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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934For the quarterly period ended June 30, 2002oro 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

DELCO REMY INTERNATIONAL, INC.(Exact name of registrant as specified in its charter)

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

(765) 778-6499(Registrants telephone number, including area code)

Not Applicable(Former name, former address and former
fiscal year, if changed since last report)

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 the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.

|                                                                   | Outstanding as of August 9, 2002
|------------------------------------------------------------------ | --------------------------------
|                                                                   |                                 
|Common Stock - Class ACommon Stock - Class BCommon Stock - Class C | 1,000 2,497,337.4916,687        
|                                                                   |                                 

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Delco Remy International, Inc. and Subsidiaries

INDEX

|PART I     | FINANCIAL INFORMATION | Page                                                                                 
|---------- | --------------------- | -------------------------------------------------------------------------------------
|           |                       |                                                                                      
|           | Item 1                | Financial Statements                                                                 
|           |                       |                                                                                      
|           |                       | Condensed Consolidated Balance Sheets                                                
|           |                       |                                                                                      
|           |                       | Condensed Consolidated Statements of Operations                                      
|           |                       |                                                                                      
|           |                       | Condensed Consolidated Statements of Cash Flows                                      
|           |                       |                                                                                      
|           |                       | Notes to Condensed Consolidated Financial Statements                                 
|           |                       |                                                                                      
|           | Item 2                | Management's Discussion and Analysis of Financial Condition and Results of Operations
|           |                       |                                                                                      
|           | Item 3                | Quantitative and Qualitative Disclosures About Market Risk                           
|           |                       |                                                                                      
|PART II    | OTHER INFORMATION     |                                                                                      
|           |                       |                                                                                      
|           | Item 1                | Legal Proceedings                                                                    
|           |                       |                                                                                      
|           | Item 6                | Exhibits and Reports on Form 8-K.                                                    
|           |                       |                                                                                      
|SIGNATURES |                       | 26                                                                                   

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Delco Remy International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands)

|                                                     |   | June 30,    |   |  |   | December 31, |  
|---------------------------------------------------- | - | ----------- | - |  | - | ------------ | -
|                                                     |   | 2002        |   |  |   | 2001         |  
|                                                     |   |             |   |  |  
|                                                     |   | (unaudited) |   |  |   |              |  
|Assets                                               |   |             |   |  |   |              |  
|Current assets:                                      |   |             |   |  |   |              |  
|Cash and cash equivalents                            | $ | 34,795      |   |  | $ | 23,868       |  
|Trade accounts receivable, net                       |   | 187,042     |   |  |   | 155,404      |  
|Other receivables                                    |   | 12,273      |   |  |   | 8,944        |  
|Inventories                                          |   | 288,362     |   |  |   | 284,693      |  
|Deferred income taxes                                |   | 18,814      |   |  |   | 21,175       |  
|Assets of discontinued operations                    |   | 9,176       |   |  |   | 41,434       |  
|Other current assets                                 |   | 16,671      |   |  |   | 12,895       |  
|                                                     |   |             |   |  |  
|Total current assets                                 |   | 567,133     |   |  |   | 548,413      |  
|                                                     |   |             |   |  |   |              |  
|Property and equipment                               |   | 303,582     |   |  |   | 294,582      |  
|Less accumulated depreciation                        |   | 132,131     |   |  |   | 118,727      |  
|                                                     |   |             |   |  |  
|Property and equipment, net                          |   | 171,451     |   |  |   | 175,855      |  
|                                                     |   |             |   |  |   |              |  
|Deferred financing costs                             |   | 16,089      |   |  |   | 12,640       |  
|Goodwill, net of accumulated amortization            |   | 185,348     |   |  |   | 179,528      |  
|Investments in joint ventures                        |   | 12,581      |   |  |   | 11,144       |  
|Deferred income taxes                                |   | 15,039      |   |  |   | 10,476       |  
|Other assets                                         |   | 11,011      |   |  |   | 9,349        |  
|                                                     |   |             |   |  |  
|Total assets                                         | $ | 978,652     |   |  | $ | 947,405      |  
|                                                     |   |             |   |  |  
|Liabilities and stockholders' equity (deficit)       |   |             |   |  |   |              |  
|Current liabilities:                                 |   |             |   |  |   |              |  
|Accounts payable                                     | $ | 160,353     |   |  | $ | 128,781      |  
|Accrued interest                                     |   | 10,134      |   |  |   | 10,100       |  
|Accrued restructuring charges                        |   | 18,368      |   |  |   | 28,268       |  
|Liabilities of discontinued operations               |   | 5,789       |   |  |   | 8,605        |  
|Other liabilities and accrued expenses               |   | 58,762      |   |  |   | 56,412       |  
|Current debt                                         |   | 23,049      |   |  |   | 6,771        |  
|                                                     |   |             |   |  |  
|Total current liabilities                            |   | 276,455     |   |  |   | 238,937      |  
|                                                     |   |             |   |  |   |              |  
|Long-term debt, less current portion                 |   | 614,352     |   |  |   | 593,178      |  
|Post-retirement benefits other than pensions         |   | 22,669      |   |  |   | 25,812       |  
|Accrued pension benefits                             |   | 10,299      |   |  |   | 10,216       |  
|Accrued preferred dividends                          |   | 35,353      |   |  |   | 20,971       |  
|Other non-current liabilities                        |   | 6,378       |   |  |   | 6,655        |  
|Commitments and contingencies                        |   |             |   |  |   |              |  
|Minority interest in subsidiaries                    |   | 30,306      |   |  |   | 30,107       |  
|                                                     |   |             |   |  |   |              |  
|Stockholders' equity:                                |   |             |   |  |   |              |  
|Preferred stock  Series A                           |   | 223,728     |   |  |   | 223,728      |  
|Common stock:                                        |   |             |   |  |   |              |  
|Class A shares                                       |   |            |   |  |   |             |  
|Class B shares                                       |   | 3           |   |  |   | 3            |  
|Class C shares                                       |   |            |   |  |   |             |  
|Retained deficit                                     |   | (226,828    | ) |  |   | (178,762     | )
|Accumulated other comprehensive loss                 |   | (14,063     | ) |  |   | (23,440      | )
|                                                     |   |             |   |  |  
|Total stockholders' equity (deficit)                 |   | (17,160     | ) |  |   | 21,529       |  
|                                                     |   |             |   |  |  
|Total liabilities and stockholders' equity (deficit) | $ | 978,652     |   |  | $ | 947,405      |  
|                                                     |   |             |   |  |  
|                                                     |   |             |   |  |   |              |  

See Notes to Condensed Consolidated Financial Statements

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Delco Remy International, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)(in thousands)

|                                                    | Three Month Period |         | Six Month Period
|--------------------------------------------------- | ------------------ | ------- | ----------------
|                                                    | Ended June 30      |         | Ended June 30   
|                                                    |                    |         |                 
|                                                    |                    | 2002    |                 
|                                                    |                    |         |                 
|                                                    |                    |         |                 
|Net sales                                           | $                  | 282,482 |                 
|Cost of goods sold                                  |                    | 233,451 |                 
|Special charges - cost of goods sold                |                    |        |                 
|                                                    |                    |         |                 
|Gross profit                                        |                    | 49,031  |                 
|                                                    |                    |         |                 
|Selling, general and administrative expenses        |                    | 25,817  |                 
|Amortization of goodwill and intangibles            |                    | 58      |                 
|                                                    |                    |         |                 
|Operating income                                    |                    | 23,156  |                 
|                                                    |                    |         |                 
|Interest expense                                    |                    | (14,968 | )               
|Non-recurring merger and tender offer expenses      |                    |        |                 
|Other non-operating income (expense)                |                    | (361    | )               
|                                                    |                    |         |                 
|Income from continuing operations before income     |                    |         |                 
|taxes, minority interest in income of subsidiaries, |                    |         |                 
|loss from unconsolidated joint ventures and         |                    |         |                 
|extraordinary items                                 |                    | 7,827   |                 
|                                                    |                    |         |                 
|Income tax expense                                  |                    | 2,810   |                 
|Minority interest in income of subsidiaries         |                    | (1,732  | )               
|Loss from unconsolidated joint ventures             |                    | (269    | )               
|                                                    |                    |         |                 
|Net income (loss) from continuing operations        |                    |         |                 
|before extraordinary items                          |                    | 3,016   |                 
|                                                    |                    |         |                 
|Discontinued operations:                            |                    |         |                 
|Loss from discontinued operations (including        |                    |         |                 
|estimated loss on disposal of $33.5 million in      |                    |         |                 
|2002)                                               |                    | (41,454 | )               
|Income tax benefit                                  |                    | (4,961  | )               
|                                                    |                    |         |                 
|Loss from discontinued operations                   |                    | (36,493 | )               
|                                                    |                    |         |                 
|Extraordinary items:                                |                    |         |                 
|Gain (loss) on early extinguishment of debt, net    |                    |         |                 
|of income tax                                       |                    | (1,108  | )               
|                                                    |                    |         |                 
|Net income (loss)                                   |                    | (34,585 | )               
|                                                    |                    |         |                 
|Preferred dividends                                 |                    | 7,623   |                 
|                                                    |                    |         |                 
|                                                    |                    |         |                 
|Loss attributable to common stockholders            | $                  | (42,208 | )               
|                                                    |                    |         |                 

See Notes to Condensed Consolidated Financial Statements

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Delco Remy International, Inc. and SubsidiariesCondensed Consolidated Statements of Cash Flows(Unaudited) (in thousands)

|                                                                 | Six Month Period
|---------------------------------------------------------------- | ----------------
|                                                                 | Ended June 30   
|                                                                 |                 
|                                                                 |                 
|                                                                 |                 
|Operating activities:                                            |                 
|Net loss                                                         | $               
|Adjustments to reconcile net loss to                             |                 
|net cash provided by (used in) operating activities:             |                 
|Loss on disposal of discontinued operations                      |                 
|Extraordinary items                                              |                 
|Depreciation                                                     |                 
|Amortization                                                     |                 
|Minority interest in income of subsidiaries                      |                 
|Loss from unconsolidated joint ventures                          |                 
|Deferred income taxes                                            |                 
|Post-retirement benefits other than pensions                     |                 
|Accrued pension benefits                                         |                 
|Non-cash interest expense                                        |                 
|Changes in operating assets and liabilities, net of acquisitions |                 
|and non-cash special charges:                                    |                 
|Accounts receivable                                              |                 
|Inventories                                                      |                 
|Accounts payable                                                 |                 
|Other current assets and liabilities                             |                 
|Cash payments for restructuring charges                          |                 
|Non-cash special charges                                         |                 
|Other non-current assets and liabilities, net                    |                 
|                                                                 |                 
|Net cash provided by (used in) operating activities              |                 
|                                                                 |                 
|Investing activities:                                            |                 
|Acquisitions, net of cash acquired                               |                 
|Purchases of property and equipment                              |                 
|Investments in joint ventures                                    |                 
|                                                                 |                 
|Net cash used in investing activities                            |                 
|                                                                 |                 
|Financing activities:                                            |                 
|Net borrowings under revolving line of credit and other          |                 
|Deferred financing costs                                         |                 
|Merger and tender offer costs                                    |                 
|Distributions to minority interests                              |                 
|                                                                 |                 
|Net cash provided by financing activities                        |                 
|Effect of exchange rate changes on cash                          |                 
|                                                                 |                 
|Net increase (decrease) in cash and cash equivalents             |                 
|Cash and cash equivalents at beginning of period                 |                 
|                                                                 |                 
|Cash and cash equivalents at end of period                       | $               
|                                                                 |                 

See Notes to Condensed Consolidated Financial Statements

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DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(dollars in thousands)

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,
2001.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. In the second quarter of 2002, the
Company reclassified operating results from 2002 and 2001 and the balance sheet at December 31, 2001, to reflect the classification of the Companys retail aftermarket gas engine business as a discontinued operation. For more information on
this matter, refer to Note 9.

Operating results for the three-month and six-month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the
full year. The balance sheet at December 31, 2001 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. Other than as described in Note 5, the Company has not materially changed its significant accounting policies from those disclosed in its Form 10-K for the year ended December 31, 2001. For further information, refer to the consolidated
financial statements and notes thereto for the year ended December 31, 2001.

2. Additional Balance Sheet Information

The components of inventory are as follows:

|                | June 30, |         | December 31,
|--------------- | -------- | ------- | ------------
|                | 2002     |         | 2001        
|                |          |         |             
|Raw material    | $        | 150,455 |             
|Work-in-process |          | 49,124  |             
|Finished goods  |          | 88,783  |             
|                |          |         |             
|Total           | $        | 288,362 |             
|                |          |         |             

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3. 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, interest rate swaps and minimum pension liability adjustments. The before tax income (loss),
related income tax expense (benefit) and accumulated balance are as follows:

|                                  |             |         |   |             |   |             |  | Unrealized |             |   |  |               |        |   |  |   |        
|--------------------------------- | ----------- | ------- | - | ----------- | - | ----------- |  | ---------- | ----------- | - |  | ------------- | ------ | - |  | - | -------
|                                  | Foreign     |         |   | Unrealized  |   | Gains       |  |            | Minimum     |   |  | Accumulated   |       
|                                  | Currency    |         |   | Gains on    |   | (Losses) On |  |            | Pension     |   |  | Other         |       
|                                  | Translation |         |   | Currency    |   | Interest    |  |            | Liability   |   |  | Comprehensive |       
|                                  | Adjustment  |         |   | Instruments |   | Rate Swaps  |  |            | Adjustments |   |  | Loss          |       
|                                  |             |         |   |             |   |             |  |            |             |   |  |               |       
|Balance at December 31, 2001      | $           | (18,208 | ) |             | $ |            |  | $          | (2,497      | ) |  | $             | (2,735 | ) |  | $ | (23,440
|Before tax                        |             | (3,691  | ) |             |   |            |  |            | 1,250       |   |  |               |       |   |  |   | (2,441 
|Income tax effect                 |             | (923    | ) |             |   |            |  |            | 475         |   |  |               |       |   |  |   | (448   
|                                  |             |         |   |             |   |             |  |            |             |   |  |               |       
|Other comprehensive income (loss) |             | (2,768  | ) |             |   |            |  |            | 775         |   |  |               |       |   |  |   | (1,993 
|                                  |             |         |   |             |   |             |  |            |             |   |  |               |       
|Balance at March 31, 2002         |             | (20,976 | ) |             |   |            |  |            | (1,722      | ) |  |               | (2,735 | ) |  |   | (25,433
|Before tax                        |             | 10,218  |   |             |   | 2,859       |  |            | 757         |   |  |               |       |   |  |   | 13,834 
|Income tax effect                 |             | 1,719   |   |             |   | 457         |  |            | 288         |   |  |               |       |   |  |   | 2,464  
|                                  |             |         |   |             |   |             |  |            |             |   |  |               |       
|Other comprehensive income        |             | 8,499   |   |             |   | 2,402       |  |            | 469         |   |  |               |       |   |  |   | 11,370 
|                                  |             |         |   |             |   |             |  |            |             |   |  |               |       
|Balance at June 30, 2002          | $           | (12,477 | ) |             | $ | 2,402       |  | $          | (1,253      | ) |  | $             | (2,735 | ) |  | $ | (14,063
|                                  |             |         |   |             |   |             |  |            |             |   |  |               |       

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

|Three months ended June 30, 2002 | $   (23,215)
|-------------------------------- | ------------
|Three months ended June 30, 2001 | 8,166       
|Six months ended June 30, 2002   | (24,307)    
|Six months ended June 30, 2001   | (4,540)     

4. Restructuring Charges

In the fourth quarter of 2001, the Company recorded a one-time charge of $39,349 in conjunction with plans for the closure and realignment of certain manufacturing facilities and administrative
functions in the United States, Canada and Europe. The charge included $26,727 for the estimated cost of various voluntary and involuntary employee separation programs associated with workforce reductions of approximately 820 production and
administrative employees. A total of $2,482 was paid in the fourth quarter of 2001, $6,846 was paid in the three month period ended March 31, 2002, and $3,380 was paid in the three month period ended June 30, 2002. Approximately $4,840, $4,593 and
$4,586 are expected to be paid in the last six months of 2002, and in 2003 and 2004, respectively. In the first quarter of 2002, the Company recorded a $4,375 gain related to the post-employment benefit plan curtailment associated with these
workforce reductions. This gain was credited to cost of goods sold.

In June 2000, the Company recorded a charge of $35,222 for the realignment of certain manufacturing facilities. The
charge included $27,098 for the estimated cost of various voluntary and involuntary employee separation programs associated with workforce reductions of approximately 860 employees, primarily production employees. A total of $5,011, $15,961, $3,087
and $424 were paid in the year ended July 31, 2000, the five months ended December 31, 2000, the year ended December 31, 2001 and the six month period ended June 30, 2002, respectively. Approximately $2,483 and $132 will be paid in the last two
quarters of 2002 and in 2003, respectively.

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The following table summarizes the reserve for restructuring charges:

|                                                                          | Termination |         | Exit/Impairment |       |   |       |   |      
|------------------------------------------------------------------------- | ----------- | ------- | --------------- | ----- | - | ----- | - | -----
|                                                                          | Benefits    |         |                 | Costs |   |       |   | Total
|                                                                          |             |         |                 |       |   |       |   |      
|Reserve at December 31, 2001                                              | $           | 28,081  |                 |       | $ | 4,343 |   |      
|Payments and charges in the six-month period ended June 30, 2002          |             | (11,303 | )               |       |   | (724  | ) |      
|                                                                          |             |         |                 |       |   |       |   |      
|Reserve at June 30, 2002                                                  |             |         |                 |       |   |       |   |      
|                                                                          | $           | 16,778  |                 |       | $ | 3,619 |   |      
|                                                                          |             |         |                 |       |   |       |   |      
|                                                                          |             |         |                 |       |   |       |   |      
|(a) Includes $4,156 classified as liabilities of discontinued operations.
|(b) Includes $2,029 classified as liabilities of discontinued operations.

5.   Recently Issued Accounting Standards

On October 3, 2001, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144). SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of and also supersedes the accounting and reporting provisions of APB Opinion Number 30,
Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring Events and Transactions, for segments of a business to be disposed of. Among its many
provisions, SFAS No. 144 retains the fundamental requirements of both previous standards, however, it resolves significant implementation issues related to SFAS No. 121 and broadens the separate presentation of discontinued operations in the income
statement required by APB Opinion Number 30 to include a component of an entity (rather than a segment of a business). The Company adopted SFAS No. 144 on January 1, 2002. The presentation of the Companys retail aftermarket gas engine business
as a discontinued operation is in accordance with the provisions of SFAS No. 144.

In April of 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13 and Technical Corrections (SFAS No. 145). The provisions of SFAS No. 145 related to the rescission of FASB Statements No. 44 and 64 and amendment of SFAS No. 13 and Technical Corrections, were adopted by the
Company in the second quarter of 2002. Adoption of these provisions did not have a material effect on the Companys results of operations, financial position or cash flows. The provisions of SFAS No. 145 related to rescission of SFAS No. 4 are
required to be adopted by the first quarter of 2003. Upon adoption, gains and losses relative to early extinguishment of debt which are reported as extraordinary items will be reclassified to operating expense.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS No. 146). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred and is effective for exit or disposal activities that are initiated after December 31, 2002.

6.   Goodwill and Other
Intangible Assets-Adoption of SFAS No. 142.

On June 29, 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 142 addresses accounting
and reporting of acquired goodwill and other intangible assets and was adopted by the Company effective January 1, 2002. The goodwill impairment testing provisions of SFAS No. 142 must be applied to any goodwill or other intangible assets that are
recognized in the Companys financial statements at the time of adoption. Also upon adoption, goodwill is no longer amortized and is tested for impairment at least annually. Excluding goodwill amortization of $1,544, the Companys net
income from continuing operations would have been $4,974 in the quarter ended June 30, 2001. Excluding goodwill amortization of

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$3,072, the Companys net income would have been $249 in the six months ended June 30, 2001. At June 30, 2002, the Company had goodwill and other intangible
assets totaling $189,000, net of accumulated amortization. Any goodwill or other intangible assets impairment losses recognized from the initial impairment test will be reported as a cumulative effect of a change in accounting principle in the
Companys financial statements. The Company has completed step one of the transitional impairment test required by SFAS No. 142. The test indicates potential impairment losses in certain of its OE and Aftermarket businesses. The amount of the
loss, if any, will be determined in the fourth quarter of 2002 and reported as the cumulative effect of a change in accounting principle effective in the first quarter of 2002.

7.   Long-term Debt

On June 28, 2002 the Company entered into a $250,000 secured, asset based, revolving credit facility (Senior Credit Facility)
with a syndicate of banks, led by Wachovia Bank, National Association and its subsidiary Congress Financial Corporation. This Facility replaced the Companys then-existing secured revolving credit facility of $200,000, which was due to expire
on March 31, 2003. The new Facility extends through March 31, 2006 and has provisions for annual extensions thereafter.

The new Senior Credit Facility contains various covenants which
include, among other things: (i) limitations on additional borrowings and encumbrances; (ii) the maintenance of certain financial ratios and compliance with certain financial tests and limitations; (iii) limitations on cash dividends paid; (iv)
limitations on investments and capital expenditures; and (v) limitations on leases and sales of assets.

The new Senior Credit Facility is collateralized by liens on substantially all
assets of the Company and substantially all of its domestic and certain foreign subsidiaries and by the capital stock of such subsidiaries.

At June 30, 2002, borrowings under the
Senior Credit Facility were $148,400 and utilization of letters of credit totaled $5,900, leaving $95,700 unused and $61,900 available under the $250,000 facility.

8.  
Acquisitions

During the six months ended June 30, 2002, the Company made payments totaling $4,364 under contractual put agreements to purchase additional shares from the minority
shareholders of World Wide Automotive, Inc. (World Wide), which was acquired in 1997. These payments increased the Companys ownership percentage of World Wide from 88.2% to 94.0%. The Company also made payments totaling $2,538
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
85.8% to 89.3%. Contingent earn-out payments of $497 were made during the quarter ended March 31, 2002 relative to the acquisition of Mazda North American Operations in June 2001. The Company currently expects to make additional payments of
approximately $25,000 during the next twelve months for minority buyouts under existing contractual commitments.

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9. Discontinued Operations

The Company has concluded that the retail aftermarket gas engine
business does not fit with its strategic objectives, and in the second quarter of 2002, plans to exit this business were completed. In connection with the discontinuance of this business, a one-time charge of $29,935, net of income tax benefits of
$3,539, was recorded in the second quarter to write down the relevant assets to their estimated realizable value. The Company currently expects to complete transfer of customer contracts and the sale and liquidation of the remaining assets during
the second half of 2002. Additional costs, including operating losses during the wind-down period and employee severance costs, will be incurred during the second half of 2002 and will be reported in results from discontinued operations.Net sales, interest expense and loss before income tax from the discontinued operation are as follows:

|                 | Three Month Period |        | Six Month Period |  
|---------------- | ------------------ | ------ | ---------------- | -
|                 | Ended June 30      |        | Ended June 30    |  
|                 |                    |        |                  |  
|                 |                    |        |                  |  
|                 |                    | 2002   |                  |  
|                 |                    |        |                  |  
|Net sales        | $                  | 3,125  |                  | $
|Interest expense |                    | 1,600  |                  |  
|Loss before tax  |                    | (7,980 | )                |  

10. Derivative Financial Instruments

In order to hedge anticipated
U.S. dollar-denominated intercompany sales of inventory by its South Korean subsidiary to a U.S. subsidiary against fluctuations between the South Korean Won and US dollar, the Company entered into a series of currency forward contracts during the
second quarter of 2002. At maturity of each contract, the Company receives a contracted amount of South Korean Won in exchange for the US dollar payment in settlement of the intercompany sale. These derivative contracts are designated as a cash flow
hedge and, accordingly, changes in fair value are charged to other comprehensive income (loss) (see Note 3). Realized gains and losses recorded upon settlement of the contracts are charged to earnings in the periods in which earnings are impacted by
the variability of the cash flows of the settled intercompany sale.

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

The Company conducts a significant portion of its business through subsidiaries. The 8 5/8% Senior Notes, the 10 5/8% Senior Subordinated Notes and the 11% Senior Subordinated Notes are fully and
unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries (the Subsidiary Guarantors). Certain of the Companys subsidiaries do not guarantee the Senior Notes or the Senior Subordinated 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 June 30, 2002 and December 31, 2001 and for the three month and six month periods ended June
30, 2002 and 2001.

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 based on managements determination that they do not provide additional information that is material to investors.

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

|                                
|--------------------------------
|Guarantor Subsidiaries          
|                                
|Delco Remy America, Inc.        
|Nabco, Inc.                     
|The A&B Group, Inc.             
|A&B Enterprises, Inc.           
|Dalex, Inc.                     
|A&B Cores, Inc.                 
|R&L Tool Company, Inc.          
|MCA, Inc. of Mississippi        
|Power Investments, Inc.         
|Franklin Power Products, Inc.   
|International Fuel Systems, Inc.
|Power Investments Marine, Inc.  
|Marine Corporation of America   
|Powrbilt Products, Inc.         
|World Wide Automotive, Inc.     
|Ballantrae Corporation          
|Tractech, Inc.                  
|Williams Technologies, Inc.     
|Western Reman, Inc.             
|Engine Master, L.P.             
|M & M Knopf Auto Parts, Inc.    
|Reman Holdings, Inc.            
|Remy International, Inc.        
|Jax Reman, LLC                  
|                                
|                                

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Delco Remy International, Inc. and SubsidiariesCondensed Consolidating Balance Sheet June 30, 2002 (Unaudited)

|                                                     | Delco Remy          |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|---------------------------------------------------- | ------------------- | -------- | ---------- |  | ------------ | ------- | ------------ |  | - | ------------ | - |  | - | -------- | ----- |  | -
|                                                     | International, Inc. |          |            |  |              |         | Non-         |  |   |              |   |  |   |          |      
|                                                     | (Parent             |          | Subsidiary |  | Guarantor    |         |              |  |   |              |   |  |  
|                                                     | Company Only)       |          | Guarantors |  | Subsidiaries |         | Eliminations |  |   | Consolidated
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|Assets                                               |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Current assets:                                      |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Cash and cash equivalents                            | $                   | 245      |            |  | $            | 81      |              |  | $ | 34,469       |   |  | $ |         |       |  | $
|Trade accounts receivable, net                       |                     |         |            |  |              | 156,806 |              |  |   | 30,236       |   |  |   |         |       |  |  
|Other receivables                                    |                     |         |            |  |              | 2,862   |              |  |   | 9,411        |   |  |   |         |       |  |  
|Inventories                                          |                     |         |            |  |              | 237,379 |              |  |   | 52,720       |   |  |   | (1,737   | )
(c) |  |  
|Deferred income taxes                                |                     | 17,184   |            |  |              |        |              |  |   | 1,630        |   |  |   |         |       |  |  
|Assets of discontinued operations                    |                     |         |            |  |              | 5,043   |              |  |   | 4,133        |   |  |   |         |       |  |  
|Other current assets                                 |                     | 4,608    |            |  |              | 2,520   |              |  |   | 9,543        |   |  |   |         |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|Total current assets                                 |                     | 22,037   |            |  |              | 404,691 |              |  |   | 142,142      |   |  |   | (1,737   | )     |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Property and equipment                               |                     | 57       |            |  |              | 205,717 |              |  |   | 97,808       |   |  |   |         |       |  |  
|Less accumulated depreciation                        |                     | 31       |            |  |              | 108,465 |              |  |   | 23,635       |   |  |   |         |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|Property and equipment, net                          |                     | 26       |            |  |              | 97,252  |              |  |   | 74,173       |   |  |   |         |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Deferred financing costs                             |                     | 16,089   |            |  |              |        |              |  |   |             |   |  |   |         |       |  |  
|Goodwill, net of accumulated amortization            |                     |         |            |  |              | 163,765 |              |  |   | 21,583       |   |  |   |         |       |  |  
|Investments in joint ventures                        |                     | 516,188  |            |  |              |        |              |  |   |             |   |  |   | (503,607 | )
(a) |  |  
|Deferred income taxes                                |                     | 14,697   |            |  |              | 3       |              |  |   | 339          |   |  |   |         |       |  |  
|Other assets                                         |                     | 5,516    |            |  |              | 3,222   |              |  |   | 2,273        |   |  |   |         |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|Total assets                                         | $                   | 574,553  |            |  | $            | 668,933 |              |  | $ | 240,510      |   |  | $ | (505,344 | )     |  | $
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Liabilities and stockholders equity (deficit)       |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Current liabilities:                                 |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Accounts payable                                     | $                   | 764      |            |  | $            | 109,151 |              |  | $ | 50,438       |   |  | $ |         |       |  | $
|Intercompany accounts                                |                     | (63,259  | )          |  |              | 75,970  |              |  |   | (12,110      | ) |  |   | (601     | )
(c) |  |  
|Accrued interest                                     |                     | 9,948    |            |  |              |        |              |  |   | 186          |   |  |   |         |       |  |  
|Accrued restructuring charges                        |                     |         |            |  |              | 17,539  |              |  |   | 829          |   |  |   |         |       |  |  
|Liabilities of discontinued operations               |                     |         |            |  |              | 2,428   |              |  |   | 3,361        |   |  |   |         |       |  |  
|Other liabilities and accrued expenses               |                     | 2,392    |            |  |              | 41,921  |              |  |   | 14,449       |   |  |   |         |       |  |  
|Current debt                                         |                     |         |            |  |              | 1,057   |              |  |   | 21,992       |   |  |   |         |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|Total current liabilities                            |                     | (50,155  | )          |  |              | 248,066 |              |  |   | 79,145       |   |  |   | (601     | )     |  |  
|Long-term debt, less current portion                 |                     | 591,650  |            |  |              | 12,937  |              |  |   | 9,765        |   |  |   |         |       |  |  
|Post-retirement benefits other than pensions         |                     |         |            |  |              | 22,669  |              |  |   |             |   |  |   |         |       |  |  
|Accrued pension benefits                             |                     |         |            |  |              | 9,917   |              |  |   | 382          |   |  |   |         |       |  |  
|Accrued preferred dividends                          |                     | 35,353   |            |  |              |        |              |  |   |             |   |  |   |         |       |  |  
|Other non-current liabilities                        |                     | 2,055    |            |  |              | 3,616   |              |  |   | 707          |   |  |   |         |       |  |  
|Minority interest in subsidiaries                    |                     |         |            |  |              | 10,939  |              |  |   | 19,367       |   |  |   |         |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Stockholders equity:                                |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Preferred stock  Series A                           |                     | 223,728  |            |  |              |        |              |  |   |             |   |  |   |         |       |  |  
|Common stock:                                        |                     |          |            |  |              |         |              |  |   |              |   |  |   |          |       |  |  
|Class A shares                                       |                     |         |            |  |              |        |              |  |   |             |   |  |   |         |       |  |  
|Class B shares                                       |                     | 3        |            |  |              |        |              |  |   |             |   |  |   |         |       |  |  
|Class C shares                                       |                     |         |            |  |              |        |              |  |   |             |   |  |   |         |       |  |  
|Subsidiary investment                                |                     |         |            |  |              | 291,416 |              |  |   | 93,249       |   |  |   | (384,665 | )
(a) |  |  
|Retained earnings (deficit)                          |                     | (226,828 | )          |  |              | 72,145  |              |  |   | 47,933       |   |  |   | (120,078 | )
(b) |  |  
|Accumulated other comprehensive loss                 |                     | (1,253   | )          |  |              | (2,772  | )            |  |   | (10,038      | ) |  |   |         |       |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|Total stockholders equity (deficit)                 |                     | (4,350   | )          |  |              | 360,789 |              |  |   | 131,181      |   |  |   | (504,743 | )     |  |  
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         
|Total liabilities and stockholders equity (deficit) | $                   | 574,553  |            |  | $            | 668,933 |              |  | $ | 240,510      |   |  | $ | (505,344 | )     |  | $
|                                                     |                     |          |            |  |              |         |              |  |   |              |   |  |   |         

|(a) | Elimination of investments in subsidiaries.          
|--- | -----------------------------------------------------
|(b) | Elimination of investments in subsidiaries earnings.
|(c) | Elimination of intercompany profit in inventory.     

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Delco Remy International, Inc. and SubsidiariesCondensed Consolidating Balance SheetDecember 31, 2001

|                                                     | Delco Remy          |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|---------------------------------------------------- | ------------------- | -------- | - | ---------- | - | ------- | ------------ | ---- | - | ------------ | - |  | ------------ | --------- | ----- |  | - | --------
|                                                     | International, Inc. |          |   |            |   |         |              | Non- |   |              |   |  |              |           |       |  |  
|                                                     | (Parent             |          |   | Subsidiary |   |         | Guarantor    |      |   |              |   |  |              |           |       | 
|                                                     | Company Only)       |          |   | Guarantors |   |         | Subsidiaries |      |   | Eliminations |   |  | Consolidated |          
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|Assets                                               |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Current assets:                                      |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Cash and cash equivalents                            | $                   |         |   |            | $ | 232     |              |      | $ | 23,636       |   |  | $            |          |       |  | $ | 23,868  
|Trade accounts receivable, net                       |                     |         |   |            |   | 131,033 |              |      |   | 24,371       |   |  |              |          |       |  |   | 155,404 
|Other receivables                                    |                     |         |   |            |   | 2,711   |              |      |   | 6,233        |   |  |              |          |       |  |   | 8,944   
|Inventories                                          |                     |         |   |            |   | 239,541 |              |      |   | 47,239       |   |  |              | (2,087    | )
(c) |  |   | 284,693 
|Deferred income taxes                                |                     | 17,184   |   |            |   |        |              |      |   | 3,991        |   |  |              |          |       |  |   | 21,175  
|Assets of discontinued operations                    |                     |         |   |            |   | 15,664  |              |      |   | 25,770       |   |  |              |          |       |  |   | 41,434  
|Other current assets                                 |                     | 4,759    |   |            |   | 2,829   |              |      |   | 5,307        |   |  |              |          |       |  |   | 12,895  
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|Total current assets                                 |                     | 21,943   |   |            |   | 392,010 |              |      |   | 136,547      |   |  |              | (2,087    | )     |  |   | 548,413 
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Property and equipment                               |                     | 57       |   |            |   | 201,673 |              |      |   | 92,852       |   |  |              |          |       |  |   | 294,582 
|Less accumulated depreciation                        |                     | 25       |   |            |   | 99,383  |              |      |   | 19,319       |   |  |              |          |       |  |   | 118,727 
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|Property and equipment, net                          |                     | 32       |   |            |   | 102,290 |              |      |   | 73,533       |   |  |              |          |       |  |   | 175,855 
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Deferred financing costs                             |                     | 11,431   |   |            |   | 1,209   |              |      |   |             |   |  |              |          |       |  |   | 12,640  
|Goodwill, net of accumulated amortization            |                     |         |   |            |   | 159,327 |              |      |   | 20,201       |   |  |              |          |       |  |   | 179,528 
|Investments in joint ventures                        |                     | 526,038  |   |            |   |        |              |      |   |             |   |  |              | (514,894  | )
(a) |  |   | 11,144  
|Deferred income taxes                                |                     | 11,121   |   |            |   | 12      |              |      |   | (657         | ) |  |              |          |       |  |   | 10,476  
|Other assets                                         |                     | 2,531    |   |            |   | 3,263   |              |      |   | 3,555        |   |  |              |          |       |  |   | 9,349   
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Total assets                                         | $                   | 573,096  |   |            | $ | 658,111 |              |      | $ | 233,179      |   |  | $            | (516,981  | )     |  | $ | 947,405 
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Liabilities and stockholders' equity (deficit)       |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Current liabilities:                                 |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Accounts payable                                     | $                   | 1,304    |   |            | $ | 96,739  |              |      | $ | 30,738       |   |  | $            |          |       |  | $ | 128,781 
|Intercompany accounts                                |                     | (59,671  | ) |            |   | 53,781  |              |      |   | 6,491        |   |  |              | (601      | )
(c) |  |   |        
|Accrued interest                                     |                     | 9,927    |   |            |   |        |              |      |   | 173          |   |  |              |          |       |  |   | 10,100  
|Accrued restructuring charges                        |                     |         |   |            |   | 26,376  |              |      |   | 1,892        |   |  |              |          |       |  |   | 28,268  
|Liabilities of discontinued operations               |                     |         |   |            |   | 3,736   |              |      |   | 4,869        |   |  |              |          |       |  |   | 8,605   
|Other liabilities and accrued expenses               |                     | 7,568    |   |            |   | 32,240  |              |      |   | 16,604       |   |  |              |          |       |  |   | 56,412  
|Current debt                                         |                     |         |   |            |   | 804     |              |      |   | 5,967        |   |  |              |          |       |  |   | 6,771   
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|Total current liabilities                            |                     | (40,872  | ) |            |   | 213,676 |              |      |   | 66,734       |   |  |              | (601      | )     |  |   | 238,937 
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Long-term debt, less current portion                 |                     | 548,683  |   |            |   | 34,580  |              |      |   | 9,915        |   |  |              |          |       |  |   | 593,178 
|Post-retirement benefits other than pensions         |                     |         |   |            |   | 25,812  |              |      |   |             |   |  |              |          |       |  |   | 25,812  
|Accrued pension benefits                             |                     |         |   |            |   | 9,035   |              |      |   | 1,181        |   |  |              |          |       |  |   | 10,216  
|Accrued preferred dividends                          |                     | 20,971   |   |            |   |        |              |      |   |             |   |  |              |          |       |  |   | 20,971  
|Other non-current liabilities                        |                     | 1,842    |   |            |   | 4,089   |              |      |   | 724          |   |  |              |          |       |  |   | 6,655   
|Minority interest in subsidiaries                    |                     |         |   |            |   | 12,696  |              |      |   | 17,411       |   |  |              |          |       |  |   | 30,107  
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Stockholders' equity:                                |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Preferred Stock  Series A                           |                     | 223,728  |   |            |   |        |              |      |   |             |   |  |              |          |       |  |   | 223,728 
|Common stock:                                        |                     |          |   |            |   |         |              |      |   |              |   |  |              |           |       |  |   |         
|Class A shares                                       |                     |         |   |            |   |        |              |      |   |             |   |  |              |          |       |  |   |        
|Class B shares                                       |                     | 3        |   |            |   |        |              |      |   |             |   |  |              |          |       |  |   | 3       
|Class C shares                                       |                     |         |   |            |   |        |              |      |   |             |   |  |              |          |       |  |   |        
|Subsidiary investment                                |                     |         |   |            |   | 291,416 |              |      |   | 93,099       |   |  |              | (384,515  | )
(a) |  |   |        
|Retained earnings (deficit)                          |                     | (178,762 | ) |            |   | 69,542  |              |      |   | 62,323       |   |  |              | (131,865  | )
(b) |  |   | (178,762
|Accumulated other comprehensive loss                 |                     | (2,497   | ) |            |   | (2,735  | )            |      |   | (18,208      | ) |  |              |           |       |  |  | (23,440 
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|Total stockholders' equity                           |                     | 42,472   |   |            |   | 358,223 |              |      |   | 137,214      |   |  |              | (516,380  | )     |  |   | 21,529  
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          
|Total liabilities and stockholders' equity (deficit) | $                   | 573,096  |   |            | $ | 658,111 |              |      | $ | 233,179      |   |  |              | $(516,981 | )     |  | $ | 947,405 
|                                                     |                     |          |   |            |   |         |              |      |   |              |   |  |              |          

(a)    Elimination of investments in subsidiaries.(b)    Elimination of investments in subsidiaries earnings.(c)    Elimination of intercompany profit in inventory.

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Delco Remy International, Inc. and SubsidiariesCondensed Consolidating Statement of OperationsFor the Three Month Period Ended June 30,
2002(Unaudited)

|                                                                                                                                                                                                                                           | Delco Remy          |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------- | ------- | - | ---------- | - | ------- | ------------ | ---- | - | ------------ | - |  | ------------ | --------- | --- |  | - | -------
|                                                                                                                                                                                                                                           | International, Inc. |         |   |            |   |         |              | Non- |   |              |   |  |              |           |     |  |  
|                                                                                                                                                                                                                                           | (Parent             |         |   | Subsidiary |   |         | Guarantor    |      |   |              |   |  |              |           |     | 
|                                                                                                                                                                                                                                           | Company Only)       |         |   | Guarantors |   |         | Subsidiaries |      |   | Eliminations |   |  | Consolidated |          
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Net sales                                                                                                                                                                                                                                  | $                   |        |   |            | $ | 279,965 |              |      | $ | 115,328      |   |  | $            | (112,811) | (a) |  | $ | 282,482
|Cost of goods sold                                                                                                                                                                                                                         |                     |        |   |            |   | 247,189 |              |      |   | 99,073       |   |  |              | (112,811) | (a) |  |   | 233,451
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Gross profit                                                                                                                                                                                                                               |                     |         |   |            |   | 32,776  |              |      |   | 16,255       |   |  |              |          |     |  |   | 49,031 
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|Selling, general and administrative expenses                                                                                                                                                                                               |                     | 3,151   |   |            |   | 18,167  |              |      |   | 4,499        |   |  |              |          |     |  |   | 25,817 
|Amortization of goodwill and intangibles                                                                                                                                                                                                   |                     |        |   |            |   |        |              |      |   | 58           |   |  |              |          |     |  |   | 58     
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Operating income (loss)                                                                                                                                                                                                                    |                     | (3,151  | ) |            |   | 14,609  |              |      |   | 11,698       |   |  |              |          |     |  |   | 23,156 
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|Interest expense                                                                                                                                                                                                                           |                     | (12,406 | ) |            |   | (2,288  | )            |      |   | (274         | ) |  |              |          |     |  |   | (14,968
|Other non-operating income (expense)                                                                                                                                                                                                       |                     |        |   |            |   | (88     | )            |      |   | (273         | ) |  |              |          |     |  |   | (361   
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Income (loss) from continuing operations    before income taxes (benefit), minority    interest in income of subsidiaries, loss 
   from unconsolidated joint ventures,     equity in earnings of subsidiaries and     extraordinary items |                     | (15,557 | ) |            |   | 12,233  |              |      |   | 11,151       |   |  |              |          |     |  |   | 7,827  
|Income tax expense (benefit)                                                                                                                                                                                                               |                     | (7,512  | ) |            |   | 5,912   |              |      |   | 4,410        |   |  |              |          |     |  |   | 2,810  
|Minority interest in income of subsidiaries                                                                                                                                                                                                |                     |        |   |            |   | (612    | )            |      |   | (1,120       | ) |  |              |          |     |  |   | (1,732 
|Loss from unconsolidated joint ventures                                                                                                                                                                                                    |                     |        |   |            |   |        |              |      |   | (269         | ) |  |              |          |     |  |   | (269   
|Equity in earnings of subsidiaries                                                                                                                                                                                                         |                     | (25,432 | ) |            |   |        |              |      |   |             |   |  |              | 25,432    | (b) |  |   |       
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Net income (loss) from continuing     operations before extraordinary items                                                                                                                                                                |                     | (33,477 | ) |            |   | 5,709   |              |      |   | 5,352        |   |  |              | 25,432    |     |  |   | 3,016  
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|Discontinued Operations:                                                                                                                                                                                                                   |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|Loss from discontinued operations       (including estimated loss on disposal       of $33.5 million in
2002                                                                                                                               |                     |        |   |            |   | (15,677 | )            |      |   | (25,777      | ) |  |              |          |     |  |   | (41,454
|Income tax benefit                                                                                                                                                                                                                         |                     |        |   |            |   | (4,961  | )            |      |   |             |   |  |              |          |     |  |   | (4,961 
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Loss from discontinued operations                                                                                                                                                                                                          |                     |        |   |            |   | (10,716 | )            |      |   | (25,777      | ) |  |              |          |     |  |   | (36,493
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|Extraordinary items:                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|Loss on early extinguishment of       debt, net of income tax                                                                                                                                                                              |                     | (1,108  | ) |            |   |        |              |      |   |             |   |  |              |          |     |  |   | (1,108 
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Net income (loss)                                                                                                                                                                                                                          |                     | (34,585 | ) |            |   | (5,007  | )            |      |   | (20,425      | ) |  |              | 25,432    |     |  |   | (34,585
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|Preferred dividends                                                                                                                                                                                                                        |                     | 7,623   |   |            |   |        |              |      |   |             |   |  |              |          |     |  |   | 7,623  
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|Income (loss) attributable to common     stockholders                                                                                                                                                                                      | $                   | (42,208 | ) |            | $ | (5,007  | )            |      | $ | (20,425      | ) |  | $            | 25,432    |     |  | $ | (42,208
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          
|                                                                                                                                                                                                                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |   |        
|(a)    Elimination of intercompany sales and cost of sales.                                                                                                                                                                                |                     |         |   |            |   |         |              |      |   |              |   |  |              |           |     |  |  
|(b)    Elimination of equity in net income of consolidated subsidiaries.                                                                                                                                                                   |                     |         |   |            |   |         |              |      |   |              |   |  |             

14



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##### Table of Contents

Delco Remy International, Inc. and SubsidiariesCondensed Consolidating Statement of OperationsFor the Three Month Period Ended June 30,
2001(Unaudited)

|                                                               | Delco Remy          |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|-------------------------------------------------------------- | ------------------- | ------- | - | ---------- | - | ------- | ------------ | ---- | - | ------------ | - |  | ------------ | -------- | ---- |  | - | -------
|                                                               | International, Inc. |         |   |            |   |         |              | Non- |   |              |   |  |              |          |      |  |  
|                                                               | (Parent             |         |   | Subsidiary |   |         | Guarantor    |      |   |              |   |  |              |          |      | 
|                                                               | Company Only)       |         |   | Guarantors |   |         | Subsidiaries |      |   | Eliminations |   |  | Consolidated |         
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Net sales                                                      | $                   |        |   |            | $ | 265,494 |              |      | $ | 99,580       |   |  | $            | (109,517 | )(a) |  | $ | 255,557
|Cost of goods sold                                             |                     |        |   |            |   | 228,256 |              |      |   | 85,872       |   |  |              | (109,517 | )(a) |  |   | 204,611
|Special charges  cost of goods sold                           |                     |        |   |            |   | 2,184   |              |      |   |             |   |  |              |         |      |  |   | 2,184  
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Gross profit                                                   |                     |        |   |            |   | 35,054  |              |      |   | 13,708       |   |  |              |         |      |  |   | 48,762 
|Selling, general and administrative expenses                   |                     | 3,391   |   |            |   | 14,748  |              |      |   | 5,263        |   |  |              |         |      |  |   | 23,402 
|Amortization of goodwill and intangibles                       |                     |        |   |            |   | 1,427   |              |      |   | 127          |   |  |              |         |      |  |   | 1,554  
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Operating income (loss)                                        |                     | (3,391  | ) |            |   | 18,879  |              |      |   | 8,318        |   |  |              |         |      |  |   | 23,806 
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Interest expense                                               |                     | (11,153 | ) |            |   | (2,865  | )            |      |   | (276         | ) |  |              |         |      |  |   | (14,294
|Other non-operating income                                     |                     |        |   |            |   | 253     |              |      |   | 274          |   |  |              |         |      |  |   | 527    
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Income (loss) from continuing operations before                |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|income taxes (benefit), minority interest in                   |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|income of subsidiaries, loss from unconsolidated               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|joint ventures, equity in earnings of subsidiaries             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|and extraordinary items                                        |                     | (14,544 | ) |            |   | 16,267  |              |      |   | 8,316        |   |  |              |         |      |  |   | 10,039 
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Income tax expense (benefit)                                   |                     | (5,152  | ) |            |   | 6,797   |              |      |   | 1,684        |   |  |              |         |      |  |   | 3,329  
|Minority interest in income of subsidiaries                    |                     |        |   |            |   | (1,226  | )            |      |   | (1,274       | ) |  |              |         |      |  |   | (2,500 
|Loss from unconsolidated joint ventures                        |                     |        |   |            |   |        |              |      |   | (131         | ) |  |              |         |      |  |   | (131   
|Equity in earnings of subsidiaries                             |                     | 13,334  |   |            |   |        |              |      |   |             |   |  |              | (13,334  | )(b) |  |   |       
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Net income (loss) from continuing operations                   |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|before extraordinary items                                     |                     | 3,942   |   |            |   | 8,244   |              |      |   | 5,227        |   |  |              | (13,334  | )    |  |   | 4,079  
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Discontinued operations:                                       |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Loss from discontinued operations                              |                     |        |   |            |   | (702    | )            |      |   | (697         | ) |  |              |         |      |  |   | (1,399 
|Income tax benefit                                             |                     |        |   |            |   | (259    | )            |      |   | (305         | ) |  |              |         |      |  |   | (564   
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Loss from discontinued operations                              |                     |         |   |            |   | (443    | )            |      |   | (392         | ) |  |              |          |      |  |   | (835   
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Extraordinary items:                                           |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Gain on early extinguishment of debt, net of        income tax |                     |        |   |            |   | 698     |              |      |   |             |   |  |              |         |      |  |   | 698    
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Net income (loss)                                              |                     | 3,942   |   |            |   | 8,499   |              |      |   | 4,835        |   |  |              | (13,334  | )    |  |   | 3,942  
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        
|Preferred dividends                                            |                     | 7,361   |   |            |   |        |              |      |   |             |   |  |              |         |      |  |   | 7,361  
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Income (loss) attributable to common stockholders              | $                   | (3,419  | ) |            | $ | 8,499   |              |      | $ | 4,835        |   |  | $            | (13,334  | )    |  | $ | (3,419 
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |      |  |   |        

(a)     Elimination of intercompany sales and cost of sales.
(b)     Elimination of equity in net income of consolidated subsidiaries.



15





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##### Table of Contents

Delco Remy International, Inc. and SubsidiariesCondensed Consolidating Statement of OperationsFor the Six Month Period Ended June 30,
2002(Unaudited)

|                                                             | Delco Remy          |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|------------------------------------------------------------ | ------------------- | ------- | - | ---------- | - | ------- | ------------ | ---- | - | ------------ | - |  | ------------ | -------- | ----- |  | - | -------
|                                                             | International, Inc. |         |   |            |   |         |              | Non- |   |              |   |  |              |          |       |  |  
|                                                             | (Parent             |         |   | Subsidiary |   |         | Guarantor    |      |   |              |   |  |              |          |       | 
|                                                             | Company Only)       |         |   | Guarantors |   |         | Subsidiaries |      |   | Eliminations |   |  | Consolidated |         
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Net sales                                                    | $                   |        |   |            | $ | 541,656 |              |      | $ | 219,344      |   |  | $            | (219,867 | )
(a) |  | $ | 541,133
|Cost of goods sold                                           |                     |        |   |            |   | 475,445 |              |      |   | 186,905      |   |  |              | (219,867 | )
(a) |  |   | 442,483
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Gross profit                                                 |                     |        |   |            |   | 66,211  |              |      |   | 32,439       |   |  |              |         |       |  |   | 98,650 
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Selling, general and administrative expenses                 |                     | 5,795   |   |            |   | 35,225  |              |      |   | 9,096        |   |  |              |         |       |  |   | 50,116 
|Amortization of goodwill and intangibles                     |                     |        |   |            |   | 19      |              |      |   | 72           |   |  |              |         |       |  |   | 91     
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Operating income (loss)                                      |                     | (5,795  | ) |            |   | 30,967  |              |      |   | 23,271       |   |  |              |         |       |  |   | 48,443 
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Interest expense                                             |                     | (24,754 | ) |            |   | (5,020  | )            |      |   | (423         | ) |  |              |         |       |  |   | (30,197
|Other non-operating expense                                  |                     |        |   |            |   | (88     | )            |      |   | (275         | ) |  |              |         |       |  |   | (363   
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Income (loss) from continuing operations before              |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|income taxes, minority interest in income of                 |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|subsidiaries, losses from unconsolidated joint               |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|ventures, equity in earnings of subsidiaries and             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|extraordinary items                                          |                     | (30,549 | ) |            |   | 25,859  |              |      |   | 22,573       |   |  |              |         |       |  |   | 17,883 
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Income tax expense (benefit)                                 |                     | (9,760  | ) |            |   | 9,839   |              |      |   | 5,644        |   |  |              |         |       |  |   | 5,723  
|Minority interest in income of subsidiaries                  |                     |        |   |            |   | (1,117  | )            |      |   | (2,418       | ) |  |              |         |       |  |   | (3,535 
|Loss from unconsolidated joint ventures                      |                     |        |   |            |   |        |              |      |   | (1,470       | ) |  |              |         |       |  |   | (1,470 
|Equity in earnings of subsidiaries                           |                     | (11,787 | ) |            |   |        |              |      |   |             |   |  |              | 11,787   | (b)   |  |   |       
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Net income (loss) from continuing operations                 |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|before extraordinary items                                   |                     | (32,576 | ) |            |   | 14,903  |              |      |   | 13,041       |   |  |              | 11,787   |       |  |   | 7,155  
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Discontinued operations:                                     |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Loss from discontinued operations (including                 |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|estimated loss on disposal of $33.5 million in      2002)    |                     |        |   |            |   | (18,909 | )            |      |   | (27,394      | ) |  |              |         |       |  |   | (46,303
|Income tax benefit                                           |                     |        |   |            |   | (6,572  | )            |      |   |             |   |  |              |         |       |  |   | (6,572 
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Loss from discontinued operations                            |                     |        |   |            |   | (12,337 | )            |      |   | (27,394      | ) |  |              |         |       |  |   | (39,731
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Extraordinary items:                                         |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Loss on early extinguishment of debt, net of      income tax |                     | (1,108  | ) |            |   |        |              |      |   |             |   |  |              |         |       |  |   | (1,108 
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Net income (loss)                                            |                     | (33,684 | ) |            |   | 2,566   |              |      |   | (14,353      | ) |  |              | 11,787   |       |  |   | (33,684
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        
|Preferred dividends                                          |                     | 14,382  |   |            |   |        |              |      |   |             |   |  |              |         |       |  |   | 14,382 
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|Income (loss) attributable to common stockholders            | $                   | (48,066 | ) |            | $ | 2,566   |              |      | $ | (14,353      | ) |  | $            | 11,787   |       |  | $ | (48,066
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |         
|                                                             |                     |         |   |            |   |         |              |      |   |              |   |  |              |          |       |  |   |        

(a)     Elimination of intercompany sales and cost of sales.(b)     Elimination of equity in net income of consolidated subsidiaries.

16





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##### Table of Contents

Delco Remy International, Inc. and Subsidiaries Condensed Consolidating Statement of Operations For the Six Month Period Ended June 30, 2001
(Unaudited)

|                                                                                                                                                                                                                                       | Delco Remy          |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------- | - | ---------- | - | ------- | ------------ | ---- | ------------ | ------- | - | ------------ | - | -------- | ----- |  | - | -------
|                                                                                                                                                                                                                                       | International, Inc. |         |   |            |   |         |              | Non- |              |         |   |              |   |          |       |  |  
|                                                                                                                                                                                                                                       | (Parent             |         |   | Subsidiary |   |         | Guarantor    |      |              |         |   |              |   |          |       | 
|                                                                                                                                                                                                                                       | Company Only)       |         |   | Guarantors |   |         | Subsidiaries |      | Eliminations |         |   | Consolidated |  
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Net sales                                                                                                                                                                                                                              | $                   |        |   |            | $ | 527,541 |              |      | $            | 193,175 |   |              | $ | (219,519 | )
(a) |  | $ | 501,197
|Cost of goods sold                                                                                                                                                                                                                     |                     |        |   |            |   | 458,226 |              |      |              | 168,313 |   |              |   | (219,519 | )
(a) |  |   | 407,020
|Special charges  cost of goods sold                                                                                                                                                                                                   |                     |        |   |            |   | 4,282   |              |      |              |        |   |              |   |         |       |  |   | 4,282  
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Gross profit                                                                                                                                                                                                                           |                     |        |   |            |   | 65,033  |              |      |              | 24,862  |   |              |   |         |       |  |   | 89,895 
|Selling, general and administrative expenses                                                                                                                                                                                           |                     | 7,873   |   |            |   | 30,275  |              |      |              | 11,625  |   |              |   |         |       |  |   | 49,773 
|Amortization of goodwill and intangibles                                                                                                                                                                                               |                     |        |   |            |   | 2,816   |              |      |              | 298     |   |              |   |         |       |  |   | 3,114  
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|Operating income (loss)                                                                                                                                                                                                                |                     | (7,873  | ) |            |   | 31,942  |              |      |              | 12,939  |   |              |   |         |       |  |   | 37,008 
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Interest expense                                                                                                                                                                                                                       |                     | (19,862 | ) |            |   | (6,485  | )            |      |              | (466    | ) |              |   |         |       |  |   | (26,813
|Non-recurring merger and tender offer expenses                                                                                                                                                                                         |                     | (3,676  | ) |            |   |        |              |      |              |        |   |              |   |         |       |  |   | (3,676 
|Other non-operating income                                                                                                                                                                                                             |                     |        |   |            |   | 254     |              |      |              | 624     |   |              |   |         |       |  |   | 878    
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|Income (loss) from continuing operations   before income taxes (benefit), minority    interest in income of subsidiaries, loss
   from unconsolidated joint ventures,    equity in earnings of subsidiaries    and extraordinary items |                     | (31,411 | ) |            |   | 25,711  |              |      |              | 13,097  |   |              |   |         |       |  |   | 7,397  
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Income tax expense (benefit)                                                                                                                                                                                                           |                     | (10,132 | ) |            |   | 10,610  |              |      |              | 2,119   |   |              |   |         |       |  |   | 2,597  
|Minority interest in income of subsidiaries                                                                                                                                                                                            |                     |        |   |            |   | (2,079  | )            |      |              | (2,243  | ) |              |   |         |       |  |   | (4,322 
|Loss from unconsolidated joint ventures                                                                                                                                                                                                |                     |        |   |            |   |        |              |      |              | (522    | ) |              |   |         |       |  |   | (522   
|Equity in earnings of subsidiaries                                                                                                                                                                                                     |                     | 19,391  |   |            |   |        |              |      |              |        |   |              |   | (19,391  | )
(b) |  |   |       
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Net income (loss) from continuing   operations before extraordinary items                                                                                                                                                              |                     | (1,888  | ) |            |   | 13,022  |              |      |              | 8,213   |   |              |   | (19,391  | )     |  |   | (44    
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Discontinued operations:                                                                                                                                                                                                               |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Loss from discontinued operations                                                                                                                                                                                                      |                     |        |   |            |   | (1,331  | )            |      |              | (2,735  | ) |              |   |         |       |  |   | (4,066 
|Income tax benefit                                                                                                                                                                                                                     |                     |        |   |            |   | (490    | )            |      |              | (1,034  | ) |              |   |         |       |  |   | (1,524 
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|Loss from discontinued operations                                                                                                                                                                                                      |                     |        |   |            |   | (841    | )            |      |              | (1,701  | ) |              |   |         |       |  |   | (2,542 
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Extraordinary items:                                                                                                                                                                                                                   |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Gain on early extinguishment of      debt, net of income tax.                                                                                                                                                                          |                     |        |   |            |   | 698     |              |      |              |        |   |              |   |         |       |  |   | 698    
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|Net income (loss)                                                                                                                                                                                                                      |                     | (1,888  | ) |            |   | 12,879  |              |      |              | 6,512   |   |              |   | (19,391  | )     |  |   | (1,888 
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        
|Preferred dividends                                                                                                                                                                                                                    |                     | 7,361   |   |            |   |        |              |      |              |        |   |              |   |         |       |  |   | 7,361  
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|Income (loss) attributable to common   stockholders                                                                                                                                                                                    | $                   | (9,249  | ) |            | $ | 12,879  |              |      | $            | 6,512   |   |              | $ | (19,391  | )     |  | $ | (9,249 
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |         
|                                                                                                                                                                                                                                       |                     |         |   |            |   |         |              |      |              |         |   |              |   |          |       |  |   |        

|(a) | Elimination of intercompany sales and cost of sales.             
|--- | -----------------------------------------------------------------
|(b) | Elimination of equity in net income of consolidated subsidiaries.

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Delco Remy International, Inc. and SubsidiariesCondensed Consolidating Statement of Cash FlowsFor the Six Month Period Ended June 30,
2002(Unaudited)

|                                                                                                      | Delco Remy  International, Inc. (Parent Company  Only) |         | Subsidiary  Guarantors |   | Non- Guarantor  Subsidiaries |   | Eliminations |         | Consolidated |  
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ------- | ---------------------- | - | ---------------------------- | - | ------------ | ------- | ------------ | -
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Operating activities:                                                                                 |                                                        |         |                        |   |                              |   |              |         |              |  
|Net income (loss)                                                                                     | $                                                      | (33,684 | )                      | $ | 2,566                        |   | $            | (14,353 | )            | $
|Adjustments to reconcile net income (loss) to net    cash provided by (used in) operating activities: |                                                        |         |                        |   |                              |   |              |         |              |  
|Loss on disposal of discontinued operations                                                           |                                                        |        |                        |   | 6,571                        |   |              | 23,364  |              |  
|Extraordinary item                                                                                    |                                                        |        |                        |   | 1,108                        |   |              |        |              |  
|Depreciation                                                                                          |                                                        | 3       |                        |   | 10,121                       |   |              | 4,548   |              |  
|Amortization                                                                                          |                                                        |        |                        |   | 19                           |   |              | 72      |              |  
|Minority interest in income of subsidiaries                                                           |                                                        |        |                        |   | 1,117                        |   |              | 2,418   |              |  
|Loss from unconsolidated joint ventures                                                               |                                                        |        |                        |   |                             |   |              | 1,470   |              |  
|Equity in earnings of subsidiary                                                                      |                                                        | 11,787  |                        |   |                             |   |              |        |              |  
|Deferred income taxes                                                                                 |                                                        | (3,576  | )                      |   |                             |   |              | 3,301   |              |  
|Postretirement benefits other than pensions                                                          |                                                        |        |                        |   | (3,143                       | ) |              |        |              |  
|Accrued pension benefits                                                                              |                                                        | (131    | )                      |   | 1,013                        |   |              | (799    | )            |  
|Non-cash interest expense                                                                             |                                                        | 1,228   |                        |   | 338                          |   |              |        |              |  
|Changes in operating assets and                                                                       |                                                        |         |                        |   |                              |   |              |         |              |  
|liabilities, net of acquisitions:                                                                     |                                                        |         |                        |   |                              |   |              |         |              |  
|Accounts receivable                                                                                   |                                                        |        |                        |   | (25,923                      | ) |              | (4,863  | )            |  
|Inventories                                                                                           |                                                        |        |                        |   | 1,529                        |   |              | (4,186  | )            |  
|Accounts payable                                                                                      |                                                        | (540    | )                      |   | 10,755                       |   |              | 20,844  |              |  
|Other current assets and liabilities                                                                  |                                                        | (5,004  | )                      |   | 9,674                        |   |              | (10,675 | )            |  
|Cash payments for restructuring charges                                                               |                                                        |        |                        |   | (9,232                       | ) |              | (2,436  | )            |  
|Intercompany accounts                                                                                 |                                                        | 1,853   |                        |   | 16,785                       |   |              | (18,638 | )            |  
|Other non-current assets and liabilities, net                                                         |                                                        | (2,414  | )                      |   | 5,627                        |   |              | 1,833   |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Net cash provided by (used in) operating activities                                                   |                                                        | (30,478 | )                      |   | 28,925                       |   |              | 1,900   |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Investing activities:                                                                                 |                                                        |         |                        |   |                              |   |              |         |              |  
|Acquisitions, net of cash acquired                                                                    |                                                        |        |                        |   | (7,399                       | ) |              |        |              |  
|Purchases of property and equipment                                                                   |                                                        |        |                        |   | (5,728                       | ) |              | (3,904  | )            |  
|Investments in joint ventures                                                                         |                                                        |        |                        |   |                             |   |              | (3,000  | )            |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Net cash used in investing activities                                                                 |                                                        |        |                        |   | (13,127                      | ) |              | (6,904  | )            |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Financing activities:                                                                                 |                                                        |         |                        |   |                              |   |              |         |              |  
|Net borrowings (repayments) under revolving line of credit and other                                  |                                                        | 37,526  |                        |   | (15,949                      | ) |              | 15,398  |              |  
|Deferred financing costs                                                                              |                                                        | (6,803  | )                      |   |                             |   |              |        |              |  
|Distributions to minority interests                                                                   |                                                        |        |                        |   |                             |   |              | (1,800  | )            |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Net cash provided by (used in) financing activities                                                   |                                                        | 30,723  |                        |   | (15,949                      | ) |              | 13,598  |              |  
|Effect of exchange rate changes on cash                                                               |                                                        |        |                        |   |                             |   |              | 2,239   |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Net increase (decrease) in cash and cash equivalents                                                  |                                                        | 245     |                        |   | (151                         | ) |              | 10,833  |              |  
|Cash and cash equivalents at beginning of period                                                      |                                                        |        |                        |   | 232                          |   |              | 23,636  |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|Cash and cash equivalents at end of period                                                            | $                                                      | 245     |                        | $ | 81                           |   | $            | 34,469  |              | $
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  
|                                                                                                      |                                                        |         |                        |   |                              |   |              |         |              |  

(a)          Elimination of equity in earnings of subsidiaries.

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|Delco Remy International, Inc. and Subsidiaries                                                       
|------------------------------------------------------------------------------------------------------
|Condensed Consolidating Statement of Cash Flows                                                       
|For the Six Month Period Ended June 30, 2001                                                          
|(Unaudited)                                                                                           
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Operating activities:                                                                                 
|Net income (loss)                                                                                     
|Adjustments to reconcile net income (loss) to net     cash provided by (used in) operating activities:
|Extraordinary item                                                                                    
|Depreciation                                                                                          
|Amortization                                                                                          
|Equity in earnings of subsidiaries                                                                    
|Minority interest in income of subsidiaries                                                           
|Loss from unconsolidated joint ventures                                                               
|Deferred income taxes                                                                                 
|Postretirement benefits other than pensions                                                          
|Accrued pension benefits                                                                              
|Non-cash interest expense                                                                             
|Changes in operating assets and liabilities,         net of acquisitions and non-cash special
charges:
|Accounts receivable                                                                                   
|Inventories                                                                                           
|Accounts payable                                                                                      
|Intercompany accounts                                                                                 
|Other current assets and liabilities                                                                  
|Cash payments for restructuring charges                                                               
|Non-cash special charges                                                                              
|Other non-current assets and liabilities, net                                                         
|                                                                                                      
|                                                                                                      
|Net cash provided by (used in) operating activities                                                   
|                                                                                                      
|Investing activities:                                                                                 
|Acquisitions, net of cash acquired                                                                    
|Purchases of property and equipment                                                                   
|Investments in joint ventures                                                                         
|                                                                                                      
|Net cash provided by (used) in investing activities                                                   
|                                                                                                      
|Financing activities:                                                                                 
|Net borrowings (repayments) under revolving line of  credit and other                                 
|Deferred financing costs                                                                              
|Merger and tender offer costs                                                                         
|Distributions to minority interests                                                                   
|                                                                                                      
|Net cash provided by (used in) financing activities                                                   
|Effect of exchange rate changes on cash                                                               
|                                                                                                      
|Net increase (decrease) in cash and cash equivalents                                                  
|Cash and cash equivalents at beginning of period                                                      
|                                                                                                      
|                                                                                                      
|Cash and cash equivalents at end of period                                                            
|                                                                                                      
|                                                                                                      
|(a) Elimination of equity in earnings of subsidiaries.                                                

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following managements discussion and analysis of
financial condition and results of operations (MD&A) should be read in conjunction with the MD&A included in the Companys Annual Report on Form 10-K for the year ended December 31, 2001. Results of operations for 2002 and
2001 reflect the classification of the Companys retail aftermarket gas engine business as a discontinued operation.

Results of
Operations

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Net Sales Net sales of $282.5 million increased $26.9 million, or 10.5%, from the second quarter of 2001. This increase reflects higher volume in the electrical aftermarket ($11.6 million), the automotive
OEM market ($6.2 million), the heavy duty OEM market ($2.0 million), core distribution services and other ($4.9 million) and the acquisitions of Mazda North American Operations ("Mazda") and Auto Matic Transmissions International A/S
(AMT) in the second quarter of 2001 ($4.6 million). These increases were partially offset by lower volume in the powertrain/drivetrain aftermarket ($2.4 million).

Gross Profit Gross profit of $49.0 million increased $0.3 million, or 0.6%, and as a percentage of net sales was 17.4% compared with 19.1% in the second quarter of 2001. The year over year increase in
gross profit reflected higher sales volume and improved margins in the automotive OEM market ($3.7 million), acquisitions ($1.3 million), improved volume and margins in the heavy duty OEM market ($2.4 million, including the effect of the $2.2
million special charge recorded in 2001 for warranty costs for a specific heavy duty alternator product) and higher volume in the core distribution business and other ($1.1 million). These improvements were partially offset by lower gross profit in
the electrical aftermarket ($5.3 million), where higher volume was offset by start-up costs of new programs, and lower gross profit in the powertrain/drivetrain aftermarket ($2.9 million), where higher margins were offset by lower volume. Margins
were negatively impacted by increased inventory usage in the aftermarket to maximize cash flow which resulted in higher levels of scrap. Also, the adverse effect of the weakening U.S. dollar on costs in the Company's foreign production facilities
negatively impacted margins. The initiative to use existing inventory to conserve cash will be continued and is expected to continue to negatively impact margins. The margin improvements discussed above reflect the impact of the restructuring
actions initiated in the fourth quarter of 2001. Excluding the special charge in 2001, gross profit was down $1.9 million, or 3.8%, and as a percentage of sales was 17.4% compared with 19.9% in the second quarter of 2001.

Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses increased $2.4 million, or 10.3%, and as a percentage of net sales were 9.1% compared
with 9.2% in the second quarter of 2001. This year over year increase reflects the impact of acquisitions in 2001 and investments in marketing programs, products and infrastructure for both heavy duty and automotive businesses, particularly in
Europe. Offsetting these increases were cost and business process improvement programs initiated in the fourth quarter of 2001 and overall spending reductions throughout the Company.

Operating Income Operating income of $23.2 million decreased $0.7 million, or 2.7%, and as a percentage of net sales was 8.2% compared with 9.3% in the second quarter of 2001. This decrease resulted from the sales, gross profit and
SG&A expense issues discussed above. Excluding the special charge and goodwill amortization in 2001, operating income decreased $4.4 million, or 15.9%, and as a percentage of net sales was 8.2% compared with 10.8% for the three months end June
30, 2001.

Interest ExpenseInterest expense of $15.0 million in the second quarter of 2002 increased $0.7 million from the comparable period in 2001. This increase was due to
higher levels of debt to fund acquisitions ($0.7 million) and the higher rate associated with the 11.0% senior subordinated notes issued on April 26, 2001 ($0.3 million), partially offset by reduced funding requirements for operations ($0.4
million). Interest expense included in results of discontinued operations was $1.6 million in 2002 and $1.1 million in 2001.

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Income Taxes The Companys consolidated effective income tax rate was 35.9% in the second quarter of 2002 compared with the U.S. statutory rate of
35.0%.

Loss From Unconsolidated Joint Ventures The year over year increase in joint venture losses was due primarily to increased research and development activity in iPower
Technologies, L.L.C.

Loss from Discontinued Operations The loss from discontinued operations before income tax in the second quarter consisted of operating losses of $8.0
million in 2002 and $1.4 million in 2001 and the estimated loss on disposal of $33.5 million in the second quarter of 2002.

Extraordinary Items In the second quarter of
2002, the Company recorded an extraordinary charge of $1.1 million, net of income taxes of $0.7 million, in connection with the early retirement of its $200 million revolving credit facility. In the second quarter of 2001, the Company recorded an
extraordinary gain of $0.7 million, net of income taxes of $0.4 million, in connection with the early retirement of the GM Subordinated Debenture.

Results of
Operations

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Net
Sales Net sales of $541.1 million increased $39.9 million, or 8.0%, compared to the six months ended June 30, 2001. This increase reflected higher volume in the electrical aftermarket ($18.8 million), the automotive OEM market ($9.6 million),
core distribution services and other ($4.4 million) and the powertrain/drivetrain aftermarket ($0.3 million), as well as the acquisition of Mazda, XL Component Distribution Limited (XL) and AMT in 2001 ($11.4 million). These increases
were partially offset by lower volume in the heavy duty OEM market, particularly in Europe ($4.6 million).

Gross Profit Gross profit of $98.7 million increased
$8.8 million, or 9.7%, and as a percentage of net sales was 18.2% compared with 17.9% for the six months ended June 30, 2001. The year over year increase reflected higher sales volume and improved margins in the automotive OEM market ($10.9
million), improved margins in the heavy duty OEM market ($4.0 million, including the effect of the $4.3 million special warranty charge recorded in 2001), higher volume in core distribution services and other ($1.3 million) and acquisitions ($3.9
million). The improvements in automotive and heavy duty OEM margin include a post-employment benefit curtailment gain of $4.4 million recorded in the first quarter of 2002. These improvements were partially offset by lower gross profit in the
electrical aftermarket ($8.7 million), where higher volume was offset by start up costs of new programs, and lower gross profit in the powertrain/drivetrain aftermarket ($2.6 million). Margins were negatively impacted by increased inventory usage in
the aftermarket to maximize cash flow which resulted in higher levels of scrap.Also, the adverse effect of the weakening US dollar on costs in the Companys foreign production
facilities negatively impacted margins. The initiative to use existing inventory to conserve cash will be continued and is expected to continue to negatively impact margins. The margin improvements discussed above reflect the initial impact of the
restructuring actions initiated in the fourth quarter of 2001. Excluding the curtailment gain in 2002 and the special charge in 2001, gross profit was up $0.1 million, or 0.1%, and as a percentage of sales was 17.4% compared with 18.8% for the six
months ended June 30, 2001.

Selling, General and Administrative Expenses SG&A expenses increased $0.3 million, or 0.7%, and as a percentage of net sales were 9.3% compared
with 9.9% for the six months ended June 30, 2001. Savings generated by cost and business improvement programs initiated in the fourth quarter of 2001 were offset by investments in marketing programs, products and infrastructure for both heavy duty
and automotive businesses, particularly in Europe.

Operating Income Operating income of $48.4 million increased $11.4 million, or 30.9%, and as a percentage of net sales was
9.0% compared with 7.4% for the six months ended June 30, 2001. This improvement resulted from the sales, gross profit and SG&A expense issues discussed above. Excluding the curtailment

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gain in 2002 and the special charge and goodwill amortization in 2001, operating income decreased $.3 million, or 0.7%, and as a percentage of net sales was 8.1%
compared with 8.9% for the six months ended June 30, 2001.

Interest ExpenseInterest expense of $30.2 million in the first six months of 2002 increased $3.4 million from the
comparable period in 2001. This increase was due to higher levels of debt to fund acquisitions ($1.5 million), the higher rate associated with the 11.0% senior subordinated notes issued on April 26, 2001 ($1.3 million) and increased funding
requirements for operations ($0.6 million). Interest expense included in results of discontinued operations was $2.9 million in 2002 and $1.8 million in 2001.

Income Taxes The
Companys consolidated effective income tax rate was 32.0% in the first six months of 2002 compared with the U.S. statutory rate of 35.0%. This difference is attributable primarily to earnings in foreign jurisdictions, which have effective
rates lower than the US federal rate.

Loss From Unconsolidated Joint Ventures The year over year increase in joint venture losses was due primarily to increased research and
development activity in iPower Technologies, L.L.C.

Loss from Discontinued Operations The loss from discontinued operations before income tax in the first six months consisted
of operating losses of $12.8 million in 2002 and $4.1 million in 2001 and the estimated loss on disposal of $33.5 million in the second quarter of 2002.

Extraordinary ItemsIn
the second quarter of 2002, the Company recorded an extraordinary charge of $1.1 million, net of income taxes of $0.7 million, in connection with the early retirement of its $200 million revolving credit facility. In the second quarter of 2001, the
Company recorded an extraordinary gain of $0.7 million, net of income taxes of $0.4 million, in connection with the early retirement of the GM Subordinated Debenture.

Liquidity and
Capital Resources

The Companys short-term liquidity needs include required debt service, including capital lease payments, day-to-day operating expenses, working capital
requirements, funding of capital expenditures and minority interest buy outs under existing contractual commitments. Long-term liquidity requirements include principal payments of long-term debt and the funding of acquisitions. The Companys
principal sources of cash to fund its short-term liquidity needs consist of cash generated by operations and borrowings under the Company's new Senior Credit Facility.

On June 28, 2002 the Company entered into a $250 million secured, asset based, revolving credit facility ("Senior Credit Facility") with a syndicate of banks, led by Wachovia Bank, National Association and
its subsidiary Congress Financial Corporation. This Facility replaced the Companys then-existing secured revolving credit facility of $200 million, which was due to expire on March 31, 2003. The new Facility extends through March 31, 2006 and
has provisions for annual extensions thereafter. The Company intends to use this Facility for general corporate purposes including, but not limited to, general operating and working capital needs.

The new Senior Credit Facility contains various covenants which include, among other things: (i) limitations on additional borrowings and encumbrances; (ii) the maintenance of certain financial ratios and compliance
with certain financial tests and limitations; (iii) limitations on cash dividends paid; (iv) limitations on investments and capital expenditures; and (v) limitations on leases and sales of assets.

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The new Senior Credit Facility is collateralized by liens on substantially all assets of the Company and substantially all of its domestic and certain foreign
subsidiaries and by the capital stock of such subsidiaries.

At June 30, 2002, borrowings under the Senior Credit Facility were $148.4 million and utilization of letters of credit
totaled $5.9 million, leaving $95.7 million unused and $61.9 million available under the $250.0 million facility.

Cash provided by operating activities of $0.3 million in the first six
months of 2002 compares with cash used of $2.5 million in 2001. Increased accounts payable, reflecting improved terms and higher production activity, was largely offset by higher restructuring payments, lower earnings adjusted for non-cash items and
a greater increase in accounts receivable due to increased shipments. Restructuring payments in both years consisted primarily of employee termination benefits.

Acquisition payments
consisted of the purchase, under contractual put agreements, of increased ownership percentages of World Wide ($4.4 million) and Power ($2.5 million), and a contingent purchase price payment on the acquisition of Mazda ($0.5 million). Capital
expenditures were primarily for production equipment and tooling. In the six months ended June 30, 2002, the Company made capital contributions totaling $3.0 million to its iPower joint venture. The Company currently expects to make payments of
approximately $25 million during the next twelve months for minority interest buy outs under existing contractual commitments.

In the six months ended June 30, 2002, payments of $6.8
million were made for deferred financing costs in conjunction with the replacement of the Companys prior senior credit facility.

Seasonality

The Companys business is moderately seasonal, as its major OEM customers historically have one-to two- week operations shutdowns in July. In response, the Company typically has shut down its
own operations for one week each July, depending on backlog, scheduled maintenance and inventory buffers, as well as an additional week during the December holidays. Consequently, the Companys third and fourth quarter results reflect the
effects of these shutdowns.

Foreign Sales

Approximately 20.1% of the Companys net sales in the six months
ending June 30, 2002 were derived from sales made to customers in foreign countries. Because of these foreign sales, the Companys business is subject to the risks of doing business abroad, including currency exchange rate fluctuations, limits
on repatriation of funds, compliance with foreign laws and other economic and political uncertainties.

Factors that May Affect Future Results

From time to time, the Company makes oral and written statements that may constitute forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 (the Act) or
by the Securities and Exchange Commission (SEC) in its rules, regulations and releases. The Company desires 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 the future performance of the Company contained in the Managements Discussion and Analysis, Notes to Condensed Consolidated Financial Statements and other statements made
in this Form 10-Q, the Companys Annual Report on Form 10-K for the year ended December 31, 2001 and in other filings with the SEC.

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The Company cautions readers that any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide
range of risks including but not limited to, risks associated with the uncertainty of future financial results, acquisitions, additional financing requirements, development of new products and services, the effect of competitive products or pricing,
the effect of economic conditions and other uncertainties. Due to these uncertainties, the Company cannot assure readers that any forward-looking statements will prove to have been correct.

In connection with its decision to exit the retail aftermarket gas engine business, the Company currently anticipates that it will incur pre-tax operating losses of approximately $8.0 million during the second
half of 2002, including operating losses during the wind-down period and employee severance costs. These items will be reported in results from discontinued operations.

Also, the Company has recorded $4.9 million as
deferred acquisition cost relating to its efforts to acquire the Delphi Alternators Business. Delphi has recently announced a decision to wind-down these operations. The Company is still in active negotiations with Delphi to purchase some or all of
the business. Should these negotiations fail, the deferred acquisition costs will be expensed.

The Company believes that cash generated from operations, together with the amounts
available under the Senior Credit Facility, will be adequate to meet its cash needs for at least the next twelve months, although no assurance can be given in this regard.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2002 there have been no material changes in the Companys market risk exposure as described in
Item 7A contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2001.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

Remy Mexico Holdings, S. de R.L. de C.V. (RMH), an indirect subsidiary of the Company, and GCID Autopartes (GCID) are parties to a series of
agreements, including a partnership agreement. The partnership agreement created Delco Remy Mexico, S. de R.L. de C.V. (DRM), which operates certain manufacturing facilities in Mexico. GCID is the minority partner with a 24% ownership
interest. RMH and GCID signed a letter of intent on or about May 3, 2000, whereby GCID agreed to terminate certain of the agreements in exchange for a $13,000,000 termination payment by RMH to GCID, but the transaction was never finalized. In June
2001, GCID declared RMH in default under certain of the agreements alleging that RMH failed to conduct the business of the partnership as contemplated therein. In August 2001, GCID instituted an arbitration proceeding before the American Arbitration
Association seeking damages for the alleged breaches of certain of the agreements between the parties. RMH has denied any such breaches. RMH, GCID and affiliates of GCID continue to maintain an ongoing relationship.

On
March 11, 2002, GCID filed an application to file a First Amended Arbitration Demand adding additional claims and parties, including DRM, Remy Componentes, S. de R.L. de C.V., an indirect subsidiary of the Company, and Delco Remy America, Inc., a
wholly owned subsidiary of the Company (together with RMH, the Named Parties). The First Amended Arbitration Demand seeks damages for breach of fiduciary duty, breaches of contracts between and among the various parties, and tortious
interference with contractual relations. The damages include a claim for the $13,000,000 termination payment and a claim for $17,000,000 for alleged breach of a Services Agreement between DRM, Remy Componentes and GCI Services, S.A. de C.V.
(Services), an affiliate of GCID, pursuant to which Services provides labor to the partnership. The Company disputes all the claims alleged in the First Amended Arbitration Demand and denies any liability for damages to GCID or any of
its affiliates. Services continues to provide services to DRM. In addition, another affiliate of GCID, Sistemas y Componentes Electricos, S.A. de C.V., continues to be the leaseholder of the premises occupied by DRM.

On
March 26, 2002, the Company filed an Objection to the Application to File a First Amended Arbitration Demand, wherein the Company maintained that the arbitration panel lacks jurisdiction over certain of the claims asserted and certain of the Named
Parties and that GCID does not have standing to assert certain of those claims. On March 27, 2002, the arbitration panel set a discovery schedule and scheduled the arbitration hearing for November 4, 2002 through November 8, 2002. The parties have
jointly requested the Arbitration Panel to extend the discovery schedule and reschedule the hearing to the earliest available time after February 1, 2003. The Company believes that the Named Parties have meritorious defenses to the action, but it is
unable to predict whether the proceedings will have a material adverse effect on the Company.

Item 6.  Exhibits and Reports on Form 8-K

|(b) | The following report on Form 8-K was filed during the quarter or prior to the filing of the Form 10-Q for the quarter ended
|--- | ---------------------------------------------------------------------------------------------------------------------------
|    | June 30, 2002.                                                                                                             
|    |                                                                                                                            
|    | 1.                                                                                                                         

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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.

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|Date:   August 14, 2002
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|Date:   August 14, 2002
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