independence with respect to the Company in light of the foregoing facts. E&Y has informed the Audit Committee that it does not believe that the holding and paying of these funds impaired E&Ys independence
with respect to the audit of the Companys consolidated financial statements. E&Y has informed the Audit Committee that it is unaware of any similar instance in which E&Y has held custody of Company funds.



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                                                                      
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Limited Waiver and Amendment No. 1 to Second Amended and Restated Loan and Security Agreement and the Other Financing Agreements dated September 1, 2004.            
|     | 
|31.1 |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|31.2 |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 
|     | 
|32.1 |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  



40



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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 4, 2004 |  |  |  | By:                      |  | /s/ Rajesh K. Shah                                                                
|      |  |                  |  |  |  |                          |  | Rajesh K. Shah                                                                    
|      |  |                  |  |  |  |                          |  | Executive Vice President and Chief Financial Officer (Principal Financial Officer)



|      |  |                  |  |  |  |     |  |                                                                       
|----- |  | ---------------- |  |  |  | --- |  | ----------------------------------------------------------------------
|      |  |                  |  | 
|Date: |  | November 4, 2004 |  |  |  | By: |  | /s/ Amitabh Rai                                                       
|      |  |                  |  |  |  |     |  | Amitabh Rai                                                           
|      |  |                  |  |  |  |     |  | Vice President and Corporate Controller (Principal Accounting Officer)



41



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EXHIBIT INDEX



|            |  |                                                                                                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                          
|10.1        |  | Limited Waiver and Amendment No. 1 to Second Amended and Restated Loan and Security Agreement and the Other Financing Agreements dated September 1, 2004.            
|            | 
|31.1        |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|            | 
|31.2        |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 
|            | 
|32.1        |  | Certification by Thomas J. Snyder, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            | 
|32.2        |  | Certification by Rajesh K. Shah, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  



42